PENSION RELEASE FAQ’s
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. It must be a Defined Contribution plan, such as a Personal Pension, employer’s Group Personal Pension / Group Money Purchase scheme, a Private Sector Defined Benefit scheme (also known as Final Salary pension), or a Public Sector Funded Defined Benefit scheme such as the Local Government Pension Scheme.
How much money can I get out of 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. You can find out about all your options by completing the Get Started form.
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 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 types of pension schemes can be accessed?
Most pension schemes can be accessed either directly or by transferring them into one that can, with the exception of unfunded Public Sector Pension schemes, which have been banned from transferring since April 2015. Grove Pension Release specialises in ALL UK Pension Types.
Ones that can be accessed could be 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 unfunded Public Sector Final Salary Schemes that are banned from transferring include NHS, Civil Service, Teachers, Armed Forces and emergency services schemes etc.
The only Funded Public Sector schemes that can still be transferred, and therefore still accessed early, are Local Government Pension Scheme (LGPS) and Universities Superannuation Scheme.
I have heard that I can get the money from my scheme myself, why would I need to speak to you?
This may well be true; the options you will be offered will depend upon the type of scheme you have.
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.
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.
Will this affect my 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.
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..
Is this 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..
Is Pension Release legal?
Yes, but you mustn’t get confused with Pension Liberation schemes which often use similar language to legitimise Pension Unlocking or Pension Release arrangements
The difference is that legitimate schemes will only apply to people aged 55 or over and can currently release the whole of a defined contribution (money purchase) plan as a cash sum of which 25% is Tax Free.
If a company is offering to release a pension before age 55, in the Pension Regulator’s own words; “there is a high chance that these are scams trying to con you out of your money.”
You should only take advice from a company who is regulated by the Financial Conduct Authority (FCA).
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.
Am I selling my pension?
Do I have to retire to get money out of my pension?
No. You can get money out of your pension and continue to work.
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.
Please also see “I’m still paying into other arrangements” on the Pension Freedom page.
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.
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 dependents.
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 if I die?
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 drawdown 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 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.
So what's the catch?
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.
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.
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.
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.
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.
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