New rules apply from 6th April 2015 which allow you more freedom in taking benefits from your pension. We would be delighted to discuss your options with you, and what they might mean. However, due to the Government introducing Pension Freedom compliance guidelines have become much stricter and there are now more steps we MUST all follow.
To help you to consider these options and what they might mean for you, we must first urge you to seek guidance from the Pension Wise and Money Advice Service information sites. These can be accessed at:
If after looking at these sites you decide that you wish to receive advice from us regarding accessing your pension, we will ask you questions about your circumstances and your objectives, and we will discuss your options and make a recommendation as to which option may be the best for you.
Our commitment to our clients is to ensure that they make informed decisions. We therefore outline below the risks and potential disadvantages of accessing your pension funds.
The Risks of Accessing your Pension Funds now
Below are some of the potential risks and disadvantages that may apply to you should you decide to access your pension plans immediately. You can shop around different financial institutions to check you are getting the best deal for your own circumstances.
- Your retirement income will be reduced by accessing your pension funds early.
- High levels of income / withdrawals taken from the pension may not be sustainable over a number of years. You could run out of money.
- You could lose guaranteed benefits which already exist in your plans now.
- There may be penalties for releasing your pension funds early
- There may be charges and costs incurred with accessing your pension funds. These could be very high in some circumstances.
- There could be a loss of benefits for your spouse / partner by accessing the pension funds.
- In the future, inflation may mean that the purchasing power of the funds you hold is reduced –however your existing benefits may protect you from inflation.
- If you are suffering from ill-health or taking certain medications you may benefit from an ill-health (impaired) annuity for life – instead of accessing the pension funds.
- Tax: Only the first 25% is deemed to be ‘tax-free’. The remaining funds will be taxed as income and you could pay a significant amount of income tax. You should check the amount of tax deducted to make sure that it is correct for your circumstances.
- Tax: Withdrawals from your pension could become subject to Inheritance Tax.
- Taking benefits could mean that you cannot claim some State Benefits, either now or in the future.
- Pensions are usually safe from creditors in the event of bankruptcy – cash released from the pension funds does not have the same protection from creditors.
If after reading the above, you understand the potential risks and would still like to speak to us about accessing your Pension, please call us on 0800 772 0042 or fill in the form below.