Pension Release
Pension release schemes allow you to draw from your pension fund before you retire. While this may sound like an attractive proposition it will mean that you are left with a smaller sum with which to purchase an income when you do decide to stop working.
Most pension funds will allow you to withdraw 25% of your fund as a lump sum on retirement, using the rest to purchase an pension income. People often decide to do this in their mid sixties.
A pension release scheme will also often allow you to withdraw up to 25% of your fund as a lump sum and/or convert your pension pot into an income. Alternatively, you may have the option of withdrawing a portion and leaving the remainder invested in your scheme. You can do this before you retire, at any time from age 55 under current law.
Could pension release be right for me?
You may be considering releasing your money if you need urgent access to funds or if you need to reduce debt that you have no other means of dealing with. Because of the negative effect that pension release can have on your retirement income it should only be considered as a last resort.
There are a number of things that you may like to consider before opting to release your funds early, including but not limited to:
- How much do you hold in your pension fund? You will usually need to have between £15,000 and £100,000 in your fund to qualify for a release scheme, you should also consider how taking an amount out of you fund may affect your future retirement income.
- Depending on the type of pension scheme your funds are held in, you may need to transfer to another scheme to make release possible. This could cost you money in exit charges from your original scheme and you may be charged set up fees for your new scheme.
- If you are not required to change pension scheme you may still have to pay a fee for withdrawing funds early from your pension scheme.
- If you are claiming any benefits these could be negatively affected by opting to take pension release. You may wanht to check this before proceeding.
Obtaining independent advice
Before deciding whether a release scheme is the right option for you should consider all your options carefully. This can be a complex process and you may wish to seek independent advice. To discuss your pension options, and for tailored expert advice speak to a member of an independent pension advice team and receive a free initial consultation.
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