Pension Release

Can I cash in my pension early?

If you are aged 55 or over and not currently paying into or receiving your personal or old company pensions, you can release 100% of your pension as a cash lump sum – up to 25% Tax Free*

Can I cash in my pension early?

If you are 55 or over and have been affected by the coronavirus, lost your job and can’t pay your bills checkout our coronavirus pension guide on how to access and release cash from your pension early.

The government introduced sweeping changes to pension regulations in 2015 know as Pension Freedom, allowing you to cash in your pension early, known as Pension Release.  The new rules give you the option to cash in part or all of your pension as a cash lump sum. The first 25% of is tax free with the rest being taxed at your normal marginal income tax rate.

You are not allowed to cash in your pension before 55 unless your are seriously ill. If your pension pot is worth more that £30,000 you need to take advice from a regulated FCA Specialist adviser, such as ourselves, before releasing cash from your pension.

The FCA has strict suitability rules when cashing in your pension early, especially with defined benefit pensions, for the most part, it is not advisable to take cash out of your pension early. This is due to the simple fact that your pension is there to provide you with an income for your retired life. Cashing in your pensions earlier than your pensionable age will almost certainly reduce your eventual retirement income.

You can take 100% of your pension fund as a cash payment; however, most people choose to just release 25% tax free and leave the rest to take at a later date.

For a significant number of people wanting to release cash from their pension early, not taking the whole lot in one go is the best advice. Taking the 25% tax free cash lump sum and leaving the balance invested in your pension is more advisable, especially if you’re working now. Any additional pension payments will simply be added to your earnings and taxed accordingly whereas leaving that money to take when you retire could mean you pay less tax.

Everyone’s circumstances are different and there are more choices now and more possibilities of getting it wrong if you don’t get professional FCA regulated advice from a pension release specialist.

One thing you can be sure of is that Grove Pension Solutions will be able to advise you which option best suits your needs and circumstances, whilst pointing out both the disadvantages and risks along with the advantages and benefits of pension release.

WARNING

This service only applies to pensions in the UK.

Taking benefits early will almost certainly reduce your pension income in retirement and is only suitable for a limited number of people and circumstances. This should not be seen as an easy option for raising cash.

If you release all your money from your pension early you will not have anything left to provide you with income in retirement.

Pension Release: Guide to cashing in your pension early

Am I eligible?

If you’re aged 55 or over with money in a certain type of pension that you’re not already receiving then you are eligible. However, this does not apply to all pensions. We list the type of pension you can cash in below.

Is pension release legal?

Yes; Legitimate pension release schemes are only offered by FCA regulated specialist advisers and only applies to people aged 55 or over. 

If a company offers to release cash from a pension before the age 55 there is a high chance that these are scams trying to con you out of your pension and will often leave you with heft tax bills or even worse you could lose your entire pension pot.  These scams are know as Pension Liberation schemes which often use similar language to legitimise Pension Unlocking or Pension Release arrangements. 

How much cash can I release from my pension?

This will depend on how much money you have in your pension in the first place; with your permission we’ll find this out for you. It will then depend on whether you want to take a cash lump sum or if you’re looking for income, or both.

CASH LUMP SUM – You can release up to 100% of your pension fund as a cash sum if it originates from a Defined Contribution plan, Private Sector Defined Benefits Scheme or Funded Public Sector Pension Scheme.

25% of your pension fund is tax free but any balance is liable for Income tax at your normal marginal rate.

Please remember that future rates of tax can change and actual tax treatment will depend upon your individual circumstances at the time.

INCOME – You have a choice about whether to buy what is known as an annuity, or leave your pension fund invested and “draw down” an income each year or as and when required.

For an annuity, which can be payable for the rest of your life, how much income you can have will depend on a number of things, such as your age, health and what death benefits you want included.

When you want to take income from your pension you don’t have to take it from the pension plan provider with whom you have been saving. In fact it’s probably better that you don’t! In other words, you may save through a pension for many years but when you decide you want income from it you can shop around for the best deal.

All pension plans include an Open Market Option. This is your ‘get-out’ clause which gives you the right to have your income paid by a different provider. To put it another way, it means you can and should shop around for the best deal for your money – remember it’s your money!

What are the advantage of releasing less than the maximum cash lump sum?

You can take less than the maximum cash sum allowed, even if this option isn’t offered to you by your existing pension provider.

This is very useful for those people who don’t need to release the whole amount all in one go. For example: you may have a need for a specific cash sum, which is less than the maximum you could take.

