Answered by Andrew Jenkinson
If you haven’t yet reached the age of 55, you usually won’t be able to take any money out of your pension. If you try to take money out of your pension before this age great care needs to be taken as there could be a 55% tax charge.
If you are aged 55 or over and have a defined contribution pension, otherwise known as a money purchase scheme, you will be able to cash in as much of your pension as you want to. This is sometimes known as pension release.
Tax on Personal Pensions
However, you should consider the tax consequences and the effect on your retirement income if you deplete your pension fund too quickly. It is often possible to take up to 25% tax free but anything in excess of this would be taxed at your marginal rate of income tax.
If you are aged over 55 and your pension is a defined benefit or ‘final salary’ scheme, it is unlikely that you can cash in your pension (unless the pension income is relatively small). It may be possible to transfer to a defined contribution scheme and take cash from there, although this isn’t right for everyone. Getting pensions advice is essential to make sure this approach works for you.
If you are at all unsure what to do, please contact us for pensions planning advice specific to your current situation from one of our qualified Financial Advisers.
Frequently Asked Pensions Advice Questions
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