There are three kinds of pension which are: those that are employment based, the disability pensions and the state and social pensions. The first type of pension plan is also called retirement plan. It is where the employer and the employee come to an agreement of contributing money to a specified fund during the time of employment for the purpose of receiving income after retirement. This process is considered a form of deferred compensation because the fund accumulates until it matures and is ready for you to claim. The disability pension refers to providing for family members in case of disabilities. This can either be an early retirement prior to reaching the required retirement age. The last type of pension plan is created by the government for their people also for the purpose of deriving income upon retirement.
Pensions are released and you get to enjoy its benefits at the time a person retires. However, there is such thing as an early pension release which means that you can enjoy the benefits of your pension early and is applicable for any kind of pension except for state pensions.
Early pension release can be triggered by a lot of factors such as death, an unexpected illness which will require you to stop working, or redundancy in your place of employment. Whatever the reason is, the same thing will happen which is having immediate cash on hand.
Generally, an early pension release option is available for you as long as you are over 55 years old and your pension fund is more than 15,000 pounds. With this option, you can release up to the amount that is considered tax free, which is 25 percent of the total value of your pension plan. With the money you receive, you can either invest it to generate more income up to the time of your retirement.
Do remember, however, that removing some of your benefits early might result to decreasing the income or interest from your pension fund. That is the reason why early pension release is advisable only to a certain number of people whose circumstances need it. This means that early pension release should not be thought of as an easy cash option. So before getting that early pension release, make sure that you have a genuine need for that extra cash.
Planning for your retirement includes managing your funds and making the right decisions in the process which will include whether or not you will need an early pension release. If your situation will need extra money and you need cash right away, you will have to be more careful and more vigilant in managing the rest of your pension fund. A pension plan or a retirement scheme is for the purpose of providing you with suitable and regular income after you have stopped working.