Can I use my pension before I retire?

14 Nov 2019 | Articles | Business Tips |

Pensions are still seen as a bad thing to put money into. As is often the case – the financial journalists only talk about the bad stories “Mrs X robbed of her life savings” or “Financial Company put Mr X in an investment that meant Mr X had to work 5 years longer” You never hear of the thousands and thousands of success stories. You dont hear of the people who are living a comfortable life because they did the sensible thing and saved in to a pension regularly for 30 years. Nor the person who saved so well during retirement that they have a large pension fund to leave behind to the next generation.

This piece is not the one to talk about the great instant returns, via tax relief, that pensions provide or the benefits of compounding returns – the one thing that Einstein couldn’t understand – this piece is to talk about the misconception that you cannot touch your pension before the age of 55.

You can use your pension fund before you are 55 to do three things that you can control:

  • Invest into a Commercial Property or Commercial Property portfolio
  • Invest into a company that you believe in or want to support
  • Lend money to a company, could be your company, to fund its investment plans

These are three great ways to use the money you are saving for your future to support you, or someone you love, now.

Here at Penguin – the 3 partners clubbed their pensions together (and took out a mortgage with the pensions) and we now own our building on Raleigh Walk via our pension fund. Penguin, and the other businesses in the building, now pay rent into our pension fund and that rent comes out as a top line expense into our pension funds, tax free!

If we sell the building in 20 years time we pay no capital gains tax on any gain.

If we, unfortunately, pass away, the value can pass to our loved ones tax free.

Why wouldn’t you pay into a pension fund if you want to own commercial property?

The other most popular way to use your pension fund for your benefit before 55 is to lend some of the money to your company or someone else’s company. You get to control the interest rate, within reason, but certainly a lot cheaper than a bank or finance house would lend it to your business at. And then the interest/repayments go back into the pension tax free – no tax on the income!

The bad news stories come from the odd, occasional unscrupulous adviser putting peoples money into things they dont understand or that come with silly risks – foreign property investments and Abu Dhabi car parks!

There has, again unfortunately, been the occasional scam that has robbed someone of their life’s savings – action has been taken to stop cold callers in the pension field – but the individuals have to take some responsibility for not doing their own due diligence and checking the regulated status of the person who “advised” them

The good news stories do not get told – we have many of them – we have many clients in retirement who live comfortably on their terms all because they saved into a pension, and sometimes other vehicles as well. They got good advice, they had a great Financial Planner, they did not buy silly investments – the key thing they did was SAVE…

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