Beware of pension trap when accessing your savings pot before retirement
15.04.2022 - 17:11
/ dailyrecord.co.uk
Most workers across the country only really start thinking about retirement when they are nearing it, largely due to the fact that making the decision to stop working can be daunting.
Understanding retirement can sometimes be the difference between having a secure financial future or taking a risk which can lead to financial repercussions.
For many people with a private or workplace pension, knowing they can start to access their hard-earned savings from the age of 55, while still in employment, is a temptation hard to resist. However, some may not be aware that by doing so, they could affect how much they get when they do eventually retire.
Michelle Crowley, wealth planner at Succession Wealth, shares some essential tips on accessing your pension before retirement.
Beware of pension trap when accessing your funds before retirement
Accessing your pension before retirement could trigger the Money Purchase Annual Allowance (MPAA), potentially reducing how much you can tax-efficiently save into a pension over the rest of your career.
For most people, their pension becomes available at the age of 55, rising to 57 by 2028, even if they plan to work past this point. It means you can access your pension while still working, providing flexibility, however, thousands may be doing so unaware that it could affect their pension contributions in the future.
Retirement planning means pulling together a lot of different information and understanding regulations. When you access your pension for the first time, it’s important to have a plan in place.
The decisions you make when deciding to access your pension could affect your income for the rest of your life, so a long-term outlook is essential.
You also need to consider things like how