Pension Release or Pension Unlocking

Pension release should not be done unless where dire circumstances dictate

Pension release is synonymous to pension unlocking. It refers to taking money out of your pension scheme early before you have retired. You may have reached retirement age and thus it may be legal to do a pension release. However, if you have not reached retirement age then it may be illegal except for the case where you’re in poor health.

The normal retirement age is defined by the respective workplace scheme, stakeholder or personal pension scheme that you belong to. In most cases, the age is set at 60-65. However, from a legal perspective, you hold all prerogative to withdraw funds from your pension scheme when you are 55 years of age. The ease of withdrawal might vary from one scheme to another. Some may require you to transfer to another different scheme altogether so that you can be able to access the funds.

Many people are doing pension releases for the wrong reasons. They are falling prey to pension scams that are increasingly being rampant. If any person purports that you can do a pension release before retirement age, that’s an outright lie. This is because it is illegal to do so. A fair warning to all who have pension schemes and are being unduly coerced to withdraw their money. Let no one mislead you and swindle you all your hard earned cash. Be on the lookout for any company that wants to give you a loan against your pension. There are other quacks in the name of advisers who would try to convince you that they can ‘help you’ get hold of your pension before retirement age. Beware of such scammers.

If you legally and consciously decide to do a pension release, no one is holding you back. However, there are implications that you should be aware of. First, the total amount that you’d get would be less than the one you would have received if you had not touched it. This will ultimately mean reduced retirement income for you.

But if you really think that you must do a pension release, do so after carefully reviewing the following:

  • If you can sustain yourself with the reduced retirement income after you unlock your pension
  • If you really need the cash you are contemplating to withdraw at that moment
  • The benefits and costs of unlocking your pension, for example, death benefits, etc.
  • If there are accruing penalties ahead of unlocking your pension and whether you are ready to pay
  • Possibilities of raising money in another manner other than pension release
  • How much retirement income would you be having if you had not unlocked your pension

A word of advice is that such considerations ought to be done under the guidance and assistance of a registered financial adviser. Make a point of doing so because there are many uncanny characters out there who will not rest until they fleece you all your money. Do not put your retirement into limbo. Do the right thing.

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