Cash Pensions

The term Cash Pension or Cashing in Pensions, is mainly used for when someone wishes to obtain a cash lump sum of money from their pension funds early. Cashing in pensions is, for the most part, not advisable. This is due to the simple fact that Pension proceeds exist, regardless of whether they are accrued via an occupational pension scheme or through a personal pension scheme, to provide pension plan members with an income for their retired life. Cashing in pensions prior your pensionable age would usually reduce the eventual retirement income.

Cashing in pensions would normally give the pension plan member the option to release part or all of your pension as a cash sum, 25% of which is tax free, and the rest of it would be taxed at your marginal rate of tax or, alternatively, provide you with an income for life, which is also taxed as earned income. Please note that the tax treatment would depend upon your personal circumstances and may be subject to change in the future.

Whether you release pension benefits through cashing in pensions that are occupational or personal, you can still usually take a cash sum as well as income. This tax free cash sum is known as the Pension Commencement Lump Sum or PCLS.

The income you receive after cashing in a pension will depend on several factors including whether the money has come from a personal pension scheme or an occupational pension scheme. To an extent, you have much more choice about how the income will be paid from a private pension compared with an occupational scheme. You have the option of cashing in a pension without the need to take immediate income.

Even so, to cash pensions of any type requires careful consideration of your options, which is where firms such as Grove can help.