Pension
Release - Frequently Asked Questions
Here are some of the most frequently asked questions that we have
encountered. If your particular question isn't there then please
call us on the above number, or get in touch via our
contact form
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Am I Eligible? |
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Why can’t I take all the money out of my
pension. Do I have to take an income too? |
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Why can't I take the money from my
existing plan? |
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Do I have to pay interest on the lump sum? |
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How much will I get? |
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What do you charge for this? |
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Do I have to retire to take my benefits? |
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How will the annuity be paid? |
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Are the figures from my current scheme
guaranteed? |
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How does this affect State Benefits? |
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This seems too good to be true! |
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Is this really tax free? |
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Am I Eligible?
If you over 55 with money in a personal pension
scheme (or previous retirement annuity contract), then you could be
eligible to receive a tax free cash lump sum and income now.
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Why can’t I take all the money out of my pension?
When you were paying in to your pension plan you got tax relief on the
contributions and the money was invested in a tax advantaged fund. As a
result, you are limited as to the amount that you can take out as a lump
sum. The remainder must purchase an annuity. However, it may be possible
to defer taking this income. If your total pension funds are less than £16000 then you
may be able to commute these on the grounds of triviality. You will need
to ask your existing provider about this.
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Why don’t I just take the money from my existing plan?
You can. You will have to handle all the paperwork yourself and get only
what they want to pay you in terms of the annuity, which will probably
not be the most competitive in the market. You can never change the
annuity provider and would be locked into a potentially inferior
contract for life. Alternatively, we can seek out the best provider for
you, handle all the paperwork and it won’t usually cost you a penny!
(see What do you charge for this?)
Do I have to pay interest on the lump sum?
No. This is your money, not a loan, so there are no
interest payments to make.
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How much will I get?
This depends on your particular circumstances, so we
need to complete a full analysis of your plans, but usually you can look
forward to a lump sum of 25% of the accumulated pension fund
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What do you charge for this?
We will receive our payment from the annuity
provider, usually 1% of the value of the annuity purchased. If you have
a number of small plans that need amalgamating then we would have to
charge you an additional fee, but this is not normally the case.
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Do I have to retire to take my pension?
No. Absolutely not!
You can take the tax free cash and income now and still work. You can
even start a new pension plan with the income payments, as detailed on
our Case Study.
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How will the annuity be paid?
Your annuity can be paid annually, half yearly, quarterly or monthly, in
advance or arrears, increasing each year or remaining level in payment
throughout. You can have benefits built in so when you die you can make
provision for your spouse or dependants.
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Are the figures from my current scheme guaranteed?
Probably not. Depending on what type of
funds it is invested in. If it invests in “unitised” funds then it will
invest in shares, fixed interest and property etc, which change in value
each day. It may be a “with-profit” fund, in which case the value
shouldn’t have fallen unless the company decides to impose a “market
value reduction”
It is therefore possible that by the time we apply for your transfer
cheque the value of your fund may have changed. Wherever possible, we
would ask you to contact your provider at once (or we can do this for
you with your authority) to see if they have a cash, or deposit fund
into which your fund can be transferred so the value can’t fall between
getting a value and actually transferring the funds.
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How does this affect State Benefits?
If you are in receipt of means tested
benefits then these may be affected. We can offer no guidance in this
respect and would recommend you check eligibility on the Direct Gov
website first (www.direct.gov.uk) or contact your local Benefit Office.
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This seems too good to be true!
Well, no, but if you take pension
benefits now then you will almost certainly get less at normal
retirement age than otherwise you would. You must weigh up the benefits
of repaying debt now against having less income later.
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Is this really tax free?
The lump sum payment is currently tax
free. However any income you receive is viewed as part of your regular
income and taxed accordingly.
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