What Is Pension Unlocking?

By Author: Peter Philip
Total Articles: 35
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As well as the money that you yourself provide to the fund, the tax payer will also provide an additional 20%. If you are gaining your pension through your employer, you normally also receive an added percentage from them, on top of what you are paying into the fund yourself.

When you are considering releasing your pension early, you should consider the other options that are available to you. The sale of assets, downsizing, re-mortgaging, short term loans, long term loans or ensuring you are receiving all the benefits that you are entitled too, are just some of the alternative options available to you that will enable you to receive some money, rather than potentially damaging your retirement fund plans.

Pension unlocking is the term used to describe when an individual decides to withdraw money from their pension fund before they have reached the age of 55. If you decide that pension unlocking is something that you want to do, you will be able to receive up to 25% from your overall pension with the rest of the fund being used to find you during ...
... your retirement, this will however mean that the money you will receive when you retire will be substantially less than you originally had accumulated. The initial sum of money that you will receive is known as the Pension Commencement Lump Sum (PCLS). Once you have unlocked your pension the rest of the money in your fund is then classed as earned income, which means it is subject to tax.

Depending on your circumstances, such as whether or not you are married, or whether your pension is a private arrangement or an occupational pension, these will all affect the amount of money that you receive from your pension commencement lump sum. So you may end up unlocking your pension just to find out you will not receive the full 25%.

Pension liberation is the term used to describe releasing your whole pension into one lump sum of cash. There is currently no legal way for this to be done. If you had been with an employer for less than two years and you were paying money into an occupational pension scheme, you may be entitled to releasing your pension fund early, however, normally you will only be allowed to withdraw the money that you put into the account, the money that the employer contributed to your pension fund will be forfeited.

If you are seriously considering releasing your pension early, the best thing for you to do would be to consult an independent financial advisor. A financial advisor will be able to consult with you for the best options that are available, and will let you know whether or not releasing your pension is a wise move to make.