Cashing in or unlocking your pension


Cashing in your pension, or unlocking your pension as it is also known, are misleading phrases, since in most instances, it means taking your pension lump sum, and/or taking an income, and usually taking it earlier than expected.


For most people over the age of 55, , it is now possible to cash in or unlock all of your pension.  How you take these benefits will depend on the type of scheme you have, and how you want to take benefits.

Many people cash in (unlock) their pensions to:

  • Pay off debts 
  • Support their business
  • Provide short term cash

For many people, all they want is their tax-free lump sum and no income, and in many circumstances this is possible, although much depends on what type of pension you have.

There are a number of downsides to taking the cash from your pension, especially if you are doing it earlier than expected. 

Unlocking your pension will almost certainly mean that you will have less income in retirement AND because of the
reduced level of income, pension unlocking is usually only suitable for a very limited number of people and circumstances.

All other avenues of raising funds or resolving the issues that require the funds should be explored before you unlock your pension just for short term issues, as it is not suitable for most people, because of the many disadvantages.  

Unlock your pension - the dangers

  • The income you could take in the future will be reduced by unlocking a pension early
  • There may be penalties for unlocking your pension early
  • There may be a reduction in benefits if you cash in your pension early such as, a loss of a terminal bonus
  • Cashing in your pension early would probably mean a smaller fund or income, rather than waiting
  • If you take an income after unlocking your pension, it is possible that the income would be taxed
  • There could be loss of guaranteed income or other virtually guaranteed benefits
  • There could be a loss/reduction in spouse's and/or children's benefits
  • Benefits in the event of ill health could be reduced
  • Taking an income from a pension now could affect your ability to claim state benefits, either now or in the future

Find out more about the risks of pension unlocking.

There are three basic methods of actually cashing in your pension. You may be able to take your benefits through your existing arrangement, or you could take your tax-free cash and buy an annuity or invest in an flexi-access drawdown contract, contact us online, or call 0800 011 2713 to find out more about cashing in your pension, or click on the links below to find out more about cashing in a:

Final Salary Scheme
Occupational Scheme Money Purchase
Personal Pension, Retirement Annuity Contract, Free Standing AVC, and Section 32

Warning: Taking any of your pension benefits early is likely to reduce your income at retirement. Therefore, pension release is only suitable for a very limited number of people and circumstances and should not be seen as an easy option for raising cash. This is because a pension is designed to provide you with benefits when you retire. Always seek independent financial advice, which we offer.


Contact us now

If you can't find the information you're looking for on the website, or you want to know more or have a question, or just want to chat through some details about your pension then please feel free to contact us, without obligation. Either contact us online or call 0800 011 2713.


Got a question? Want to speak to a pension specialist?

Contact us now online or call 0800 011 2713, without obligation.