Pension Release FAQs

Pension Release FAQs

What Is Pension Release?

Pension Release is a way of withdrawing funds from your pension scheme before you retire. It is also known as pension “unlocking”. It relates only to pensions not yet in payment and does not give you access to any State Pension benefits.

Provided you are over 55 years of age, you have a legal entitlement to release or unlock a pension not yet in payment – although the rules of your current scheme may not allow it, meaning that you need to transfer to another pension scheme and bear any costs and loss of benefits such a transfer might entail.

What Are the Main Disadvantages of Pension Release?

There are two main drawbacks:

  • By unlocking part of your pension, you diminish the amount and value of your remaining pension fund, so reducing the income which the pension had intended to provide you during your retirement.
  • Although you may withdraw up to 25% of the pension fund’s value as a “Tax Free” lump sum, you may only do so once.

Am I Eligible for Pension Release?

You need to be 55 years of age or over, have a personal or former company pension scheme not yet in payment and have a need or objective for the money as releasing benefits from your pension early may significantly reduce your pension income at retirement.

How Much Will I Receive?

Every pension is scheme is different and, as your Independent Financial Adviser we would need to conduct a thorough and detailed analysis of your pensions before we can answer the question.

Once we have all the information required we can establish how much you could receive in tax free cash and/or income or a combination of both.

Typically, you can release up to 25% of your pension as a Tax Free lump sum. Any additional benefits taken will be taxable at your highest marginal rate (up to 45%).

It is important that we establish how much you ideally need to release, as you may not require the full 25%, leaving this invested in your pension until retirement.

Do I Have to Retire to Receive a Lump Sum?

No, you may take benefits and continue to work.

It is typically not possible to release funds from your current employer’s pension scheme if you are still making contributions to it and it is a Defined Benefit – or Final Salary – pension scheme.

What Are the Benefits of Professional Advice About My Pension?

Your pension is designed to take care of your financial needs throughout your retirement – so it is essential that you take sound professional advice.

Here at Independent Pension Specialists Ltd (IPSL), we make it our mission to provide the best possible independent advice, informed by our meticulous research and taking into full account current pension legislation and the range of pension contracts and retirement planning solutions available.

This may or not reveal that Pension Release is a suitable option for you – it is not for everyone. The decision is complicated by the sheer number of variables:

  • 20 mainstream pension providers in the UK offer 70 different pension contracts.
  • These include schemes such as Guaranteed Income (Annuity), Flexible Income (Flexi-Access) Drawdown, Flexible Lump Sums (uncrystallised fund pension lump sum), unlocking the whole of your pension pot in one go, as well as other Third Way products.
  • Any one of these schemes may change its current terms and conditions.
  • Each scheme typically carries a number of options from which to select.
  • If you are considering investment-backed options, there are literally thousands of underlining investment funds from which to choose.
  • Whatever your decision, it is likely to have a major impact on the future level of income you receive from your pension and may also carry significant tax implications.

What Services Do You Provide?

We are Independent Financial Advisers and not an insurance company or an annuity provider – our specialist advice is on pensions and retirement planning-related matters.

Our wide range of services includes:

  • Independent Financial Advice.
  • Pension Specialists.
  • Research of the whole market.
  • Finding the appropriate product for you.
  • Investigating all Pension Transfer options.
  • Liaising with legal advisers and scheme administrators.
  • Dealing with all the paperwork requirements.
  • Arranging the set-up of a new policy.
  • Arranging the transfer of funds.
  • Providing ongoing monitoring and review of your pension arrangements

What Services Don’t You Provide?

At Independent Pensions Specialists Ltd, we do not:

  • Provide legal advice.
  • Receive your money into our bank account.
  • Arrange transfers into occupational schemes.
  • Deal with total pension values below £100k.

What Are Your Fees?

We do not make any charge for the initial assessment and/or face to face meeting/telephone discussion, to determine your objectives and establish whether our services are appropriate for you.

We help you decide which service may be right for you and will agree the fee before commencing any chargeable work on your behalf

Our fees reflect the nature of whatever services you ask us to perform – the fee structure and methods of payment is fully documented in our Key Facts “about our services and costs” document. This, along with our Terms of Business document will be issued to you automatically upon receipt of your initial Enquiry Form and Letter of Authorisation. You may request a copy in advance, or you may download a copy from our website.

