The government will soon raise the minimum age at which you can take pension benefits from 50 to 55, which means if you are approaching this age and are considering taking your pension early you should act fast. Whist it may be tempting to cash in your pension pot and get your hands on the tax free 25% lump sum, it may not always be the wisest decision. Especially given the fact that average life expectancy is rising all the time. If you do wish to take your pension early, you can enjoy the lump sum and then will be obliged to procure an annuity or enter into an unsecured pension/income drawdown.
The recession is likely to have increased the inclination of people to take pension benefits early to help with the everyday cost of living. However it should be recognised that doing this will mean that there is less income available down the line when income from employment will have stopped. Another reason behind the lure of taking retirement benefits early is that many fear that by waiting they could either be offered lower annuity rates, or, that their pension pot will be worth less than they would have expected.
Uncertainty in the stock markets and investment markets may lead some to conclude that they should cash in their pension now and obtain the rates that are available today. This feeling is partly fueled by the stark reality that rates for annuities fell 8% in 2009. It is also likely that they will not increase rapidly in the near future as insurance companies compensate for people living longer as well as being obliged by either the FSA or the EU to hoard more capital.
