Pension Release Explained – Making Wise Choices

Posted on: June, 2, 2015

The UK government has now introduced new regulations, which make pension unlocking accessible for men and women from age 55. Pension release explained in easy terms means that everyone with a private pension can now withdraw all their pension pot funds before the standard retirement age, and not face the mandatory requirement of having to purchase an annuity. Final salary scheme holders can move their funds to a personal pension, and then withdraw the funds if that is applicable.

Early Pension Release Explained

Understanding pension unlocking is very important. There are several choices available, and these involve withdrawing all of the cash or just a part of it: 1.You can withdraw a cash free amount of 25% of the fund value, and use the balance to purchase an annuity, or if desired, you can give yourself an income straight from the fund. Or 2. you can withdraw a tax free lump sum of 25% and keep the remaining apportionment of the pension invested, so that you can purchase an annuity at a later date.

Is Pension Release the Right Decision?

The disadvantage of pension unlocking and opting to receive your pension from 55 years old will however, result in a lower income per month than it would have been if you had not released it until age 65. This is because due to the early pension release the provider of the annuity will have to pay the pension for an additional 10 years. Therefore, although you will have the benefit of receiving your pension for longer, applying for it at this earlier stage means that the extra ten year growth in your investment will be lost. In addition, an early pension withdrawal could well mean that you receive less state benefits. And another negative effect is that will be unable to purchase an annuity which is enhanced and pays out a higher rate to individuals with an under average life expectancy, should your health decline in future years, because your pension fund has already been drawn.

On a positive note however, everyone marvels at having a cash injection, and you have worked extremely hard over many years to reap the benefits of an early pension release. So with this new flexibility and free reign, you will be able to have some spare cash (25% of the investment) to do some of the things that you have dreamed of and wanted to do or take care of, and you can buy an annuity as well, or have the 25% cash and have an income from the fund as well, or have the 25% cash and keep the rest of the money invested. And the great part is that the 25% pension release will be completely tax free. One of the popular options which can endow you with a regular income and give you the 25% tax free money, is to invest the remaining 75% into a plan known as a tax-efficient drawdown. As time goes on this can accrue very good interest which will affect the income that you will receive at a later time. A further option is a combination of moderate sized a tax-efficient drawdown and a small sized annuity. Many people are now wandering is pension release the right decision for them. So whatever you are considering, getting more information on understanding pension unlocking, and finding out further details about the options for your unique situation is imperative. To request more information & Advice, go to :

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