In addition, there may be charges made by your existing pension provider for releasing funds before or after your policy retirement date. Remember that you might be giving up guarantees in any Pension Transfer and that these are, in a way, also a cost to you if you lose them.

If a Pension Transfer to a new company is recommended, there are likely to be set up charges.

How Long Will It Take?

It might take longer than you expected and is dependent upon:

  • Your return to us of the relevant forms as quickly as possible.
  • The time taken by your pension scheme or schemes to return all the information we require.

Thanks to our excellent relationships with many pension companies, and with the help of our dedicated and experienced team, we do everything to ensure that the arrangements are completed as quickly as possible, once you decide to proceed.

If a Pension Transfer to a new company is recommended, there are likely to be set up charges.

If I Draw an Income as Well as a Lump Sum, How Will This Be Paid?

You can have your pension paid as a regular annuity income; annually, half yearly, quarterly or monthly, in advance or arrears, increasing each year or remaining level in payment throughout.

Provision may be made that, in the event of your death, a pension continues to be paid to your spouse and/or dependents.

Our adviser will discuss all the options with you and recommend the most suitable annuity for your circumstances and objectives.

There are also other income options available which do not involve the purchase of an annuity. These are only appropriate in certain circumstances and our adviser will discuss these with you.

Will the Figures I Receive Change?

They may, depending on what type of pension it is.

Typically, so-called Defined Contribution schemes (such as Personal Pensions) are invested in your own name and the value of the investments fluctuate daily.

So-called Defined Benefit schemes (also known as Final Salary pensions) usually guarantee their figures for three months from the date they are calculated.

If you are not sure which type of pension you have, please contact one of our advisers who will be able to help.

What Happens if I Die?

If you die before any transfer takes place, the rules of your current pension scheme will still be applicable.

If a transfer takes place then any death benefits payable will depend on the rules of the new pension set up. We will supply full details at the time.

Will Pension Release Affect Any of My State Benefits?

Your state benefits may well be affected if you release benefits from your pension.

You may need to contact Jobcentre Plus or the Department of Work and Pensions for full details, before you proceed with Pension Release to see if and how your State benefits are affected.

Do I Have to Pay Tax on My Pension Release?

Current legislation allows you to unlock up to 25% of your pension fund tax free.

Remember, though, that HM Revenue & Customs (HMRC) consider the unlocked sum to be part of your income for the year it is received. Depending on your financial circumstances, therefore, you may need to pay income tax on the released amount.

Do I Have to Pay Monthly Premiums to the Policy?

No, not if you don’t want to, but there is an option to make further contributions if you so choose.

Can I Continue to Work Whilst Taking Early Benefits?

In most cases, yes.

You can draw on your pensions once you reach 55 and continue to work. Many people continue to work even though they are drawing their State Pension and are over retirement age.

HMRC will include any pension payments you receive as part of your income when working out how much tax you owe. This is normal and will happen whether you access your pension now or later.

Can I Sell My Pension?

UK law prevents you from selling a pension fund.

Can I Make Up the Shortfall, After I Have Released Cash From My Pension?

It is important that you take account of what your actual income requirements will be once you retire fully. Our report will provide you with projected benefits at your normal retirement age.

If the income available to you appears insufficient to meet your needs, it is important that you take measures to make up for this shortfall by making extra pension contributions, reducing your expenditure, or extending your working life.

Can I Have a Face to Face Meeting With You?

Yes, you can. We would arrange a convenient appointment for you to visit our offices in Maidstone, Kent – they are just 3 minutes’ walk away from Maidstone West railway station, or if you are driving, we have a car park at the rear of the building.

Otherwise, all our business is conducted by post, email or telephone and draws on the latest technology where necessary.

If you have a question that is not covered in these FAQs, please call 01622 238000 for assistance.

What we do

Getting the right financial advice at the right time can literally change people’s lives. This is what our business is about.

Who we work with

We specialise in working with people who are saving towards their retirement, are approaching retirement, or have recently retired.

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In some circumstances, more than one service or a combination of services may be appropriate.


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