What is Pension Release

Given the UKs current obsession with property and its rise and then sharp fall in value, its fairly safe to assume that most people are familiar with the term Equity Release or unlocking the money tied up in the value of your home. But what if you have no equity in your home, yet still need to release cash? The answer could lie in Pension Release.

Pension Release or Pension Unlocking is the term used to describe the taking of the benefits of a pension before the normal retirement age. This could be in the form of a tax-free lump sum, monthly income, or a combination of the two. Alternatively, you might want to take a cash-free lump sum and invest the balance to provide you with an income when you do come to retire.

Generally, a maximum of 25% of the value of the pension can be released tax-free, although it is possible to take a larger proportion of cash, but this could be subject to tax.

There are strict guidelines surrounding Pension Release. The Fi nancial Services Authority advises caution with these schemes. Currently a UK pension holder can access a pension unlocking scheme at the age of 50, but this will change in April 2010 to a minimum age of 55.

In addition to the age limit, you also have to have a UK personal or old company pension that you are not currently receiving benefits from. Its possible, for example, that if you have worked for a number of companies over the years, then you might have more than one pension. Even if you have not paid into them for a number of years you could still release the cash early through pension release.

It is worth pointing out that the whole purpose of making contributions to pension schemes is, naturally, to provide an income during retirement. It is therefore important to be aware that releasing your pension benefits early could reduce your income and your standard of living at retirement. This is why Pension Release is only suitable for a limited number of people and circumstances and shouldnt be seen as an easy option to raise cash.

Many people have tried to unlock the cash in their pensions by approaching their pension provider directly. Unsurprisingly many do not provide advice on pension release and will only supply a small number of options. To further confuse the issue there are complex clauses and legal jargon at every turn. For these very reasons its often better to contact a specialist pension release company. Reputable companies are regulated by the Financial Services Authority and will offer impartial advice in plain English. They will not advise you to release cash from your pension unless it is the most suitable option available to you.

Pension release has helped thousands of people to release the cash from their pensions for many reasons. It is only suitable in special circumstances but for many it has provided a financial lifeline at a time when they needed it.

Article provided by Braemar Pension Release (www.pension-release.com)

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