Can I cash in my pension?
With the introduction of the new legislation, many people have asked the question: “Can I cash in my pension?”
The two main factors are your age and the type of pension you have. If you are under 55, you can’t take money from your pension unless you are in very ill health and have permission from HMRC – anyone encouraging you to release money if you’re under 55 is likely to be a pension liberation scam, with heavy penalties.
If you have an unfunded pension, where payments are made from current taxation instead of a savings fund, it is no longer possible to cash in your pension.
If you are 55 or over with any of the following then you should be eligible to cash in your pension:
- Private pension
- Company pension
- Funded final salary pension
- Old company or personal pension
However, being eligible doesn’t always mean it is the most appropriate choice for you, especially as for some pensions it could mean you surrender generous benefits that you would be better off keeping. Cashing in your pension is a big decision that you should talk to an adviser about.
Although it may seem tempting to access the money, it’s important to remember that you saved for many years in order to provide for retirement. We have also explained what you need to know about annuities and income drawdown.
It’s also important to consider why you want to remove money from your pension, and learn how to keep your money safe so you don’t fall victim to any of the various scams.
How much can I release?
The new rules allow you to take as much as you want from your fund, including the ability to strip it completely. However, only 25% is tax free, and the rest is considered taxable income. You do not have to release any cash from your fund, or can just take the 25% tax-free cash before purchasing an annuity or choosing income drawdown if preferred.
Whatever you decide to do will affect the rest of your life, so never rush the decision and make sure you speak to a regulated adviser before signing on the dotted line.
Can I cash in the State Pension?
No, it isn’t possible to cash in the State Pension. However, if you reach state retirement age before April 2016, the State Pension increases 10.4% each year it is deferred – or 5.8% each deferred year if you reach state retirement age after April 2016. When you decide to start taking the State Pension, you can either receive the increased amount each year, or take the accrued amount as a lump sum.
The State Pension is receiving a number of changes in 2016, including changes to the State Pension age that you need to know about to plan your retirement effectively.
Are you considering cashing in your pension or will you leave it alone? Let us know with a comment below.
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The details provided in this article are for general information only and are in no way deemed to be financial advice. All of the material is correct as of the publication date, but could be out-of-date by the time you read the article. For our latest information and news, please see our articles section: https://www.portafina.co.uk/whats-new\
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