Having a significant amount of money does feel very nice. However, if you’re not careful, your money will run out quickly; it doesn’t just come like oxygen, especially if you have no income for life other than a Final Salary pension pot.
Therefore, it is wise to have specific targets and strategies in place relating to your financial planning if you are looking to withdraw the Final Salary pension funds early. If the targets and strategies are correct, then we can say that withdrawing your pension pot funds can be profitable. Or, that it will not make a loss and result in bankruptcy.
If the financial targets and strategies are correct, we can say that withdrawing your pension pot funds is profitable and can provide a decent retirement income. There are several situations and factors that could be considered when it comes to deciding on whether to transfer your Final Salary pension.
Children Or Other Beneficiaries
The Final Salary pension scheme does not give anything to your children or other beneficiaries as long as you live. The Final Salary pension funds can only be enjoyed when you are passed away. The difference is that it will be tax-free if you die before the age of 75. If you die after 75 years, a tax will be charged.
Presence of Poor Health Conditions
No matter how good the DB pension scheme you have is, you will not be able to enjoy it if you are in ill-health. As such, you can withdraw the retirement pot and use it for medical purposes if you have health conditions. This act of withdrawing would be far better than you suffer from illness and not withdrawing the retirement pot at all.
Projections That Employers And Pension Schemes Will Collapse
Recently, many companies have been burdened with pension payments. Therefore, it is not difficult to find some companies and DB pension schemes stating that they cannot continue with the pension scheme. When your company and pension scheme collapse, there is a Pension Protection Fund (PPF) that will provide compensation. Unfortunately, the PPF compensation fund will not be as much as the retirement income in your pension pot.
Therefore, if you have a projected collapse of the retirement DB scheme, then it is very reasonable to withdraw all of your funds. However, you must ensure that these projections come from precise calculations, not just emotional ones.
There Is A Need For High Financial Flexibility
Complete control over your pension fund makes your financial flexibility much better than with a Defined Benefit pension scheme. On the one hand, high flexibility does feel advantageous. However, there are always risks that you have to pay attention too. This is why, transferring your Final Salary pension to a pension-wrapper such as International SIPP, will provide you with this benefit.
Some Other Conditions And Needs
Whatever the need, you need to make sure that the decision to withdraw the Final Salary pension is based on common sense and the correct calculations. Some temptations will come to draw the DB pot pension lump sum even though there is no urgent need and demands. As such, ensuring that all logical calculations and sensible decisions are taken at every step is necessary.
We also discuss the important things you need to consider before you decide to transfer out your Final Salary pension, in one of our YouTube video below.
Consulting an FCA-regulated IFA is the best way you can do to help you with the decision-making process. Your IFA will help you to analyze your needs, your current financial situation, your financial goals, and your risk profile to certain investments products that will last during your retirement. Your IFA will also provide you with the suitable financial advice that is adjusted with your situation and goals.
At Cameron James, you will always have a free initial consultation with one of our qualified IFAs so that you can explain your situation, and we will provide you with proper financial advice before you decide to transfer out your Final Salary pension. Always take care of your DB pension, whatever you wish to do, always remember that it will be a one-way ticket that cannot be reversed.