Pensions you can and cannot access from 55

Pension release has become a very popular option in recent times, so if you have been told by your provider that you cannot access your savings, it can be very confusing and disappointing. The good news is that even though you have been given a negative response, it pays to check out your pension a little deeper to get the full facts. This page outlines the reasons why you may have been deterred from taking any further action and how you can explore what other options might be available.

Many people may take the word of their pension provider that they cannot access their pension as final, and give up considering pension release any further. Although it may appear that your provider has declined your application for pension release, there may well be other routes you can take to access your money. Some types of pension do not allow access at all, some schemes allow for direct access and others need a more indirect route through pension transfer with the support of a financial adviser.
Pensions you can and cannot access from 55

Why did my pension provider say no?

It is more than likely that your provider was acting in your best interests, but perhaps was not aware of all the options open to you. For instance, it may be that the type of pension you hold with your provider, does not give the option of releasing your pension directly through pension release. However, if your pension is eligible under the current regulations, there may be other routes you could take to access your savings, which may require independent financial advice. As most pension providers, do not usually offer financial advice, it is likely you will only be told what is acceptable within the rules of their scheme.

It’s worth remembering that most pensions were setup before the freedoms were put into place, so they aren’t equipped to offer this function. Therefore, it may be worth seeking financial advice to assist you with the options you have.

Pensions you can and cannot access from 55

How can I find out if my pension is eligible?

The most effective way to find out if your pension is eligible for pension release is to seek the help of a financial adviser, who can check if your pension has this option. An adviser can guide you through the process, explain the different choices available and provide you with a recommendation of what is the best way to move forward, based specifically on your circumstances.

Do I have the right type of pension?

Releasing money from your pension at the age of 55 through pension release is not a feature that is available with all pensions. You can facilitate it with private and most company pension schemes but pensions such as local government schemes (LGPS), will require a slightly different approach which involves pension transfer. There are some schemes which you cannot access until retirement. Generally, these include unfunded public sector pension schemes (occupations include: NHS, military, police, fireman, teachers) which only allow access at retirement and do not allow pension transfer. You would not be able to use pension release with pensions that you are already taking an income from or from the state pension. Accessing your pension early shouldn’t be taken lightly though, as it could affect your future retirement income, so it’s important to seek financial advice before making any decisions.

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How will it affect my pension if I need to transfer to a new pension scheme?

The pension scheme you currently have will no doubt offer valuable benefits and features. Some schemes such as those called defined benefit and Local Government Pension Schemes, may come with certain guarantees upon retirement. These schemes tend to not allow you to access them flexibly from the age of 55 (you may still be able to take early retirement), instead you would be required to move into an alternative private scheme that allows money to be released. Private pensions will also have attractive benefits and features, but it’s important to consider what you will be losing with what you will be gaining in the short and long term. It’s vital that you seek regulated financial advice for these final salary pension schemes, as sometimes the guarantees will be too good to give up, and understanding the pros and cons of each option will enable you to make an informed decision.

Do I have to use a financial adviser?

Not all pension providers will insist that you seek financial advice and will allow you to access money direct. This doesn’t necessarily mean that it’s the best option to take, as there can be drawbacks by not shopping around, such as higher scheme charges from going direct. A regulated financial adviser however will ensure that your money is placed in the most efficient pension and one that is right for you. A recent study shows that people who get financial advice will end up with over £27,000 more pension wealth than those who don’t.
Some pension providers will require that you use a financial adviser. These tend to be if you have built up more than £30,000 worth of benefits into either a final salary pension, or a pension with guarantees attached. This regulation is put in place to ensure you are aware of all the pros and cons of transferring your money to another pension scheme and to help keep you safe.

1 http://www.telegraph.co.uk/finance/personalfinance/pensions/2802698/Serps-mass-mis-selling-or-witch-hunt.html

*Tax treatment depends on your individual circumstances and may be subject to change

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