Things to consider before taking money from your pension

Things to consider before taking money from your pension

Transferring out of a Final Salary scheme is unlikely to be in the best interests of most people.

The value of pensions and the income they produce can fall as well as rise. You may get back less than you invested.

The closer you get to retirement the more thought you need to give as to how much money you will have to support yourself.

It is a decision not to be taken lightly, so it is important to consider all of your options before taking money from your pension – below are a few questions to ask yourself.

When to retire?

This will depend on how much you have saved and if it is going to be enough to cover bills and luxuries. At age 55 you are able to drawdown on your pension and take 25% as tax-free cash, but the remainder will be taxed. However, to withdraw your entire fund is unlikely to be the best course of action and advice from a pension specialist is definitely needed if this is being considered.

Of course, some people might not have enough to retire early, in which case the better option might be to leave it invested.

How much money are you going to have?

Think about all the things that you might need to pay for during your retirement, from your daily living costs and any extra emergencies that you have to pay for.

Making a budget is going to be the best way to see exactly what you are going to have in retirement. List all of your outgoings and any other sources of income. This holistic method will help paint a much clearer picture of your retirement.

Do you have more than one pension?

Over your working life you may have paid into more than one pension, a possible idea is to consolidate them all into one plan to make managing your pensions easier. This could potentially reduce management fees and charges, but this decision might not be right for everyone so make sure you get professional advice first.

Do you need to locate forgotten pensions?

If you do have more than one pension pot, do you know where they all are and how much is each one worth? If you can’t remember where you put that statement then the team here at Pensionlite can certainly help.

Get professional advice

Before making any major financial decision that affects your long term future it is important to get the right advice. At Pensionlite our team of dedicated specialist pension advisers have lots of industry knowledge and are able to help you make informed decisions.