Pension Freedom Questions and Answers

Yes, but you mustn’t get confused with Pension Liberation schemes which often use similar language to legitimise Pension Unlocking or Pension Freedom arrangements.

The difference is that legitimate schemes will only apply to people aged 55 or over and can currently release the whole of a defined contribution (money purchase) plan as a cash sum of which 25% is Tax Free.

If a company is offering to release a pension before age 55, in the Pension Regulator’s own words; “there is a high chance that these are scams trying to con you out of your money.”

You should only take advice from a company who is regulated by The Financial Conduct Authority.

If you’re aged 55 or over with money in a certain type of pension that you’re not already receiving then you are eligible; however, as already mentioned this does not apply to ALL pensions. It must be a Defined Contribution plan, such as a Personal Pension, employers Group Personal Pension / Group Money Purchase scheme, a Private Sector Defined Benefit scheme (also known as Final Salary pension), or a Public Sector Funded Defined Benefit scheme such as the Local Government Pension Scheme.

This will depend on how much money you have in your pension in the first place; with your permission we’ll find this out for you. It will then depend on whether you want to take a cash lump sum or if you’re looking for income, or both. You can find out about your pension by completing the “Quick Start” form.

CASH LUMP SUM – You can free 100% of your pension fund as a cash sum if it originates from a Defined Contribution plan, Private Sector Defined Benefits Scheme or Funded Public Sector Pension Scheme.

Whilst you can usually free up to 25% of your pension fund Tax Free the balance is liable for Income Tax at your marginal rate.

Please remember that future rates of tax can change and actual tax treatment will depend upon your individual circumstances at the time.

INCOME – How much income you can have from your pension will depend on a number of things, such as your age, health and what death benefits you want included.

You also have a choice about whether to buy what is known as an annuity, or leave your pension fund invested and “draw down” an income each year.

When you want to take income from your pension you don’t have to take it from the pension plan provider with whom you have been saving. In fact it’s probably better that you don’t! In other words, you may save through a pension for many years but when you decide you want income from it you can shop around for the best deal.

All pension plans include an Open Market Option. This is your ‘get-out’ clause which gives you the right to have your income paid by a different provider. To put it another way, it means you can and should shop around for the best deal for your money – remember it’s your money!

This is a difficult question to answer without knowing what pension(s) you have or what your intentions or goals are.

Some pension providers have a charge if you’re looking to get cash out early, although most of them don’t. Any transfers to a new provider are also going to have setting up charges and an amount paid as a fee to our Independent Financial Advisor, as agreed with you in the written advice report.

Our IFA will charge a fee for arranging the transfer, which is deducted from the monies transferred, so you will not have to pay us anything just to find out what your options are. This fee does not affect the amount of tax free cash you will receive. Our IFA will also charge an ongoing fee, deducted from the monies remaining invested, which covers annual reviews and any ongoing advice that you may require regarding this pension.

With any recommendation we make you will be told exactly what costs and charges there are before you decide what you’re going to do. If you don’t do anything then you don’t have to pay us anything. Note- our IFA will pay Ten a commission for client business introduced.

Ten only work with Independent Financial Advisors whom they have a long term business relationship, evidence of an outstanding track record and are fully licensed to G60 professional qualification standard. Unlike some of our competitors who complete all the work via email, telephone and post we are adamant all our clients have a face to face meeting with our qualified advisor. This means you can feel confident you are receiving the professional, expert and complete service throughout the process from start to finish.

No we are not Independent Financial Advisors, Ten is a company that specialises in Pension Freedom and who act as an introducer only to companies who offer Financial Advice and are authorised and regulated by the Financial Conduct Authority. Companies we used are authorised and regulated by the Financial Conduct authority. Ten is not regulated to give advice.

