Taking A Pension Early
Pensions are long term plans designed to provide an income at retirement. That's at retirement when your other income ceases and you want a source of regular income to keep you hopefully in(or close to) the manner to which you have become accustomed.
The decision to take a pension or the Tax Free Lump Sum should be taken only after serious consideration.
Why Take A Pension Early?
Q. Can a pension be taken early?
A. Except in the case of serious ill health a pension can only be taken at any age after age 55.
Q. Why are pensions taken earlier?
A. It should be because of an emergency requirement for cash but often it is because of impatience to get hands on the cash.
Q. Are there genuine circumstances where it makes sense?
A. Only really in the event of a genuine emergency. However there can sometimes be a case for using the tax free cash to settle debt that is very expensive to service or can no longer be serviced.
Q. What are the pitfalls of taking a pension earlier?
A. There are quite a few.
- The pension fund (or the bit that is taken) stops growing.
- It will considerably reduce the chances of an adequate pension at retirement.
- There may be penalties, sometimes considerable, for taking benefits earlier.
- Special guarantees such as higher annuity rates could be lost.
- Death Benefits may be lost.
- Social security benefits may be affected.
Q. If I still want to take my pension early what should I do?
A. Ask your provider/scheme for an early retirement statement and always seek independant financial advice.