United Kingdom

Unlocking pension cash could missing out later in life, experts warn

Pension savers could unwittingly cut off their entitlement to certain benefits and other financial help by releasing cash from their retirement pots, experts warn.

With an imminent cut in Universal Credit payments and the end of the furlough scheme, they may turn to their pension for financial support, consultants LCP (Lane Clark & Peacock) and technology firm EngageSmarter report.

But when those under state pension age take money out of a pension pot, this can affect their benefit entitlement in two main ways.

If someone takes a lump sum or draws a regular income from their pension, it could potentially affect their entitlement to means-tested benefits such as Universal Credit or Pension Credit

If they end up with more savings, this could have an impact when they are assessed for benefits.

Those with more than £16,000 in capital are disqualified from Universal Credit, they said.

And if they use their pension to buy a regular income through a retirement annuity, this income could be deducted from their benefit income.

Those behind the research said a new website tool — www.pensions-and-benefits.uk/ — has been launched to allow savers to check how they could be affected.

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