Our preferred Independent Financial Advisor Associates have a combined 47 years experience in the Financial Services Industry holding senior management positions in National Independent Financial Advisory firms. They are also qualified to handle all aspects of financial planning and have the qualifications to handle all areas with regard to pensions and retirement planning. Many IFAs use their expertise with their own clients in relation to final salary schemes.

Yes. We are not able to help with individual funds of less than £30,000 if this is the only pension you have. However, if you have a combination of pensions that in total add up to £30,000 or more, we can help.

Most pension schemes can be accessed either directly or by transferring them into one that can, with the exception of Unfunded Public Sector Pension schemes, which are banned from transferring from April 2015. Ten Pension Freedom specialises in ALL UK Pension Types.

Ones that can be accessed could be Personal Pensions, Stakeholder Pensions, Former Protected Rights Pensions and “old style” Retirement Annuity Contracts. They could be any type of Private Company Pension Scheme, Executive Pensions, Section 32 Buy Out Bonds, Final Salary Pension Schemes (also known as Defined Benefit Schemes) or Money Purchase Schemes (also known as Defined Contribution Schemes).

From April 2015 transfers from unfunded Public Sector Final Salary Schemes will be banned. This includes NHS, Civil Service, Teachers, Police, Armed Forces etc.

The only Funded Public Sector schemes that can still be transferred, and therefore still accessed early, are Local Government Pension Scheme (LGPS) and Universities Superannuation Scheme.

This will depend on what benefits you’re receiving and how much money you want to take out of your pension. It will also depend on whether you take an income now or a lump sum and whether that lump sum is tax free or liable for income tax.

The decision as to whether your benefits are affected is usually made at your local benefits agency so you’ll need to check with them. However; we’ll be able to advise you how most benefits are usually affected.

In a lot of cases your state benefits are not affected if you simply adjust what you take out of your pension. Again, we will be able to let you know about this before you make any final decisions.

No. This is not a loan because the money is already yours; it’s simply a case of getting your own money out of your pension.

No. You would not be selling your pension; in fact the rules don’t allow you to. Again, this is simply a case of you taking money out of something that is already yours.

No. You can get money out of your pension and continue to work.

If, however; you are an active member of your employers occupational pension scheme then it is extremely unlikely you should even consider taking money from that type of pension early.

You have the choice of having it paid annually, half yearly, quarterly or monthly; either in advance or arrears and either increasing each year or remaining level in payment throughout.

In the event of your death you can also make provision for a pension to continue to be paid to your spouse or partner or dependents.

You can usually take up to 25% of your pension fund tax free. The remaining fund is liable for Income Tax, which is dealt with slightly differently depending on whether you take further cash payments from your invested fund or exchange it for an annuity.

An annuity has tax deducted in much the same way as if you were receiving that income in the form of salary.

A lump sum payment over and above the tax free amount is taxed at your highest marginal rate, depending on your circumstances and could be subject to change in the future.

With your existing pension it will depend on the rules of the arrangement. This is one of the things we’ll look into for you.

The death benefits of any new pension arrangement will depend on which options you’ve chosen.

We’ll provide you with full details about your options and explain them to you in a way you can understand.

The most obvious problem with taking any money out of your pension now is that it won’t be available for you at a later date. You therefore need to make sure you’re making the right decision. Remember you may have another 20 to 30 years to live and will require income in that time!

You should always think about whether you would be better off borrowing the money you want instead or, if you have other savings or investments, should these be used instead rather than taking money from your pension.

If you’re considering taking money from your pension early you need to be aware that it would only be suitable for a very limited number of people and circumstances. It will almost certainly reduce your pension income in retirement and if you take 100% cash there will be nothing left to provide retirement income. Also, this should not be seen as an easy option for raising cash.

We will look at all your options and make a recommendation that takes this all into account. Remember, there is no cost or obligation for you to find out what your options are.

And in addition to explaining any penalties for accessing the pension now, we will also be able to warn you as to exactly how this will affect you financially in the long run, before you have to make any decisions or incur any charges.