What is Pension Unlocking?
Pension unlocking is also known as pension release. It is the process of releasing money from your pension at an early stage before you reach retirement.
Most people are quite surprised that it is possible to release part of their pensions at an earlier stage. Not only that, but you can release up to 25% as a tax-free cash lump sum.
There are some criteria that need to be met in order for this to be possible. You have to have a UK personal or private pension which you are not drawing from or receiving. You also need to be aged between 55 and 64. Any kind of decision that you make regarding your pension needs to be carefully considered. It is absolutely necessary that you take the time and get proper financial advice regarding what your personal financial circumstances are. You need to know if pension unlocking is right for you. You should always look to see if you have an alternative avenue of raising money because taking money from your pension early will inevitably mean that you will receive less later on.
Here is a video presentation that gives a really simple example of how pension release works and how much you can cash in from your current pension.
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Cash In Pension – Is This A Good Idea?
Many people are finding that the recent economic situation has left them with poor credit ratings, which in turn can cause problems when trying to find financial assistance from traditional sources. It can be harsh for those people who are reaching the end of their working lives and find themselves facing more debt rather than looking forward to relaxing retirement.
If you find yourself in the position of having exhausted your normal ways of raising money, and are considering a pension unlocking or pension release scheme, then make sure that you take the time to look through as much information as possible. There are many companies who specialise in pension release and you should know that the financial services authority (FSA) regulate this area rigourously. You should seek the advice of the pension adviser from a reputable company. At no point should you be put under any pressure or obligation to go ahead with one of these schemes. The adviser will carefully look through your options and that your pension in some detail and they will advise you whether pension release is something that is advisable in your current financial circumstances.
Pension Unlocking – How Long Does It Take?
If, after careful consideration you feel that pension unlocking is a good and sensible option for you, take your time and choosing your financial advisor. You will be asked to provide the details of your pension plan and to give the adviser permission to seek information from your pension provider. This will enable your adviser to chase up all parties and make sure that the process is as quick as possible. In some cases it is possible to receive the tax-free cash in as little as 20 working days. Sometimes, you will need to move your pension from your current provider to provider who allows pension release. If this is the case then you will need to allow more time as this process can sometimes drag on.
In most situations pension unlocking is an absolute last resort and it isn’t suitable for everyone. It is worth noting again that if you release equity from your pension early then you will have less later on when you actually start to draw from the pension.
In some situations, however there is good reason for taking some of your pension fund money early. It is quite possible that paying off debt now could be the most prudent thing to do. Paying off a mortgage or large credit card debt could make financial sense and may well put you in a better financial situation for the future.