By only taking what you need it has the advantage of leaving more money invested in your pension. This means more should be available for you at a later date, although the value of your fund can go down as well as up.

You do not lose your entitlement to the balance of what you didn’t take. This balance can be taken when you retire or even sooner if you have a change in circumstances and need it.

Again, there are both advantages and disadvantages with this option so it’s important to make sure you are aware and understand both. 

What if I only want income?

It’s possible to take just income from your pension without releasing a cash sum and there are a number of ways you can do this.

One option is to buy an annuity, which is simply handing over your pension fund to an insurance company and them promising to pay you back a regular income for the rest of your life.

The annuity market is very competitive and the rates differ between companies. It’s possible to substantially increase your pension income by purchasing your annuity from the company with the best rates, which means you get the biggest income. This is called “Exercising the Open Market Option” and it usually costs nothing, with the exception of an adviser’s fee or commission, to take advantage of this option. There are many different ways an annuity can be paid to you, so it’s important to make sure you get the right one and at the best possible rate.

You can also take advantage of enhanced rates if you are a smoker or in ill health, which basically means you get a bigger income if you smoke or your health is such that it could affect how long you live.

As an alternative to buying an annuity it may suit you better to leave your pension fund invested and simply draw an income directly from it. This way you don’t have to hand over all your money to an insurance company in exchange for an annuity. However; there are risks with this that you’ll need to be made aware of and understand.

Whichever option you choose it’s always a matter of making sure you get the one that best suits you both now and in the future and that you are fully aware of the disadvantages as well as the advantages. Any income is subject to Income Tax at your marginal rate, which may change in the future.

If I take ongoing regular income how will this be paid?

I have the choice of having it paid annually, half yearly, quarterly or monthly; either in advance or arrears and either increasing each year or remaining level in payment throughout.

Various options are available depending upon whether you take the income via a draw down arrangement.

Will I have to pay extra tax?

You can usually take up to 25% of your pension fund tax free. The remaining fund is liable for Income Tax, which is dealt with slightly differently depending on whether you take further cash payments from your invested fund or exchange it for an annuity.

An annuity has tax deducted in much the same way as if you were receiving that income in the form of salary.

A lump sum payment over and above the tax free amount is taxed at your highest marginal rate, depending on your circumstances and could be subject to change in the future.

What happens to my death benefits if I die?

In the event of your death you can also make provision for a pension to continue to be paid to your spouse or partner or dependants free of inheritance tax.

With your existing pension it will depend on the rules of the arrangement. This is one of the things we’ll look into for you. For example; an occupational pension scheme can only pay death benefits to your spouse or a dependant whereas an individual arrangement can pay them to virtually anyone.

There are also tax differences between ongoing pensions paid to beneficiaries depending upon which type of scheme they are paid from. If paid as a scheme pension from a Defined Benefit scheme then it is taxed as part of the income of the beneficiary. If paid as an annuity or income from a draw-down pension arrangement then the income is tax free as long as death occurs before age 75. On death after age 75 it is taxed as income of the beneficiary.

The death benefits of any new pension release arrangement will depend on which options you’ve chosen.

We’ll provide you with full details about your options and explain them to you in a way you can understand.

Question: I have an income paid to me from a pension but what happens to it when I die?

Pensions come in various types and the rules applying to them vary considerably. The pension may be paying you an income directly or it may have been used to purchase a policy that pays an income.

You may be considering accessing your pension early, even if you haven’t retired.

Probably the simplest type of policy is an annuity whereby an insurance company will exchange your pension fund for a promise to pay you an income for the remainder of your life.

The cost of the annuity and the level of income will depend on many factors. For example, if you are a smoker, diabetic or suffer poor health then the income may be enhanced. [This is the reverse of life insurance.]

There may even be a guarantee that the pension will be paid for say the first 5 years even if you die sooner, say after 3 years.

However, the pension or part of it may continue to be paid after your death to a surviving spouse or civil partner for the remainder of their life, if this was how the annuity was set up.

But in its simplest form it would be paid for as long as you live and then cease. However, if you elected not to receive an income then you most probably are drawing an income from the fund, even if that income is £0. Unlike an annuity, if you are drawing an income there will most probably be a fund to be left to relatives, albeit subject to tax.

As explained, annuities could be bigger if you are in poor health, in which case there may be benefits in deferring taking the income until a later date, when your health is more likely to deteriorate.

You are allowed to release a tax free cash lump sum early and defer taking the income. You’ll need to consider whether this is suitable and if alternative options make better financial senses, however, early pension release is a very real consideration.

Will this affect my state benefits?

