What’s the best way to access my pension early?
If you are considering a pension loan then you should read this first. Pension loans are exactly what the name implies – a loan. Loans have to be paid back usually with interest and over a long period this can mount up.
There are many schemes available on the internet offering this type of service which on the surface can appear to be the answer, they can however work out very expensive.
You should be aware that there are quite frankly easier and less costly options. One one of these ways to access the cash in your pension is through a company that we found and in our opinion offers the best, tried and tested option to access your money.
It is 100% legal and transparent with HMRC. Even better, is that the average schemes only allow you to borrow up to 50% of your pension where Control Your Pension puts YOU in control of your pension.
So if you are genuinely looking to utilise or make better use of the funds you have set aside for your retirement, firstly seek advice from a qualified financial advisor but secondly speak to someone who can give you options.
Take a look at Revive My Pension as they offer a “best of both worlds” tax free solution for over and under 55’s. They also have a pension cash release calculator.
We’ve chosen Revive My Pension as our top website as we have had numerous feedback regarding their choice of options to either reinvest or take advantage of current options available to access cash.
As part of our review criteria we completed their online contact form and were pleasantly surprised by the quick response from one of their consultants. Everything was explained in plain English and was easy to understand. Having discussed the options available (of which there was a good choice of routes to access small or large portions of funds) there was no hard sell involved and we were not harassed by further follow-up calls.
What we like about this particular website is that they actually offer a choice of products allowing clients access to the solution best suited to their needs or circumstances.
What we liked:
- Quick response
- No pushy sales calls
- No upfront fees
- Good cash options
- Brexit-proof protection
What we didn’t like:
- No options for smaller pension values under £20,000
Pension Loans explained
The term ‘pension loans’ has been coined to describe the early release of funds in a pension scheme or part thereof. It is important to note that if you opt for one of the schemes you could be left with very little or zero savings at retirement and could even be liable to pay tax.
How does it work?
The pension needs to be transferred out of its current scheme to another. It is during this transfer process and sometimes after that you will be forwarded a cash lump sum directly or indirectly. This could be set up as a loan equivalent to the value of your pension either in its entirety or a small portion, which may need to be paid back.
The many websites!
We have seen many websites which offer loans people who have pensioned schemes. These loans may not directly come from your pension but a loan might be given to you without the need for credit checks if you transfer your pension to their scheme under special arrangement.
What is the catch?
The first catch might seem obvious but the fact is you will not have that money at retirement so you should consider wisely before opting for such a scheme even it may seem like an easy way out if you need cash urgently.
The second is that you may be charged high fees for the arrangement to take place in the form of a commission. These commissions vary but typically will be around 20% to 30% of the pension value.
Depending on the scheme that you have selected you may be liable for tax. So ensure to check if you will be liable for these charges.
What to look out for
You should be wary of websites offering immediate cash lump sums. The release of immediate cash is likely to have significant tax implications.
Take financial advice from an independent advisor before engaging in any pension loan scheme. Ensure that you understand the full consequence of opting for such a loan. Many of the websites promoting these loans are authorised as financial advisers and should therefore explain everything to you.
Yes there are many loan schemes and to be honest, these are suited for the higher valued pension funds.
Loans against pensions which are under £10000 are on offer all over the internet but with these schemes, owners can lose thousands. We have been told by previous pension holders who used these schemes that they ended up with on average £3000 out of a £10000 pension fund!