Pension Company Lump Sum

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Can (my) Pension Company stop me taking my Lump Sum at 55 years ? Answer : NO - if it is a personal pension

The question above was entered into Google buy a visitor to our website. We hope they found the answer, but just in case we will take this opportunity to explain in full.

The quick answer is No they can’t stop you, but . . . . . Please let us explain further.

In this case we are assuming the term ‘Pension Company’ means an insurance company who you deal directly with and to whom you pay your premiums, or did pay a premium to at some point. In other words we are not talking about a scheme that is administered by your employer.

An employer’s scheme is administered by its trustees and the scheme rules may prevent trustees from letting you take your lump sum before a certain age, say 60 or 65. But, as previously stated, in this case we are assuming that we are not talking about a company pension.

Assuming that this is a private personal pension that you hold with a pension company then they cannot stop you from taking your lump sum at age 55, but they may not be able to help you in the way you want.

In 2006 the Government made changes to the Pension law that allowed anybody aged 55 or over to take benefits from a personal pension. Benefits means Lump Sum and Income. In our experience, most customers who want to take their Lump Sum before they retire want the Lump Sum only, they don’t want any income until a later date. This where it is many pension companies can have trouble helping you. The good news is that we can help you – read on !

One of the things many people are unaware of is that just because you have saved with a pension company for many years you have no obligation to take your benefits from them. This is one of the biggest secrets in the financial services industry and it is something the regulator is working hard to address. They feel that you pension company should be much clearer on making you aware that you may be better of using the product of another company.

So when you go to your pension company any ask for your lump sum and no income, they simply state it cannot be done. What they really mean is that they don’t have a contract that allows them to do it, if they pay you the Lump Sum they will also pay you an income. In the worst case customers who have not been made aware of this fact have taken an income when they didn't want or need one, simply so they can get access to the Lump Sum. This is a terrible shame as somebody who was planning to take an income at 65, is likely to get considerably less if they are compelled to take it ten years earlier at age 55.

By now you may have guessed that what you need is a pension product that will enable you to take the lump sum and leave the rest of your fund invested until you retire. The good news is that these contracts exist and we can set one up for you in no time at all. They are perfectly legal and regulated by the Financial Conduct Authority. These contracts are known as Drawdown contracts.

Drawdown has many uses and can be used by customers to achieve a number of outcomes. They are far more flexible than standard personal pensions. The ability to take a tax free lump sum now, but defer taking an income cannot be achieved using an annuity or personal pension. It may be possible to take a lump sum from a Self-Invested Personal Pension (SIPP), but only if the contract specifically has this facility. Drawdown on the other hand achieves this objective

It is very important that if you intend to transfer into a Drawdown contract, that the Drawdown provider pays the Lump Sum. If you let your existing provider pay it, you will not be able to use the Drawdown and you will be forced to take an income.

We offer very competitive Drawdown products from selected award winning providers. We can normally get a quote to a customer within a couple of hours. We also include a comprehensive information pack with every quote.

For those customers who are concerned about poor investment performance reducing the value of their remaining fund, we can either offer a product that will give you guaranteed growth in exchange for a fixed term of three years or more.

If you appoint us to administer your drawdown contract, we will do all the work for you including completing the relevant paperwork, liaising with the product providers and of course keeping you updated at every step of the process.

We are also willing to answer any questions you have or explain anything you are uncertain about, all with no obligation to use us. Call 020 33 55 4827 now where a fully qualified member of our team will be willing to help you.

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Published : 30 June 2013    
Author : Bob Cook    
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