Taking pension early for medical reasons
It could be possible for an individual to access their allowance before the age of 55 if they are unable to continue to work because their health forestalls them from doing so.
Benefits from the registered scheme could be taken before the minimum pension age if the member is in ill health. To pay benefits in these circumstances, the scheme will need a written opinion from a registered medical consultant that the member is incapable of continuing their current occupation because of ill health. Benefits can be taken in two forms:
1) up to 25 percent of the fund (including protected rights) can be taken as a allowance commencement one-off sum (PCILS), which is tax-free.
2) the balance of the fund have to be used to provide as earnings, either in the guise of an annuity, by entering into pension drawdown.
Taking benefits from a pension scheme is referred to as 'crystallisation'. The time at which crystallisation happens is referred to as a benefit crystallisation event. Private allowance crystallisation events are: . Purchasing an annuity (BCE 4);
. Beginning annuity drawdown (BCE 1);
. Reaching age 75 in annuity drawdown (BCE 5A);
. Reaching age 75 with uncrystallised benefits (BCE SB);
. Taking the allowance commencement lump sum. This does not apply if the PCLS has not been paid till after age 75 - this is because of the fact that BCE 5A and SB make certain that the sum concerned is tested against the lifetime allowance.
We look into earlier that the plan holder can take as much as 25 percent of the fund value as a tax free lump sum. Subject to the pension plan offering the facility, it is now possible to take the annuity commencement one-off sum (PCLS) and defer taking earnings till a later time. This is attained by preparing an annuity drawdown facility. Alternatively, an individual with a phased retirement plan can take the PCLS from several segments and leave the remainder invested.
Bad health and protected premature retirement ages are the only legit reasons that an individual person can start to take their annuity at an age sooner than 55.
As folk have a bigger need for cash given the complicated economic environment, people are looking towards schemes where they are told cashing in pensions early is a worthwhile use of these monies. Whilst this may appear to be the case, it is very important not to forget this exchange may suffer sizeable punative tax charges.
If you have any questions regarding pensions or financial advice, it is always recommended to seek expert fianancial advice from a financial adviser, who can put you on the right path for your financial future.
About the Author:
Pension Age and Early Retirement are key issues looked at by My UK Pension Plan, an online service which connects individuals with Financial Advisers
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