Should I cash my pension in at 55?
Should I cash my pension in at 55?
So, you’ve reached the age of 55 and you’re thinking about cashing in your pension.
The first question you are probably asking is can you cash in your pension at 55? For most schemes, the answer is yes.
The bigger question you should be asking is:
Should you?
There are lots of things that can be done but aren’t always in your best interests.
Sometimes the effects can be short lived, like eating too much at Christmas. After a couple of days, you’re probably fed up with eating turkey or chocolate and your waistline is looking forward to and end of the festivities!
Getting your pension withdrawal wrong can cost you for decades.
What your pension needs to provide you, depends on your personal circumstances. You have saved this money up for your retirement and you could live another 30 years. Your state pension might not start until 68 and so how are you going to fund yourself between now and then?
After that, will the state pension be enough?
Drawing your whole pension – how would it work?
If you cash in the pension, you can probably take up to 25% of the fund as tax free cash.
Once that’s out of the way, if you withdraw any more, you’ll pay income tax on it. If you’re still working, you could very easily make yourself a higher rate taxpayer and pay tax at 40%.
In an extreme case you might even end up losing your personal allowance or paying tax at 45%.
Not all pension providers provide the full range of withdrawal options. You might be forced to either take everything or nothing. Switching to a new plan may be your best option here.
How we can help
What we offer is an initial call. We’ll discuss what you want to achieve and what you know about your pension plans.
If we choose to work together, we’ll arrange for us to speak to your pension provider on your behalf.
We’ll be checking:
1) What benefits does your pension provider – are there any guarantees or protections?
2) What options you have available within your current scheme
3) What are your needs in retirement and how can we help you achieve that?
When we have the outline of a plan, we can discuss and agree a plan and what it will cost. You can find out more about our charges here.
We will only recommend what is in your best interests.