You can now manage your pension so quickly, thanks to the pension reforms of 2015. However, if you are nearing your retirement, or if you are thinking about the future, you’ll need to consider your options.
Accessing Pension Funds Early
If you decide to access your pension funds early, it’s important that this is for a wise purpose and not just because you want the money now. If you’re planning on using these funds to buy the property or go traveling then take some of the cash out as needed while leaving enough in there for retirement day when they will be most useful.
Cash In Your Pension Right Now
You’ll need to be qualified for the State Pension1, and you’ll also have had to be paying money into your work pension throughout your working life. This will allow you access to each of those pension funds at different ages.
The government decides how old a person needs to be for their State Pension. If you aren’t that specified age, you won’t be able to withdraw funds every week. The age for men is 66. Women will have to be 67 (which has only been in place since 2008).
The good news is that:
You can access your work or your pension earlier than that age. Once you reach 55, you can cash in all your funds or a lump sum. The lump-sum will, of course, be tax-free, up to 25%.
Tax will be charged on the remaining funds when they’re withdrawn. There is an option of buying an annuity with all your funds. The annuity will pay out a stable income until you pass away, or until the funds run out. You don’t have to stick with an annuity either. You may also reinvest your pension in something else if that suits you better.
Taking Money From Your Pension Pots Could Affect Your Benefits
Pension pots are a boon for many retirees, providing them with an income to see them through their retirement years. However, it isn’t always wise to take money from your pension pot because doing this could affect the benefits you will receive in the future. If you decide that taking some of your pension is necessary, make sure to understand exactly what impact this decision will have on other parts of your life.
Taking Your Whole Pension Pot as Cash
One of the most common reasons for taking your whole pension pot as cash is to supplement income. However, this move can be very costly so it should only be attempted if you are certain that you will make up for the loss in other ways. Plus, once the money has been taken out and spent there’s no getting it back again!
How Does Drawdown Work?
Drawdown² is an extremely flexible option. Many people do that instead of buying an annuity. With drawdown, you are freed to reinvest your cash into other funds, and you can also take out any amount at any time.
Now, let’s talk about reinvesting your pension.
Invest the Money in a Drawdown Fund
If you’re not sure what to do with your pension pot, it could be a good idea to invest the money in a drawdown fund. This will allow you to take out some of the cash as needed and leave the rest invested for security.
What does this mean to you?
When you choose to do so, your funds will most likely go into shares, cash, and bonds2. The money that you’ll receive is dependent on how your funds are performing in their new location.
Nevertheless, you aren’t guaranteed cash flow forever. Even though drawdown makes it so easy to gain access and release your pension funds, those funds might run out at some point.
Can I Cash In My Pension?
Think about this:
Consider the pros and cons before you draw cash from your pension funds. Have a comprehensive plan ready.
You’ll be able to keep seeing the funds’ performance. There’s an online dashboard that will show their performance. Once you are 55, you can start taking out money from your funds very quickly. As long your bank details are verified and accurate, it will be only 7-10 working days until you get your money.
Can I Withdraw Money Early from My Pension?
The answer is yes! You can absolutely withdraw money from your pension earlier than you’d planned or thought you could. Once you are 55, you’ll have access to your pension funds. You can withdraw any amount you wish to or need to, so if you’re stuck financially, your pension pot can be a saving.
Can You Withdraw Money from A Retirement Fund?
Yes, you can! You need to be over 55, though. Your retirement fund opens up for you to manage once you turn the minimum age, and you can then decide what you want to do from there. You can withdraw everything and invest in something else, or take a little every month from your retirement fund.
Can I Take A Lump Sum from My Pension?
Yes, you can take a lump sum from your pension pot, you’ll be taxed accordingly. If you withdraw 25% or less or your total amount, you won’t be taxed. Otherwise you’ll be charged the normal tax rate on the rest of your funds.
Can You Withdraw Money from A Standard Life Pension?
Once again, you can start taking lump sums or segments from your pension once you turn 55 (although this age might change). However, there are other ways to withdraw money from your pension. You can set up an annuity (a stable life-long income) or choose a flexible income (a drawdown pension).
Before Concluding, Let’s Define 2 Things:
There are certain terms which are good to know about when you’re thinking about your pension. Pension Pots, Pension Providers, and Lifetime Allowance are all very important and commonly used terms. Firstly, pension pots are the total amount of pensions you have: workplace and personal all combined, as well as any others you might have.
Secondly, pension providers are the companies that help you with your pension. And lastly, your lifetime allowance is how much benefit you’re allowed to gain from your pension, which is limited.
It turns out,
You can get your pension before you retire! There are many options to choose from and it’s never been simpler!