For those on certain State Benefits it may be advisable to limit yourself to taking just £6,000 tax free cash, thus keeping you below the threshold on losing your State Benefits.

This will depend on what benefits you’re receiving and how much money you want to take out of your pension. It will also depend on whether you take an income now or a lump sum and whether that lump sum is tax free or liable for income tax.

The decision as to whether your benefits are affected is usually made at your local benefits agency so you’ll need to check with them. However; we’ll be able to advise you how most benefits are usually affected.

In a lot of cases your state benefits are not affected if you simply adjust what you take out of your pension. Again, we will be able to let you know about this before you make any final decisions.

Can I still work and cash in my pension?

Yes you can cash in your pension even if you haven’t retired yet but need some cash now. If you’re 55 or over and have either a Personal Pension or old Company Pension you’re not currently receiving, you can cash in your pension even if it was originally set up to an older retirement age, of say 60 or 65. If, however; you are an active member of your employer’s sponsored pension scheme then it is extremely unlikely you should even consider taking money from that type of pension early as you would lose your employer’s contribution.

Is pension release a loan?

No. This is not a loan because the money is already yours; it’s simply a case of getting your own money out of your pension..

Am I selling my pension?
No. You would not be selling your pension in fact the rules don’t allow you to. Again, this is simply a case of you taking money out of something that is already yours.
Why do I need to speak to an adviser before cashing in my pension?

If your pension pot is worth £30,000 you are legally obliged to seek specialist FCA regulated advice. Your pension provider will not release your pension until they have confirmation that you have take regulated FCA  advice.

Defined Benefit Scheme (company Final Salary Scheme)

Many schemes will not allow you access your benefits early, but if they do it is likely to be an all or nothing option. This is usually a lump sum payment and a pension income for life. If you only have a small amount in this type of pension you may be able to take the whole lot as a one off cash payment. All in all there is generally no flexibility in what you can do.

Most employer schemes will let you transfer your pension fund into a private arrangement, where you can take advantage of the full flexibility that the new pension freedom rules allow. You can take whatever cash payment that suits you now and leave the balance to take at some stage in the future.

You are also likely to have far better death benefits available from these plans.

Why speak to us? We can look at all these options for you, as we have the special permission from our regulator, the Financial Conduct Authority (FCA), to give advice on these types of occupational pension scheme. If you decide taking your pensions benefits direct is better for you then you can do that and if you don’t use our services then you don’t pay us anything.

In a nutshell, by asking us to look at your options you have nothing to lose and everything to gain.

Defined Contribution (Personal Pensions)

Whilst you can go direct with these types of scheme, it is quite likely you won’t be offered the full range of pension freedom flexibility available. You may just be allowed to take the whole amount as a cash sum in one go.

Again, as it doesn’t cost you anything to find out your options when using our service, you can look at your options and then make an informed decision about what suits you best. If you want to go direct, then you won’t have to pay us anything if you don’t use our services.

Please note that in both the above cases taking some or your entire pension as a cash sum will reduce the amount of income you will have during retirement.

What's the risks of cashing in your pension early?

The most obvious problem with taking any money out of your pension now is that it won’t be available for you at a later date. You therefore need to make sure you’re making the right decision. Remember you may have another 20 to 30 years to live and will require income in that time!

You should always think about whether you would be better off borrowing the money you want instead or, if you have other savings or investments, should these be used instead rather than taking money from your pension.

If you’re considering taking money from your pension early you need to be aware that it would only be suitable for a very limited number of people and circumstances. It will almost certainly reduce your pension income in retirement and if you take 100% cash there will be nothing left to provide retirement income. Also, this should not be seen as an easy option for raising cash.

We will look at all your options and make a recommendation that takes this all into account. Remember, there is no cost or obligation for you to find out what your options are.

And in addition to explaining any penalties for accessing the pension now, we will also be able to warn you as to exactly how this will affect you financially in the long run, before you have to make any decisions or incur any charges.

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Types of pensions you can cash in early

Below is a guide to the different types of pension you can cash in at 55 plus.

Personal/Stakeholder, Group Personal Pension, some Defined Contribution Company Pensions.

Definition: Money is paid by you and/or an employer, usually to a pension company. Personal Pensions, Stakeholder Pensions, Former Protected Rights Pensions and “old style” Retirement Annuity Contracts. They could be any type of Private Company Pension Scheme, Executive Pensions, Section 32 Buy Out Bonds, Final Salary Pension Schemes (also known as Defined Benefit Schemes) or Money Purchase Schemes (also known as Defined Contribution Schemes

The contributions are invested in a fund or funds and what you get will depend on investment returns and how much was paid in.

