Selling Your Pension

Strictly speaking you are not able to sell your pension, however; the term Selling Your Pension is often used when someone wants to take a lump sum of cash from their pension fund before retirement. Selling your pension, or as it should be called Pension Release or Pension Unlocking or even Pension Surrender is, for the most part, not an advisable move.

This is due to the fact that pensions exist to provide a pension plan member with an income during their retired life. The income might be obtained via an occupational pension scheme or a personal pension scheme. This “selling your pension” prior to your pensionable age would usually result in a reduced income during retirement.

If you use the term Selling Your Pension, even incorrectly, it is still likely you mean that you want the option to 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.

Selling Your Pension, whether through cashing in an occupational or personal pension, still usually gives you the option to 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 selling your pension will depend on several factors such as whether the money has come from a personal pension scheme or an occupational pension scheme. To a certain extent, there is much more choice in how the income will be paid from a personal pension compared with an occupational scheme. You do have the option of selling your pension, or as we should say unlock your pension, without the need to take immediate income.

Even so, selling your pension or pension release, regardless of what type of pension it is, requires careful consideration of your options, which is where firms such as Grove can help.