Guide to Pension Release

Guide Contents

What does pension release mean?
Why would I need to unlock my pension early?
How do I release my pension?
Applying for a pension release scheme
Pension release FAQs
Where can I go to get more help?

What does Pension Release mean?

All non-state pension schemes have the option of taking up to 25% of the pension fund as a tax free lump sum upon retirement age.

However, if you are aged 55 years or over and have a sufficient amount in your pension fund it may be possible to unlock the pension fund early and access this tax free lump sum before you retire.

This is called pension release or pension unlocking.

Depending on the type of pension you have, a pension release scheme can provide you with the options outlined below:

Pension Release options Provides....
Tax free lump sum Up to 25% of the pension fund's value as a one off cash payment. You don't have to take the full 25%, you can take a smaller percentage i.e. 10% and take the remaining 15% as a tax free lump sum later on or when you retire.
Regular income A regular taxable income either through buying an annuity (giving an insurance company a lump sum in return for regular payments to you) or leaving the funds invested and drawing directly from the pension fund.

Pension release schemes have risks associated with them and it is recommended you have at least £15,000 in your pension fund, before you consider taking anything out of it.

Releasing funds from your pension early will reduce the income you get from your pension when you retire, pension release is not for everyone.

Everyone's pension schemes and circumstances are different so it's very important to take independent financial advice before considering a pension release.

If you take an early pension release, you can still continue to make additional/new contributions to your pension. These will attract tax relief and will be combined with the balance of your existing pension fund when you retire. You can continue to work after taking a pension release.

This guide explains how pension release schemes work, along with things to consider. We also provide helpful resources and links to experts who can give you advice on whether a pension release scheme is appropriate for you.

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