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Can You Cash In A Pension?

Pension Reforms Provide Greater Freedom Than Ever

Many of those approaching retirement age are concerned about the performance of their pension fund. Take control and do something about it.

The pension crisis is a problem that will affect at least 11 million of us over the coming years, as one company after another reports pension deficits in the millions, and in some cases billions, of pounds.

It means that final salary schemes will fall well short, and millions will be left struggling to make ends meet, or will forced to continue working into retirement unless they do something about it now.

Doing something definitely sounds like the better option, but the question, of course, is what to do. Pension reforms that have come into effect over the past couple of years give investors far better control over their money, and the freedom to cash in a pension early and put the money to better use for a more prosperous retirement.

Is this something that you should consider? Let’s take a look at what is involved.

Can you cash in your pension?

In almost all cases, the answer is a resounding yes. However, this immediately leads on to the follow up question of whether you should. This depends on a number of factors, including your age, the amount you are planning to withdraw and what other savings and investments you have.

No two people’s circumstances are identical, which is why it is so important to get some professional, impartial advice. In general, however, the majority of people find that it makes far more financial sense to release at least a portion of their pension pot and put the money to more effective use.

What if you are under 55?

There is a popular misconception that you cannot cash in your pension if you are below the age of 55. This is simply not the case.

Even if you are under 55, there is still the possibility to release money from your pension. There are, however, additional factors to take into account, as you could face higher tax liabilities for doing so.

There are certain special circumstances in which you can release money from your pension before the age of 55 without incurring these costs, for example if you have a serious health condition or have permanently retired.

Whatever your situation, it still makes sense to weigh up your options and take some expert advice. It could be that the pros of cashing in your pension early outweigh the cons of the higher tax bill.

How can you spend it?

It is your money, so that is entirely up to you. Some people choose to reinvest it in alternative financial products, or even in property, where it will generate better returns. Others use it to pay off debts that are incurring far higher interest rates than the pension fund was generating.

You might even use the money to treat yourself to some home improvements, a new car or the holiday of a lifetime.

Is there a downside?

Of course, and money that you take now will no longer be available for you to withdraw as an income source after retirement. This is why cashing in a pension needs to be just one part of a broader investment strategy to make your money work better.

You should always take professional advice and look at all the angles, to decide what is best for you and your family.