Questions and Answers
To give you more of an insight into unlocking your pension funds, we have put together a list of questions with answers.
- Am I Eligible?
- Is this a loan?
- How much will I receive?
- How much does it cost?
- Do I have to retire to receive a lump sum?
- If I draw a pension as well as a lump sum, how will this be paid?
- Will the figures you've given me change?
- What happens if I die?
- Will this affect any of my state benefits?
- So what's the catch?
- Do I have to pay tax on the money?
- Do I have to pay monthly premiums to the policy?
- Can I continue to work whilst taking early benefits?
- Can I sell my pension?
Am I Eligible?
If you are over 50 with money in a personal or old company pension scheme then you could be eligible to receive a tax free cash sum and/or income.
Is this a loan?
This is not a loan and there are no interest payments to make.
How much will I receive?
Because the circumstances surrounding each pension are different, we need to make a thorough and detailed analysis of your pension before we can give you a complete answer to this question. Needless to say, once we have all this information we'll analyse what you can receive in tax free cash and / or income or a combination of both.
How much does it cost?
We will investigate your pension and provide you with a written report which sets out our recommendation.
In the report we will provide you with a quotation detailing all the costs. For example your pension company may deduct monies as a penalty for you taking the funds now. Any pension company recommended has setting up charges that would be deducted, out of which they would pay our fees by way of commission.
As we said earlier, pension schemes are complicated and have different sets of rules and regulations therefore the amount of work we have to do varies for each person. Sometimes we need to charge an amount in addition to any payment we receive from the pension company. This would be deducted from your cash sum before it is sent to you (so you don't have to write us a cheque at any time). This will be confirmed in writing before you make any decisions.
Do I have to retire to receive a lump sum?
In a word - No.
You can take tax free cash and or income now and continue to work although we will not be able to release funds from your current employer's pension if you are still eligible to make contributions.
If I draw a pension as well as a lump sum, how will this be paid?
You have the choice of having it paid annually, half yearly, quarterly or monthly; either in advance or arrears and either increasing each year or remaining level in payment throughout. You can also make provision in the event of your death for a pension to continue to your spouse and / or dependents.
Will the figures you've given me change?
They may depending on where the pension fund is coming from. A pension fund is made up of investments (like stocks and shares, property etc), the value of which alters daily. In other words, by the time we apply for your transfer cheque the value of your fund may have changed.
If your circumstances change or if some new information comes to light, that may also affect the value of your fund.
What happens if I die?
If you die before any transfer takes place, the rules of your current pension scheme will still be applicable.
If a transfer takes place then any death benefits payable will depend on the rules of the new pension set up. We will supply full details at the time.
Will this affect any of my state benefits?
It is possible that your state benefits will be affected if you access your pension. You should contact the DWP for full details.
So what's the catch?
It's a great temptation to release your money and or income from your pension, especially if you really feel that you need it now. However you must bear in mind that releasing your pension now means, quite naturally, that your income in retirement will probably be considerably less than if you waited until your normal retirement age.
This means that you will have less to live on when you retire, and as such pension unlocking is only suitable for a very limited number of people. So unlocking your pension will rarely be to your long term financial advantage. Therefore you should look at all the other options before considering releasing your pension. You should ask yourself if you really need to raise extra cash? If so, could you borrow the money by way of a personal loan or remortgage? Do you have any savings or other assets you could use?
Your pension consultant will recommend the option that he considers is best for you having considered all the advantages and disadvantages, your objectives, circumstances and the other options you could use for raising the money. Just to remind you, there is no cost or obligation to you in our recommendation as to the most suitable option and how it will affect you now and in the future.
Do I have to pay tax on the money?
The lump sum payment is tax free. However any income you receive is viewed as part of your regular income by the HM Revenue and Customs, which means that you may have to pay income tax on it depending on your personal circumstances. However tax rules may change in the future.
Do I have to pay monthly premiums to the policy?
No in fact you can't pay any more into it.
The purpose of this is for you to look at being able to take your money now as either a lump sum, income or a combination of both.
Can I continue to work whilst taking early benefits?
In most cases, yes.
You can draw on your pension once you reach 50 and continue to work. Many people continue to work even though they are drawing their State Pension and are over retirement age.
The Inland Revenue will include any pension payments you receive as part of your income when working out how much tax you owe. This is normal and will happen whether you access your pension now or later.
Can I sell my pension?
Legal requirements prevent anyone from selling a pension fund.
This service applies to pensions within the UK. Unlocking your pension will mean that your income will probably be considerably less than you could expect if you waited until your normal retirement date and as such is only suitable for a very limited number of people and circumstances.