Unlock my Pension - A Guide to Pension Release in the UK

If you are struggling financially or have something specific you need to pay for and can't obtain funds from anywhere else, unlocking part of your pension fund early may be an alternative way to obtain extra income or a tax free lump sum.

Taking out a new loan from a Bank or finance company, with potentially high interest rates may not be the best option for someone approaching retirement. For some people the benefit of taking an amount out of their pension early and reducing their future pension income, may out weigh the costs of financing a loan.

Alternatively if you are paying into an older UK pension scheme which has had low returns as a result of falls in the stock market, your financial adviser may suggest you transfer your pension into another high performing scheme. During the process of transferring a pension, it has to be unlocked so this also provides an opportunity to take a pension release tax free lump sum.

If your circumstances are suitable and your pension scheme allows for a pension release you can use the money however you wish, for example to:

However, because the long term benefits of a pension are hard to replace it is very important that all other possible finance options, such as re-mortgaging, personal loans, or using other savings or assets to raise cash, are considered thoroughly before unlocking a pension.

In all cases you must be sure that your needs are genuine and they justify the loss of income you will incur later in life. The costs and risks associated with a pension release are usually only justified in a very limited number of circumstances.