Many of us worry about how we’re going to manage financially as we get older, and for some, the fear of asking their children for money is all too real. A recent newspaper report revealed that 1 in 6 people over the age of 40 think that they will need to ask their children to support them. No parent wants to put their child in that position – so how can you maintain your financial independence? Well, if you have a private pension, cashing in part of that is always an option. Here’s everything you need to know.
We all joke about the bank of mum and dad. However, dipping into savings to support children through university or helping them to get onto the property ladder can have serious repercussions later on. When it comes to supporting themselves in retirement, parents may find that their generosity during their children’s fledging years has potentially cost them dearly if they want to enjoy a good lifestyle. It’s what any parent would do though – and none would like to have to ask their children to return the favour. Thankfully though, there is a solution.
A few years ago, the UK government overhauled an outdated system and enabled people to take control of their retirement savings in a way that suited them. These plans offered people a lot more flexibility, allowing them to access some or all their pension as a cash lump sum. Now, taking out part of your pension as a cash lump sum would be a great way of easing any intentional financial burden on your children. So how does it work, and how should you start the process?
Accessing your cash
First things first, always make sure you talk to an impartial pensions expert. They’ll be able to advise you on how much money a week you’ll get after taking out your lump sum, and how your state benefits and tax could be affected too.
If you do decide to go ahead and cash in part of your pension, the first 25% of your pension savings that you withdraw will be tax free. Now, that’s a massive relief knowing that all that money will be yours to spend on what you like. Remember, there’s no one size fits all approach to cashing in your pension. That’s why it’s so important to weigh up your options beforehand.
Enjoy your retirement free of stress
Having some readily accessible cash is a huge weight lifted for those who think they’ll need to rely on their children in retirement. The freedom to pay for any home repairs, a new car or just living life freely is truly liberating. In turn, not having to ask your children to help you out means that they’ll be able to start saving for their own retirement sooner, making life easier for them. Surely that’s the greatest gift a parent can give to their child? So if you’re worried about how far your money is going to go in retirement, start exploring your options now.