What Is Pension Release?..pension Release, Sometimes Know As Pensions Unlocking, Is The Term Used Wh

Pension Release, sometimes know as Pensions Unlocking

, is the term used when people want to release funds from a pension early. It applies to both Occupational Pension Schemes (whether they are Defined Contribution or Defined Benefit) and Personal Pensions.

There is an age restriction that applies, which means you must be aged 50 or over. In 2010 this minimum age is increasing to 55.

Occupational pensions work in a different way from personal pensions. Nearly all personal pensions these days allow you to release funds from age 50, even if the plans were set up to an older age originally. However; it is also usually the case that if you decide to release a tax free cash sum (currently know as Pension Commencement Lump Sum PCLS), then you will also be forced to buy an annuity with the balance.

The maximum PCLS is 25% of the fund value; the remaining 75% is handed back to the Insurance Company in exchange for them providing you with an income for the rest of your life. Whilst the cash sum is tax free the income is classed as earned income and therefore liable for income tax at your highest rate. This means that if you are a higher rate tax payer you will pay higher rate tax on the annuity; if you are a basic rate tax payer then you only pay basic rate tax. You must be careful though; when you add the income from the annuity to your other income it could push that part of your earnings into the higher rate tax bracket.

You do not have to buy the annuity with the insurance company the pension was taken out with. You can release the PCLS from them but buy the annuity with another provider. This is known as taking advantage of the Open Market Option (OMO) and all pension providers must offer you this option. It is important you take advantage of this because you can sometimes increase the income you receive substantially.

You also have a choice of what shape annuity you buy and this will depend on your circumstances at the time. For example, if you are married you may decide to include a pension that will be paid to your spouse in the event of your death this is usually 50% of the pension you were receiving but does not necessarily have to be that amount, it can be 100%. You can also choose whether the pension is paid yearly or monthly or if it remains level throughout or increase by say 3% each year. However; you must remember that each extra benefit you add onto the annuity the smaller the payment you will receive in the first place. So someone with a 10,000 fund to buy an annuity, if everything else is identical, the annuity that includes a 50% spouses pension will be a lower annual payment than the annuity that doesnt include a spouse pension. Or, the person who wants to include a spouses pension equal to 100% of their annuity would start with a lower annuity than the person who only includes a 50% spouses pension.

It is very important not to necessarily take the options being offered by your existing pension provider because there are always other choices. For example, you could decide to transfer your pension fund away from the existing contract you are in and put it into something that is more flexible. You now have an option whereby you can still release the maximum PCLS (or a smaller amount if that is all you need) but decide to leave the rest of the pension fund invested in the plan to take some other time. This is not something you are likely to be offered with the existing plan. This is because it is a relatively new development in pension legislation and was only introduced in April 2006 so if your pension was taken out before this date (and quite possibly even after this date) the contract is not likely to have been amended to allow this option so the only way you can take advantage of it is to transfer into a new contract that does have this facility.

You must be careful with this because there are sometimes penalty charges applied when personal pensions are taken earlier than originally intended. Also, there are sometimes guaranteed rates that only apply if a pension is taken at the original selected retirement age, so if you elect to release your pension early you could loose out. Mind you, sometimes when a pension provider makes a penalty charge for accessing the plan early, all they are really doing is clawing back the charges they would have made had you left the pension invested to your original selected retirement age. In other words, they are going to take these charges anyway its just a case that if you release your pension early they take it in one go rather than a smaller annual amount being deducted form the funds if you left them.

Whatever the reason you are thinking about releasing your personal pension early for, it is extremely important you dont make a rash decision. Even if there arent any charges or penalties for releasing a pension fund early, you are still likely to get less than you would have got had you waited until your normal selected retirement age. So make sure you spend some time investigating all your options before making a final decision. Think about whether you will have enough income in retirement and if the reason you want to release money from your pension early is a good enough reason, or if there is an alternative way of achieving what you need other than releasing your pension early.

