Pension Release, An Option For People In Debt

Pension Release

Due to recent UK legislation it is now possible for members of the public to access their pension pot once they have reached the age of 55, meaning they can access their money before the previous age of 65.

This comes as a result of the pension reforms’ statement by the FCA back in 2015 that enables people to access their money (up to 25% of their pension pot as a withdrawal, tax free), this process is known as a “release” and there are many companies that handle this in the UK such as this pension release company who have an article section for people wanting to know more about unlocking their pension and the pros’ and cons’.

Is It A Good Idea To Release My Pension?

This is dependent on the person circumstances and the future prospects of the individual(s) looking to release their pension, if a pension release will live an individual short of money in retirement, then they should not release their pension money.

However if an individual is paying out high interest costs and charges for debt repayments, or if there are mortgage arrears or outstanding sums of money to be paid on loans or credit cards, then a tax-free lump sum from a pension can be a desirable solution, (provided their prospects for the future with their personal circumstances are stable).

Reasons Why You Should Consider Unlocking Your Pension

1/ Helps you out in a tough situation by providing a source of money otherwise unavailable

2/ Can provide a useful source of cash for home improvement, or a holiday or an event on the horizon such as a wedding

3/ Can help you to repay outstanding debt liabilities

Reasons Why You Should Hold On To Your Pension As It Stands

1/ Moving your pension is risky and releasing your pension fund will usually mean you need to re-invest your pension into a scheme that requires you take some form of risk (remember to check thoroughly any investment you plan to make before signing up)

2/ You may end up leaving yourself short financially in retirement.

3/ There may be other means to procure the finance you require you repay debt, such as a debt management plan.

In summary

It is at the discretion of the individual however advice can be sought at the citizen’s advice bureau who will give impartial advice in helping people get out of debt.

It would be sensible to look into all options possible before embarking on a pension release, you should find out if there is a less drastic means of managing any outstanding debts and there are a number of options for this besides unlocking your pension.

Alternative Debt Solutions:

IVA’s – Individual Voluntary Arrangements, these are 5 year debt plans after which a debt is considered settled after a series of payments

Debt management plans – Informal arrangement with creditors to repay a debt in manageable chunks over a period of time

Debt consolidation loan – check the rates before agreeing to any loan to see that it is viable.

All in all there are multiple options available, it’s important to research before making your decision.

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