Transferring your final
salary pension is an option that many companies offer to their employees to save
money on future pay-outs. Employees or former employees who participate or have
participated in their pension plan are given the opportunity to withdraw their
money as a lump sum as they leave the organisation or perhaps long after they
have left. In exchange, people who choose to cash in their final salary pension
forgo their right to a guaranteed income for life. While cashing in your pension may seem an attractive option as you’ll be getting your pension savings
as a lump sum, there are certain things that you should consider before jumping
in and giving up your retirement income.
One of the main
things you should think about when considering cashing in your pension is your
retirement needs. Annuity guarantees your monthly income throughout retirement.
However, a lump sum which is based on your earnings at the company gives you
immediate and complete control of your money so you can invest it the way you
see fit. Consider the pros and cons of both when thinking about cashing in your
pension, because while a lump sum might give you great prospects for investment
a guaranteed income during retirement is useful so you can cover your
retirement expenses (e.g. cost of living, utilities, medical needs, etc.). Compare
your guaranteed monthly income with your projected monthly expenses so you can
decide whether or not it makes more sense to withdraw your pension
now or later.
