Early Tax Free Cash

To drawdown tax-free cash early from your pension fund you can take advantage of changes brought in from April, 2006 (A-Day), which allow you access to your tax-free cash, but without the need to buy an annuity and start drawing your pension income.

How it works

Transferring your current plan

To achieve this you would need to transfer your current pension plan or plans into a suitable income drawdown type contract and then select a zero income option.

Considerations

Be wary if clearing debts

While this is becoming a very popular idea, for example, to clear debts, care does need to be taken when assessing the suitability of this route. As pensions offer tax efficient savings, it may be more appropriate to find alternative sources for capital, but we can help you with that assessment.

Investments

Building the value of your remaining fund

The balance of the fund, i.e. after the tax-free cash has been taken, is invested in a mix of funds ready for the income to be accessed as required. In addition, you can also still make contributions to the plan, building further funds and tax-free cash.

Important footnote

A word of caution. Taking the tax-free cash early will mean there is less of a pension fund for your eventual annuity purchase. Therefore, you should always seek advice before setting up a drawdown arrangement.