What is Cash in Pension?

The term cash in pension to some may simply refer to actual cash that is held within a pension scheme, and indeed it is recommended that each individual does have at least some cash in their pension to mitigate risk and provide liquidity.

But the term may also be used to describe the process of pension release which allows individuals with suitable pension funds to literally cash in pension funds for a 25% tax free lump sum and then reinvest the residual amount with a new provider.

It should be noted however that limits do apply on what pensions may be cashed, you are for example unable to cash in pension for your State Pension or for many final salary schemes that you are still an active member of.

If you do need to cash in pension funds for whatever reason then you should contact a suitable financial adviser to help you do so. However, before a cash in pension routine is executed, it is recommended by the industry regulator the FSA that pensions be used for retirement and as such you should think carefully if to cash in pension funds is what is right for you.

How do you Cash in Pension Funds?

Once you have contacted a suitable financial adviser about cash in pension funds then they will likely conduct a full know your client factfind and risk assessment as required by the FSA so they can determine what your exact needs are and if to cash in pension funds is suitable for you and your circumstances.

Each cash in pension adviser is different in what kinds of cash in pension funds they accept as some have limits on the lowest amount they are willing to deal with while others refuse to deal with final salary schemes due to the defined benefits they provide but there are advisers out there that can help you cash in pension if your situation is right to cash in pension funds.

If you situation is suitable then they will assist you in contacting your current pension provider to see what your current pension is worth and if they are able to transfer it to cash in pension funds. It is worth noting you will need to transfer your pension out of your current pension provider to cash in pension funds so please consider carefully if  you wish to proceed with the process or not.

Once your pension details have been received they may then transfer your pension to a new suitable provider (or enable you to purchase an annuity if you choose) after sending you a suitability report and you have agreed to the process at which time you can expect to receive your selected benefits (usually the 25% tax free cash lump sum and possibly an income) from the new provider assisting to cash in pension funds.

It is worth noting that each adviser is different and as such the process may differ slightly between them and will nearly always be more complicated than the description above which is meant to be just a brief summary of the cash in pension process to help you understand how it works.