Pension Release

How to Take Pension Release Guide

Pension release allows you to access money you have saved for your pension before you retire, or before the full term of your pension is up. It doesn’t matter if you have a private or company pension, if you are over 55 and have over £8,000 in your pension fund, pension release may be possible for you.

Up until recently pension release could be taken by anyone from the age of 50, but with the ageing British population placing a strain on the pension market and National Insurance Contributions barely managing to meet the demand of the State Pension, the Government decided to increase the minimum retirement age to 55 meaning that pension release can now only be taken from that age.

But what is pension release?

It is the method of releasing a tax free lump sum of up to 25% of your pension to use in manner that you desire, though the FSA do suggest that this only be taken before retirement if you really do need the cash for something you urgently need such as repaying debt so please consider it carefully before proceeding as it may harm your income at retirement.

Once you have released up to the maximum 25% of tax free cash available through pension release you may re-invest the residual fund into a new provider that best suits your needs and circumstances that you may discuss with a qualified financial advisor to receive the best advice possible. However, you may not re-invest the amount with your current provider, taking pension release involves transferring your pension away from your provider in order to take the tax free lump sum.

To take pension release you will need to contact an advisor (as mentioned above) who will then guide you through the process and do the leg work of getting it done for you. You will be shown how much money you can release and how best to use the remaining sum in your pension for an income while taking into account your entire financial situation to ensure you are not unduly disavantaged at retirement.

You will receive recommendations on how to draw this income (which can be taken as either an annuity or as income drawdown) monthly, quarterly, six monthly, or yearly which can be taken at a later date or immediately should you decide. It is worth noting that there is now no age limit by which you must commence taking an annuity with your pension, so you can decide to take it when you are much older than you are now, if at all.

Please note however that pension release is not for everyone and you should only consider it as a last resort to gain access to the maximum 25% tax free lump sum from your pension. Please ask your advisor for any advice about whether you would be a suitable candidate to take pension release.

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