Legitimate Pension Release DOES NOT equal Pension Liberation

There has been a lot in the press lately about Pension Liberation. This is where you are offered the facility to cash in your entire pension, less any charges and commission, irrespective of your age.  In The Financial Conduct Authority’s (formerly The Financial Service Authority or FSA) own words “There is a high chance these are scams trying to con you out of your money”.

Unfortunately The FCA’s “Warning about early pension release schemes” does not make it at all clear there are legitimate Early Pension Release schemes too. However, it is important to note that even though there are legitimate options, these are only suitable for a limited number of people and circumstances  and certainly shouldn’t be considered as a quick short term fix.

If you are aged 55 or over, with a UK pension scheme you are not paying into or receiving, you can usually access your entitlement of Tax Free cash immediately. This is known as crystallising your pension fund in order to generate your Pension Commencement Lump Sum (PCLS); however, the standard limit is 25% of the value of your pension fund as a cash lump sum – tax free; the balance (the remaining 75%) being used to provide an income, which is taxable. The income can either be taken at the same time as the lump sum or deferred until a later date. This type of business is regulated by The FCA and uses HMRC approved products.

This legitimate way of accessing your pension early can be achieved even if your existing pension provider or company pension doesn’t allow it but it will mean transferring your existing arrangement into another product. As already mentioned, this will be a transfer to a UK company using an HMRC approved product and there are likely to be charges for doing so.

Typically the legitimate companies call this Early Pension Release or Pension Unlocking. Unsurprisingly, most of the firms involved with Pension Liberation use the same terminology in order to give the appearance of legitimacy.

The safest way to make sure the advice you are receiving is good is to make sure you are dealing with a UK based company, which is registered and therefore regulated by The Financial Conduct Authority. You can do this by simply looking them up on The FCA website to make sure.