Can I just cash in and release a target sum of cash from my pension now?

YES – You can cash in any amount you need; however, it is likely you will need to transfer your pension pot into a new contract, which will allow you to take advantage of the new Pension Freedom rules.

There are a number of different options: you could take just the tax free part of your fund now (up to 25% of your pension pot), leaving the remainder to release at a later date (this part is liable for income tax*).

Alternatively you may want to release an amount that is partly tax free and partly taxed; it will depend on your current circumstances and future plans.

Can I cash in and release 100% of my pension fund as a single cash lump sum payment?

YES – You can cash in and release 100% of your pension pot as a single cash payment, usually from your existing contract.

25% is tax free; the balance is liable for income tax*.

With careful planning and forethought, spreading release of your payment over more than one year can sometimes save significant amounts of tax or the loss of state benefits.

Private Sector and Funded Public Sector Final Salary pensions

Definition: Also known as Defined Benefit Pensions or Final Salary Pensions; these are typically provided by bigger employers, including Local Government Pension Scheme (LGPS) and Universities Superannuation Scheme.

You are guaranteed a pension in retirement based on your length of service and earnings.

Can I just cash in and release a target sum of cash from my pension now?

YES – You can cash in and release any amount you need; however, it is likely you will need to transfer your pension pot into a new contract, which will allow you to take advantage of the new Pension Freedom rules.

There are a number of different options: you could take just the tax free part of your fund now (up to 25% of your pension pot), leaving the remainder to release at a later date (this part is liable for income tax*).

Alternatively you may want to release an amount that is partly tax free and partly taxed; it will depend on your current circumstances and future plans.

Can I  cash in and release 100% of my pension fund as a single cash lump sum payment?

YES – You can cash in and release 100% of your pension pot as a single cash payment; however, you will have to transfer your pension pot into a new contract, which will allow you to take advantage of the new Pension Freedom rules.

25% is tax free; the balance is liable for income tax*.

With careful planning and forethought, spreading release of your payment over more than one year can sometimes save significant amounts of tax or the loss of state benefits.

Unfunded Public Sector Final Salary Pensions

Definition: Known as Defined Benefit schemes or Final Salary Schemes such as the NHS, Teachers’, Police, Civil Service, Armed Forcesand emergency services schemes etc .

You are guaranteed a pension in retirement based on your length of service and earnings.

Can I just  cash in and release of cash from my pension now?

NO – These types of schemes are banned from transferring into a Defined Contribution pension and as a result are unable to take advantage of the flexibility Pension Freedom allows.

You are only able to receive benefits direct from the pension scheme and dependant on the rules of that scheme.

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Pension Release Case Studies

Can I cash in my pension early?

John had an old government pension from when he used to work for his local council which has a cash equivalent transfer value of £40,000.

Can I cash in my pension to pay off debt?

If you are aged 55 plus you can your pension fund to raise cash and clear unwanted debts.

Can I Pay off credit card debt with my pension?

If you have credit card debts you may be able to pay them off by releasing money from your pension early.

Can I cash in my pension to pay off my mortgage?

Should you use a cash lump sum from your pension to pay off your mortgage

Can i cash in my pension to buy a house?

Helen needed money urgently and used pension release to buy a house.

Release cash from your pension to move abroad

Dorothy needed to raise as much capital as possible to move abroad.

PENSION RELEASE PROCESS

Simply fill in the Get Started form. We will send you an information pack. Complete the form at the back of the pack telling us what pensions you want us to look into.

We will then present you with a clear set of recommendations in plain English, only advising you to transfer your pension if we believe it’s in your best interest.

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1. COMPLETE OUR GET STARTED FORM

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2. SPEAK TO ONE OF OUR ADVISORS

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3. MAKE YOUR DECISION

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4. RECEIVE YOUR CASH

FAQ’s

Are you Independent Financial Advisers?

We are not Independent Financial Advisers, but are called “Restricted”. This is because we are a specialist company dealing solely with Pension Release and at retirement services and as such there are a limited number of providers who also specialise in pensions. We have sourced who we consider to be the best providers for this type of business but that is a limited list.

Will I have to see an adviser face to face?

Not unless you want to.

A large part of our service can be conducted by a combination of Telephone, Royal Mail, SMS and Email. However, given the complicated nature of Pension Release we would recommend a face to face meeting, especially if your enquiry relates to an old company pension scheme. Having said this though, the choice is entirely yours.

 

I am talking to my own financial adviser about this, why would I need to speak to you?

