I’ve been told by my provider that I cannot access my pension, why?

If you have been told you cannot benefit from releasing your pension it could be due to the type of pension you have. But you may still be able to access your fund.

The quick and easy guide to accessing your pension fund

Pension release has become a very popular option in recent times, so if you have been told by your provider that you cannot access your savings, it can be very confusing and disappointing. The good news is that even though you have been given a negative response, it pays to check out your pension a little deeper to get the full facts. This article outlines the reasons why you may have been deterred from taking any further action and how you can explore what other options might be available.

The headline facts at a glance

Many people may take the word of their pension provider that they cannot access their pension as final, and give up considering pension release any further. Although it may appear that your provider has declined your application for pension release, there may well be other routes you can take to access your money. Some types of pension do not allow access at all, some schemes allow for direct access and others need a more indirect route through pension transfer with the support of a financial adviser.

Why did my pension provider say no?

It is more than likely that your provider was acting in your best interests, but perhaps was not aware of all the options open to you. For instance, it may be that the type of pension you hold with your provider, does not give the option of releasing your pension directly through pension release. However, if your pension is eligible under the current regulations, there may be other routes you could take to access your savings, which may require independent financial advice. As most pension providers, do not usually offer financial advice, it is likely you will only be told what is acceptable within the rules of their scheme.

 It’s worth remembering that most pensions were setup before the freedoms were put into place, so they aren’t equipped to offer this function. Therefore, it may be worth seeking financial advice to assist you with the options you have’

Do I have the right type of pension?

Releasing money from your pension at the age of 55 through pension release is not a feature that is available with all pensions. You can facilitate it with private and most company pension schemes but pensions such as local government schemes (LGPS), will require a slightly different approach which involves pension transfer. There are some schemes which you cannot access until retirement. Generally, these include unfunded public sector pension schemes (occupations include: NHS, military, police, fireman, teachers) which only allow access at retirement and do not allow pension transfer. You would not be able to use pension release with pensions that you are already taking an income from or from the state pension. Accessing your pension early shouldn’t be taken lightly though, as it could affect your future retirement income, so it’s important to seek financial advice before making any decisions.

How can I find out if my pension is eligible?

The most effective way to find out if your pension is eligible for pension release is to seek the help of a financial adviser, who can check if your pension has this option. An adviser can guide you through the process, explain the different choices available and provide you with a recommendation of what is the best way to move forward, based specifically on your circumstances. 

How will it affect my pension if I need to transfer to a new pension scheme?

The pension scheme you currently have will no doubt offer valuable benefits and features. Some schemes such as those called defined benefit and Local Government Pension Schemes, may come with certain guarantees upon retirement. These schemes tend to not allow you to access them flexibly from the age of 55 (you may still be able to take early retirement), instead you would be required to move into an alternative private scheme that allows money to be released. Private pensions will also have attractive benefits and features, but it’s important to consider what you will be losing with what you will be gaining in the short and long term. It’s vital that you seek regulated financial advice for these final salary pension schemes, as sometimes the guarantees will be too good to give up, and understanding the pros and cons of each option will enable you to make an informed decision.

Do I have to use a financial adviser?

Not all pension providers will insist that you seek financial advice and will allow you to access money direct. This doesn’t necessarily mean that it’s the best option to take, as there can be drawbacks by not shopping around, such as higher scheme charges from going direct. A regulated financial adviser however will ensure that your money is placed in the most efficient pension and one that is right for you. A recent study shows that people who get financial advice will end up with over £27,000 more pension wealth than those who don’t.

Some pension providers will require that you use a financial adviser. These tend to be if you have built up more than £30,000 worth of benefits into either a final salary pension, or a pension with guarantees attached. This regulation is put in place to ensure you are aware of all the pros and cons of transferring your money to another pension scheme and to help keep you safe.

How can Portafina help?

Portafina offers regulated financial advice without obligation to pay anything. This means that you can find out exactly what we think you should do with your pension with no cost, and you only pay a fee if you wish us to act on the advice given. We will walk you through your options in plain English, and tell you what we think your best option would be in order to achieve the financial future you want. If you do wish to go ahead after the review, you do not have to find any money – it is usually taken directly from your pension.


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More information…

Hopefully the information in this guide has given you a clearer idea of why your pension provider may have said no to your request when accessing your retirement savings and also given you ideas as to how you can consider other options. Below are three of our most frequently asked questions. If you cannot find what you are looking for here please do not hesitate to give us a call.

 What is pension release?

Pension Release has been available for many years but it was particularly brought to the general public’s attention in 2015 when it was highlighted in the government’s “Pension Freedoms”. Basically, it allows people the opportunity to access money they have saved in their private or most company pensions from the age of 55 – sometimes a really handy facility to fall back on in some instances when you are in need of a small lump sum to see you through difficult times.

If your pension is eligible, legally, you are allowed to take as much money from your pot as you wish, but only the first 25% will be tax-free. However, you do not have to take the money in one go – you can release lump sums over whatever period you like. The remainder of the money within your pension fund will still be invested and continue to grow. Be aware that Tax treatment depends on your individual circumstances and may be subject to change in the future.

Is taking money from your pension the right thing for you to do?

To answer this question, you first need to balance the importance of what you currently need with what you might need in the future. Taking money from your pension now could reduce your future income and therefore affect the way you live your life when it is time to retire. On the flip slide, for many people considering this option, resolving their current need can have a lasting positive impact on their future. It is not an easy decision to make and that is why many people seek advice from a regulated financial adviser, someone who knows pensions inside out and who will do all the hard work for you.

Can I pay into a pension if I have taken money out of it?

In most cases, yes you can. You might, for example, decide to use your tax-free cash at 55 and then continue paying into the pension until you retire. The main thing to consider is that taking more than the 25% tax-free amount from your pension may reduce the amount of money you can pay into your pension each year and receive tax relief on. Remember that tax treatment depends on your individual circumstances and may be subject to change in the future.

Call 0800 304 7600 for a friendly chat about your pension

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Important Information
1 http://www.telegraph.co.uk/finance/personalfinance/pensions/2802698/Serps-mass-mis-selling-or-witch-hunt.html

*Tax treatment depends on your individual circumstances and may be subject to change

 

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