Cashing in a final salary pension scheme is a very complex area, and the options available depend on a number of factors.

Take the pension and lump sum through the existing scheme

This may or may not be an option for you. If you're 50, then the legislation permits you to take the benefits through the existing scheme. However:

• the scheme may not allow it under its own rules

• you may need the agreement of the trustees, which may not be forthcoming

• you may not be able to take a lump sum, or a particularly large lump sum, if you're taking the pension early, especially if you have an element of Guaranteed Minimum Pension (GMP)

• there may even be large reductions for taking the pension early

Much depends on the rules of the scheme and your age. If your scheme allows you to take the benefits early then it will more than likely mean a reduced lump sum, and reduced income, than if you waited until your normal retirement age.

If you can't take your pension through the existing scheme for whatever reason, then provided you're 50 or above, then you should be able to take your pension by another method. But is a complex area of financial planning, and taking your pension early will probably mean that you will be financially worse off in the future, than if you had waited, until you normal retirement age.

Cash Equivalent Transfer Value

Nearly final salary schemes allow you to transfer what is known as the Cash Equivalent Transfer Value (CETV), which represents the value in cash terms of your existing benefits.

e.g. So, supposing you're 50, and have a pension with a former employer which is due to give you £5,000 per year at age 60, this could have a CETV of £60,000 at age 50. So even if the trustees/rules of this scheme won't allow you to take benefits now, for whatever reason you could still take the benefits.

With the above example, it would then be possible to transfer it to a personal pension environment, and allow you to take £15,000 as a tax-free lump sum, and then take an income. The above example also shows one of the one of the main disadvantages of taking such a course of action. Effectively you would be giving up £5,000 per year, which would also have some inflation proofing and spouse's benefits, in exchange for £15,000 of tax-free cash now, and £45,000 invested in an annuity or income drawdown contract, which is unlikely to give you the same level of income. Mathematically these types of transactions very often do not make sense, much depends on your desire to take the benefits now, in exchange for a probable lower income in the future. The job of a pension specialist adviser is to make you aware of exactly what you would be giving up and then to recommend the best course of action, which can mean leaving your pension where it is.

Options for the Cash Equivalent Transfer Value

If you are not able to take your final salary pension through the existing scheme, and you do decide you want to take the CETV to in order to take your pension, there are two options.

1. Tax-free cash and annuity purchase - this allows you to take the lump sum, and buy an annuity, which is an income for life. See annuities for more details.

2. Tax-free cash and income drawdown - this again allows you to take the lump, but rather than converting the remaining money to an income, it can then be invested. It is possible to either take an income from the remaining funds, or leave it invested without taking an income. If you do not take an income, then the fund could grow to provide you with better benefits at a later date. See income drawdown for more details

Contact us online, or call 0800 011 2713 , without obligation to find out more about cashing in your pension.

Warning: Taking your pension benefits early is unlikely to be in your long term financial interests as it will probably reduce your retirement income. Always seek independent financial advice. Contact us now

Don't take any chances with your pension, your retirement will depend upon it, talk to an independent pension specialist now