Talking to your current financial adviser is a good idea as a starting point – if they can help that is great.

It is very possible they are unable to advise you about Defined Benefit pensions schemes (or those that have safeguarded or guaranteed benefits) because they don’t hold the correct permissions from our regulator, the FCA. Even if they do, what you have to ask yourself is do they have the knowledge and experience to advise you about what is a very complicated and risky subject.

We are a specialist firm who deal with nothing else. The best comparison is with that of your GP, very good at general advice, but once they have identified what your problem is will then refer you to a specialist consultant, that is who we are.

Again, as it doesn’t cost you anything to find out your options when using our service, you can look at your options and then make an informed decision about what suits you best. If you don’t want to use us and you want to go direct, then you won’t have to pay us anything.

Is there a minimum value of pension fund that Grove can advise on?

Yes. We are not able to help with individual funds of less than £10,000 if this is the only pension you have. However, if you have a combination of pensions that in total add up to £10,000 or more, we can help..

Do you do the work yourselves or ‘farm it out’?

Unlike some of our competitors we complete all the work ourselves and do not “farm out” some of it to other financial service companies. This means you can feel confident you are dealing with the actual company doing the work and giving the advice – we are directly answerable to you.

 We also have permission from the Financial Conduct Authority (FCA) to advise on BOTH Personal and Company pension schemes; this requires additional professional qualifications and robust monitoring structures to protect you.

How much will it cost me?

This is a difficult question to answer without knowing what pension you have or what it is you want to do.

 Some pension providers have a charge if you’re looking to get cash out early, although most of them don’t. Any transfers to a new provider are also going to have setting up charges and an amount paid as a fee to us, as agreed with you.

We charge a fee for arranging the release, which is usually deducted from the monies transferred, so you will not have to pay us anything just to find out what your options are. This fee does not affect the amount of tax free cash you will receive. We also charge an ongoing fee, deducted from the monies remaining invested, which covers annual reviews and any ongoing advice that you may require regarding this pension.

With any recommendation we make you will be told exactly what costs and charges there are before you decide what you’re going to do. If you don’t do anything then you don’t have to pay us anything.

Complaints

First of all, if you have a complaint, you should complain to the business you’re unhappy with. Financial services complaints that cannot be settled may be referred to the Financial Ombudsman Service Tel: 0800 023 4567.

Need Pension Release Advice?

It’s free to find out your options 

Grove Pension Solutions Ltd is regulated by the Financial Conduct Authority.

We are financial advisers specialising in pension release. We help people understand their pension release options and how to cash in their pension early. We have been doing this for many years now, long before the Pension Freedom changes came into effect.

We have provided professional advice to thousands of people over the years.

Our service allows you to evaluate your Pension Freedom options without paying a penny. It’s only if you decide to go ahead with releasing all or part of your pension pot that you pay a fee. You are under no obligation to go ahead if you don’t want to.

Get Started Today and receive our free Information Pack on Cashing in your pension at 55.

Testimonials

Very satisfied from start to finish with the quick & professional service.

Mr HB, Lancaster

I found your service to be very professional. The people I had contact with were very patient and understanding.

Mr DW, Bradford

The Grove Pension Release company are very helpful who go through every aspect step by step so that you understand. … The service you get is A1 and the staff are polite and helpful in every way. The response and service I got was second to none.

Mr GA, Widnes

I would recommend your services to anyone. A good job well done. Thanks.

Mr SM, Nottingham

….what can I say. This company has been a breath of fresh air. I fully recommend any one considering any form of financial planning to contact Grove Pension Release. In plain English, those people are “NOT” cowboys. Thank you for all your help.

Mr EG, Bedford

Your staff were very helpful from the start and very professional in their approach to what is a complex field. I would recommend your services to anybody.

Mr AS, Oxford

From the moment I went on to the website with Grove, right to the end of my pension dealings. They’ve acted in a very professional way with myself, I would recommend them to any person who – like me – needs much needed help on pension release. Well done to everyone at Grove, you deserve a pat on the back, thank you.

Mr KW, West Bromwich

from the point of initial contact right the way through to what was an extremely painless and satisfactory final outcome I was treated with courtesy, politeness and kept informed of every stage. My requests for any further clarification are treated with great patience and understanding.

Mrs HB, Newcastle Upon Tyne

I thought the process of pension release would be difficult but was made easy to understand by the very helpful staff at Grove.

Mrs KS, Runcorn

GROVE SUPPORTED CHARITIES

Grove actively support the following charities and institutions

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Bromley Mencap
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