Pensions freedoms have brought financial flexibility for those entering retirement age, however you must be aware of the consequences of withdrawing lump sums from your pension pot, especially if you plan on doing so before retirement age.
Since pension freedoms were introduced in 2015, over £17 billion has been withdrawn from pension pots as cash lump sums and annuities. There has been much debate over how effective these new freedoms have been, and worries over how much money people are leaving for themselves in later retirement. Now, some companies are targeting under-55s to let them know they are able to access their pension early. While this is true, with it comes financial penalties which some people may not be aware of.
Withdrawing Before Retirement
If you are under the age of 55 and withdraw from your pension, there are a number of ways you may be penalised financially. Your pension company will likely charge a fee for facilitating the withdrawal, and can charge as much as 30% of the withdrawn amount. You will also incur a 55% taxation on whatever you withdrew from HRMC. If you still wish to withdraw, despite the hefty financial cost, you must choose a reputable company to assist you. All costs to you must be clearly laid out by them, and you must be made fully aware of the process.
Before you make a bad decision regarding your pension or retirement fund, do speak to a trusted financial advisor to find out all of the consequences and processes of accessing your money. If you would like to chat about your pension, please get in touch. We'll be happy to help.
