There are two main qualifications that you need to fulfill in order to cash your pension in early:
- You must be aged 55 or over
- You must have a pension that you are not receiving or paying into (this does not include the state pension)
Most pensions can be cashed in early, whether they are ones set up by your employer as company pension schemes, or whether they are personal pensions. It may be the case that your current pension provider says you can’t cash the pension in early; however, you can usually transfer that pension into an arrangement that does allow it.
The big question that you need to ask yourself even if you are eligible to cash in your pension early is “should you do it?”
For most people the answer has to be NO. The reason for this is because pensions are designed to provide benefits for when you retire so if you are thinking of taking it early the chances are you will end up with less in retirement than you would otherwise have – that can’t be a good thing.
For a limited number of people however; it can be a very good thing. It will all depend on their circumstances and reason why they think they need to cash their pension in early.
You must look at all the costs involved including charges by both the pension provider but also the advisers. It also is sensible to compare what you would have got from your pension had you waited to take it at retirement compared to what you will get back cashing it in early. You need to consider what other options you have and whether you will be able to retire.
It is a complicated business and should be a decision that isn’t made lightly. It is always sensible to get professional advice as well and make sure you understand the consequences of what you are considering doing before you make any final decisions.