Cashing in or unlocking an
occupational money purchase pension
Cashing in an occupational
money purchase scheme can have a number of complications. There
should not be any issues about when you take the benefits as
most schemes allow benefits to be taken from age 50.
How it works
An occupational money purchase
scheme is just a pot of cash. The value of these benefits
depends on the value of the fund. If you're taking it early,
then it will have less time to grow, and so obviously is more
likely to provide lower benefits, and if you're taking an income
the income will also be lower because you're younger. There are three other key
points you need to be aware of before you cash in such a
pension:
Tax-Free Cash - the amount of
tax-free cash available from such a scheme depends on your
length of service, your earnings, and when you joined the
scheme. This could mean that the entire value of the fund could
be available as a tax-free lump sum, or it could mean that less
than 25% of the fund is available as a tax-free lump sum. It is
generally always best to ask the company or provider to
calculate the maximum tax-free cash.
Guaranteed Annuity Rates - some
older contracts have some guaranteed benefits. This could mean a
guaranteed level of income at a particular age. By taking the
benefits early it is possible that these could be lost.
Penalties - some companies
apply a penalty for taking the benefits before your normal
retirement age. These can be nominal to relatively large
penalties
Options for unlocking an
occupational money purchase pension
The two basic options are:-
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 a fixed 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

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