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With average debt levels of UK residents increasing and the credit
crunch squeezing the available opportunities for borrowing, individuals
now need to look at alternatives to usual avenues of lending. One such
alternative is a Pension ReleaseScheme.
Pension release is a provision in the UK that allows you to withdraw
money from your pension scheme prior to full retirement. Eligibility
for this procedure requires in the very least that the person is over
50 and has a UK pension plan. Other factors will be assessed on
application before you can be deemed fully eligible to receive a tax
free cash sum and/or income. For the most part, people go through with
the process of releasing their pension funds as they may require some
money now but not have reached retirement yet. Alternatively, an
individual may be thinking about retirement and want to look at their
options.
By taking pension benefits early, the applicant will reduce the amount
of money they will receive in retirement, but it is a way of getting
money out when you need it. A total cash sum of just over 25% of the
full pension fund can be acquired in the first year after applying to
have a pension unlocked. Nearly all of this is tax free. The money can
be taken as Income immediately or left until a later date where it will
be taxed as earned income.
A pension release applicant need not release all available cash
benefits from their pension fund, and it is advisable not to do so if
you do not need it all. Only take out what you need. If all the money
allowed is unlocked, an applicant must be aware that the rest of your
pension fund must be used to provide an ongoing income. This money can
be taken immediately or it can be deferred (as from April 2006) leaving
the pension fund available to take another time. The main advantage of
taking less than the maximum available cash sum is that the untaken
money will stay invested in your pension.
Pension release also works by taking just an income without any cash
sum immediately, and there different ways to do this. An annuity can be
bought - in this case the pension fund is handed over to an insurance
company and they pay back a regular income for the rest of applicant's
life. The annuity market is a very competitive place and rates vary
between companies. By doing some investigation and research, it is
possible to substantially increase your pension income by purchasing an
annuity from the company with the best rates.
The alternative to buying an annuity is to leave the pension fund
invested and draw an income directly from it. This avoids handing over
the pension funds to anyone else, but there are disadvantages that need
noting.
As a best practice, advice should be sort before deciding to release
money from a pension fund. It is important to make sure that the
implications of releasing pension funds is fully understand before any
decisions are made. Pension Release Experts can help with quotes for
unlocking pensions according to the individual pension scheme.
John Horace is a freelance web content writer covering subjects including pensions, mortgages, telecommunications technology and property investment.
He lives in Nottinghamshire but supports Watford FC.
» left by Robert Melaccio, Sr.(6,317) Robert Melaccio, Sr. (141 days 5 hours ago.)
You are getting more like America each day, spending yourself into debt, borrow where you can until you become, well as our politicans call us majority the non credit worthy and irresponsible types. A friendly note of advice, leave your pensiions alone unlkess you have a hardship. They will take as much as they can from you. Respond to this comment
» left by John Horace from United Kingdom (136 days 9 hours ago.)
Hi Robert,
I totally agree, people should leave their pensions alone. As stated, the more you release, the less you will have come retirement. It is important that people know all the avenues available to them in any given situation though, don't you think?
John Respond to this comment
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Article added to SearchWarp.com on Wednesday, July 02, 2008 View other articles written by John Horace(24)
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