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Cash In Pension

Cash in pension:

Factors to Consider Before Taking Cash in Pension.

With the implementation of the new law in the UK, more people aged over 55 are planning to enjoy and take their cash in pension starting next year, April 2016 to be exact. Pensioners can enjoy their pension pot in whatever way they wanted to spend it. However, people who want to cash in their pensions must be aware of some implications that may arise from their chosen option.

One implication is the tax issue when pensioners take their cash in pension all at once. Taking the lump sum at once means paying for the tax liability in one big time. The law reserves the 25% free from tax, leaving 75% taxable, which is still pretty heavy on retiree’s pocket.

Cash in Pension options to minimise the burden?

The first option being recommended by experts is to invest your cash in pension into real estate property such as bedroom apartment and have it leased for passive income. You can avail of mortgage to sustain the financial requirement in purchasing the property and amortise it using rental income.

The second option is to put your cash in pension into a deposit for sure interest income. If you put your money into fixed-rate bond with at least five year locked-in period, you would surely get an income by the end of the bond period. However, this is subjected to income tax liability too.

The third option is to put your hard-earned pension into online peer to peer account that matches borrowers with savers for the latter’s higher interest income. However, do not put all your eggs in one basket; otherwise, your money is not safe. Higher risk means higher return and vice versa.

Cash in a Pension

Another option is for you to withdraw your cash in pension gradually over time while you are enjoying your retirement. The 25% will remain tax free, but as you withdraw the 75%, tax liability becomes due and payable too. While you are enjoying the rest of your pension, you can put it in a small business and earn income from it and grow from small amounts. Despite the tax, you still have some income that will augment your financial needs.

If you are not confident enough that you could handle your finances, leaving the 75% taxable pension with your provider is also a good option. Most providers put money into low risk investments, but this also means lower return for your pension fund.

Regardless of what option a person takes cash in pension, possible implications must always be given attention. Your health condition and plan of leaving an inheritance to your surviving heirs are also factors to be considered before pursuing an option.

Cash in Pension Team:

Contact our ‘cash in pension’ team to learn and discover what options are available to you. We have vast range of options for you.


Cash in pension

Cash in pension