When it comes to saving for your retirement there are many options. Auto-enrolment has made it easy for people and their employers to contribute into a pension pot – if you’re looking to cash in on your pension here are a few considerations.
Not until you’re 55
If you’re looking to cash in on your pensions, you’re going to have to wait until you’re 55 to do so. If you do attempt to cash your pensions below this age then you will be charged a tax penalty of 55% on whatever you withdraw.
If you are contacted by anyone who says they can unlock your pension below 55, chances are it is a pension scam and there is a danger you could lose everything.
Move your pensions
While you might not be able to withdraw any savings before the age of 55 you can still move your existing pensions. More often than not when people change jobs their savings can be forgotten about – and there is the possibility they will not grow as effectively, meaning a lack of future savings in retirement.
Locating your existing pensions by contacting old employers and checking statements means you will be able to see how your funds are performing.
If they are not growing at a rate you would expect then you might consider transferring them. By doing this you will give them more opportunity based on the investment type and your attitude to risk.
Transferring into one
Transferring all your old pensions into one can be the most efficient way to manage them. However, sometimes it’s better to leave them where they are.
Most workplace pensions are defined contributions which are valued on how much you’ve paid in and how your investments have performed.
If you have worked for a number of years then you may have a defined benefit (final salary) which is based on your salary and the number of years you worked for your employer. If you transfer out of this type of scheme then you could lose out on any benefits the scheme has.
This is why it is a legal requirement that you should seek professional advice if you wish to transfer a defined benefit scheme which is worth more than £30,000.
If you have recently turned 55 or are approaching this milestone, we can help advise you on the best way to drawdown on your savings.
Get in touch with one of the Pensionlite team today.
The value of your pensions, investments and the income they produce can fall as well as rise. You may get back less than you invested.
Transferring out of a Final Salary scheme is unlikely to be in the best interests of most people.