The Basics of Pension Release Now More Clearly Explained Than Ever Before
Pension release is a way to take as much as 25% of the total pension amount in a tax-free cash lump sum.
Many people are turning to Individual Savings Accounts (ISAs) rather than pensions for their retirement savings, simply because they feel that it’s impractical to lock away your money for your entire life until retirement. However, it’s important to know that those over the age of 55 have the option of pension release, which is a way to take as much as 25% of the total pension amount in a tax-free cash lump sum.
This is generally not a course that is recommended to anyone who is not struggling significantly to raise capital, and many experts will first say that to turn to a re-mortgaging, personal loans, or selling off other assets before dipping into pension. In the end, the decision is entirely up to the individual, but it is imperative that s/he seek out advice from a pensions expert before deciding to pursue pension release.
Though pension release is sometimes referred to as ‘early pension release,’ it’s important to distinguish between the completely lawful practice of taking some of the pension amount at the age of 55 and the option that many new companies are offering: unlocking the pension amount beforethe individual is 55 years old. In many cases, these companies claim to be able to release more than 25% of the pension as well.
However, the Financial Services Authority (FSA) and HM Revenue and Customs (HMRC) have both warned against these schemes, with HMRC going so far as to say the unlocked pension may be subject to extra tax of up to 55% if one engages in one of these dodgy pension release schemes. In addition to the tax dangers, these companies don’t unlock the money for free — they usually take exorbitant commission fees and may even invest the remainder of the pension amount in a non-FSA regulated overseas pension.
For more information, please visit https://medium.com/@shortnuseful/the-basics-of-the-pension-release-376234f3288f#.6ym1vaqc1
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