How To Release A Pension- Certain Things To Consider


Pension releasing or unlocking has always being a matter of debate among people. The critics of this scheme term it has a non-viable option for the majority of people, by releasing cash from your pension early you are trimming down the pension pot, which you have accumulated through your years of hard work. While other use it as a way to get instant cash in order to satisfy their urgent monetary need of the hour. Irrespective, what you opt for; scroll down to take a look the procedure on how to release a pension:

Is Pension Release Legal?

Pension release simply means getting cash out of your pension. And, as far the law goes, it is completely legal to release pension. However, every year many cases of scams are reported, it makes sense to get the best advice from a trusted professional.  

The April 2006 Notification

April 2006 saw dramatic changes in Pension legislation for the United Kingdom. The new regulations made it easier for people to get up to 25% tax-free lump from their personal or occupational pension schemes, while the owner can reinvest the remaining amount, carry on working for many more years (and, contribute to their pensions pot).   Initially, the minimum age to release money from a pension was 50 years, but the age restriction was raised to 55 years old according to new pensions notification by the government in April 2010.

Three Options

A pension owner has three options for taking cash from his or her pensions, and even the option of combining it with pension drawdown.  

  1. Take Cash-Free Cash

A pensioner has the luxury of taking a lump sum, usually 25% from your pension pot tree-free. The best part of taking this route is that you don’t have to cash in the remaining money straight away, however, when you do, it’ll be taxed as income in the year that you take it. If you are in urgent need of some cash but has used up any personal tax allowance, then this might be a great thought for you.  

  1. Take a Slice out of Your Pension

By choosing this option, you’ll get 25% of the cash from your pension tax-free, while the rest of the money is taxed as income. What’s left of your money can be obtained as cash at a later date and the part of it still tax-free. This is the best option, if you are in need of cash; however, have some unveiled personal income tax allowance.

  1. Have the Tree-Free Cash and a Bit More

With this, only 25% of your pension pot is tax-free, you may pay income tax on the rest of the money.

Don’t hesitate to take Advice

Before, deciding on any of the above agree money from your pension options, it is advisable to talk consultation from a financial advisor. They will thoroughly understand your financial condition, and advise you on how to release a pension. The key here is to harmonize your current monetary needs with what you may need in the future.