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Make A Knowledgeable Decision Regarding Pension Release

If you're aged 55 or over, you may well be able to release up to 25 percent of your pension in a tax free, lump sum. Though while this may seem like a great idea allowing you to obtain some instant cash, the move will obviously, lower your final pension repayments.

Author: Robert Deans
Date: Feb 2, 2011 - 12:42:14 PM

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Pension release could be a smart decision if you are over 55 years old and wishes to access a lump sum of your pension up to 25 percent. Whilst a cash lump sum payment could be a particularly attractive option, you need to weigh up the pros and cons, as it will reduce your pension entitlement once you come to retire. This is why, any decision made regarding a pension release needs to be considered carefully to be certain you're making the best choice.



Pension release will be based upon the type of pension you have. Personal pensions are yours to do with what you wish, and you are free to release cash from them should you so choose. If your pension is an employer pension scheme you may only be able to choose a pension release if you don't work for the employer, and then the employer is not making contributions.



The very first factor to consider is, exactly what do you intend to do with the cash from the pension release. If you’d choose to use the money for a nice holiday, or even treat your family to a fantastic Christmas, you are probably better to resist and go without. You have to remember that you'll depend on your pension for daily essentials when you retire and if an earlier pension release means you wind up struggling you may regret your choice.



Of course this is all relative; many individuals elect to start a pension fund very at the beginning of their working life, or are lucky enough to work for a very generous boss. In this instance, chances are that by their mid 50’s they'll have accumulated quite a substantial amount of cash. Even so, depending on your plans you may decide that the money is better off being left to have fun with once you actually retire.



There are actually situations though when a pension release can be extremely helpful, and worth the reduced payments in later life. Clearing a large debt that's accumulating substantial interest could leave you financially better off than should you continue struggling to meet repayments. Even if a pension release in order to settle existing debts does not leave you financially better off, it might still be a good choice if the debts are causing you stress or worry, lifting that burden could offer you a better quality of life.



Similarly, a pension release could be beneficial in repaying the remainder of a mortgage. Whilst interest levels are currently quite low, they may not stay like that and the interest soon accumulates over the duration of a mortgage. With this in mind, paying the remainder of your mortgage in one lump sum payment can relieve a lot of stress, as well as saving you money on future interest payments.



If after considering both the positives as well as the negatives you think a pension release is the right choice, you'll find companies offering independent financial advice who can help you to get the process started. All good companies will talk through your options with you, as opposed to pressuring you to apply for a pension release, so you will be completely sure that your decision is the best one for you.

This article was written by R. Deans on behalf of Robert Bruce Associates, experts in pension release. For more info on pension release please visit rbaifa.co.uk

View all articles by Robert Deans

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