Pension liberation
If you are short of cash, you may be tempted to ask your pension scheme to release your pension savings before your retirement date. There are a number of firms which claim to be able to help you achieve this goal (in return for a percentage of the released funds), but they rarely explain the tax implications. There are some sharks out there – police raids and arrests of some of the rogues were recently featured on the national news.
If you gain access to your pension savings before the retirement age set by your pension scheme (normally 55 or older), you will be liable to a 55% tax charge. This applies to all taxpayers, whatever their marginal rate of income tax. It also applies if you take a loan from the scheme and repay the funds back later. The firm that helps you access the pension funds will not pay the tax charge for you – it is always payable by the individual.
Pension funds can be safely transferred from one pension scheme to another. It is sometime sensible to do this to consolidate several small pension pots. But you should always seek advice from a qualified financial adviser who is registered on the financial services register, before making any decisions about moving pension funds.
