While accessing your pension early can provide immediate financial benefits, there are potential downsides to consider:
Reduced Pension Pot
Withdrawing large sums early can significantly reduce the size of your pension pot. This means you’ll have less money available for your later years, potentially leading to financial difficulties if you outlive your savings.
Tax Implications
Taking large lump sums can result in higher tax bills, reducing the overall benefit of accessing your pension early. Careful planning is required to avoid unnecessary tax burdens.
“At Hilltop Financial Planning, we believe that keeping your pension invested can help your savings grow, offering more financial security in retirement.
“Regularly reviewing your investment strategy with a trusted pension adviser could ensure you’re on the right track and prepared for any market changes,” said Matthew Knowles, Financial Adviser at Hilltop Financial Planning.
Impact on Benefits
Accessing your pension can affect your entitlement to means-tested benefits. For example, taking a lump sum could reduce or eliminate your eligibility for certain state benefits.