Shall I Cash My Pension Now?

The amount of money that you contribute to the fund on a monthly basis is flexible;

you decide how much you want to pay in, and if your circumstances change, you can alter the amount youre paying into the fund at any time. Your pension is then invested into places that you choose. The success of your investments will provide you with extra value to your pension fund. The earlier you decide to start a pension the better off you will ultimately be, you will be able to contribute more money from your own wages as well as gaining more money from the investments that you will make with your pension.

There are many different types of pensions that you can choose from. Employment based pensions are where an employer and the employee both contribute money to your pension fund. There is no tax on money that is contributed to the fund, which allows for a greater build up of money that can be used for when you retire. Social and State pensions are a benefit that you will receive if you have made national insurance contributions. Once an individual has reached pensionable age and they have met certain requirements you are qualified for a social and state pension, this form of pension is however taxable. If someone suffers from a disability, some pension plans could provide an early retirement plan for someone who is below the retirement age.

So, shall I cash my pension now? With the current economic state, more and more people are asking themselves that question. Unlocking your pension early will mean that you can get up to 25% from your pension fund in one big cash sum. This money is not taxable and you will be able to spend it on anything you desire. Cashing your pension in early will, however, mean that the overall pension fund that you will acquire when you retire will be greatly diminished. The rest of your money that is left in the fund will then need to be turned into a regular income, this can be done in the form of an annuity.

An annuity is where an individual provides either one payment of a large sum of money, or numerous regular payments to a parent company. The parent company will then make future monthly payments to the client when they retire; this is all part of a financial contract between both parties. When an individual reaches the age of 75, an annuity is compulsory. The annuity has an unknown duration length, it is based upon when an individual passes away, and this is when the contract will terminate. If there is any money left in the fund it will either be forfeited or passed onto any beneficiaries or annuitants that are named on your contract.

by: Peter Philip

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