If you are looking at releasing money from an occupational pension earlier than normal there are other issues you need to consider. Defined Contribution (DC) pensions are not usually as good as a Defined Benefit (DB) pension. With a DC scheme you usually pay in a percentage of your salary and your employer also contributes. The pension you eventually get in retirement will largely depend on the size of your pension fund. A DB scheme works differently. With these sorts of schemes you get the promise of a pension paid in retirement, which is dependant on how many years you work for that employer and what your final salary is. The longer you work for that employer the bigger the percentage of your salary you will get as a pension in retirement.

What makes DB schemes so good is that you, the member, has no investment risk at all, it is all down to the employer taking the risk. This is because you are promised a pension at retirement based on a percentage of your final salary. Whatever the cost it is for the employer to pay you that pension, they must find the money. If there is a stock market crash or some other event that means the value of the pension fund reduces, it is not your problem. You will receive the pension you are promised at retirement and your former employer must pay it.

With both DB and DC schemes you should never even consider releasing funds early if you are still an active member of the scheme. This is because you will lose the contribution being paid in by your employer, and quite likely lose other ancillary benefits such as life assurance, known as Death in Service.

Defined Contribution schemes will operate on a similar basis to a personal pension when considering the merits of pension release. Defined Benefit schemes are completely different and you are likely to reduce pension benefits considerably if you release your pension early. In fact, these types of scheme are universally considered to be the best types of pension scheme you can have so you should only consider releasing benefits early as a matter of last resort.

Having said all of this, there is a place for Pension Release or Pensions Unlocking but you should always seek professional advice and look at all your options before making a final decision as to whether it will be suitable for you.

Most of us take goodbyes for granted. I know I used to. Thats to be expected when we experience them as often as we do. When we say goodbye, we assume we will see that particular person again. The reality is the next goodbye you share with someone could be your last. There is always a slight chance you will never see that person again.

Im not trying to bring you down or to be negative. Not at all. Im not suggesting that you break down crying like a baby every time you say goodbye to someone. Im just pointing out that goodbyes are strong moments in the human experience, and we should learn to appreciate them. If you are uncomfortable saying goodbye to someone, as it might be when you know you will not see this person for an extended period of time, then embrace the discomfort and allow yourself to feel it. Dont shirk it off or try to subdue it (that would be counterproductive to maximizing your life experience). To avoid a goodbye altogether is nothing more than robbing yourself of one of the more powerful moments in life.

Two of the most important moments in life that Ive outlined in this book will always generate a goodbye. One of them is Introduction (you cant meet someone without also saying goodbye); and the other is Reunion, which we will talk about later.

When a goodbye is coupled with introduction, you need to pay close attention to this encounter. You need to give your best first impression, and you should also enhance the goodbye in some manner. If you manage to successfully do both, then you have capitalized on a particularly strong moment in the human experience. You will have left a memorable impression with whomever you met.

Ive had a strong aversion to goodbyes my entire life. I dont fully understand why. At family reunions, parties, or any get-together, I would almost always exit by the back door whenever I left. Few people ever saw me go, and I soon developed a reputation for sneaking out.

Now that Im a little older and a little wiser, I take the time to say goodbye. I make sure I thank my hosts and shake their hands or give them a hug. Even though I fully understand how important goodbyes are for the human spirit, I still find myself a little uncomfortable whenever I experience them.

Death is the ultimate goodbye. There is a finality to someone dying that cannot be comprehended until you actually experience it. When someone dies, family members and friends cant ever experience the seven moments with them again. All we can do after someone passes is to reflect on the moments in life that we did share with them. If a close friend or family member has passed away in your life, what sort of memories come to mind when you think of this person? More than likely your memories will be based around the seven moments.

When I was in the fifth grade, my father worked in construction and would leave the house very early in the morning, often before daylight. He would get up before anyone else in the house and make coffee. I can still remember the smell of the coffee brewing. When hed leave, I would go outside and stand in the middle of our small town road and wave goodbye until the taillights from his work truck faded into the dark. Those mornings when I said goodbye to my father are my earliest memories of how powerful a goodbye can be.

You should appreciate a goodbye situation every time you experience it, no matter how painful or how emotionally light it may seem at the time. When you say goodbye, focus on that moment. Be sincere. Pay attention to the details.

The next part of this article series is titled How To Improve Your Quality of Life by using the Seven Moments - Moment #5

by: asbservices9

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