Early access to pension cash

Reports in the press yesterday suggest that the Treasury will shortly consult on allowing people early access to the cash in their pension funds.

The plans could see individuals being able to access some of the value within their pension schemes before their minimum retirement age.

Since 6th April 2010, the minimum age at which you can access a pension commencement lump sum (tax-free cash) has been age 55. It was previously possible to access tax-free cash from age 50.

The new rules allowing earlier access are likely to come with some restrictions.

It has been suggested that the cash could only be used to fund specific activities, including educating children, housing and health care.

Increased flexibility is always welcome when it comes to financial products. Allowing earlier access to some of the cash within a pension fund for specific types of expenditure could ease the financial problems many people face each year.

If the new rules are introduced, people who choose to access their pension cash early will need to do so with care.

Even under current rules, those taking tax-free cash at age 55 but deferring a pension income until later need to think ahead to the impact this will have on their income in retirement.

It will be essential to seek professional independent financial advice, consider all of the options carefully and plan ahead to make sure you will still have sufficient pension income available in your older age.

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