The term Pension Surrender is often used when people want to receive a lump sum of money from their pension early. Obtaining cash from your pension via pension surrender is for the most part not advisable. Pension fund proceeds, regardless of whether they are occupational scheme or personal pension scheme funds, are intended to provide plan members with an income after they have retired, so to surrender pension benefits early would usually reduce the eventual retirement income.
Pension Surrender normally gives you the option to release part of your pension as a cash sum, tax free, and the rest of the funds would provide you with an income for life; this is taxed as earned income.
Whether people cash pensions via pension surrender from an occupational pension scheme or personal pension scheme, you can still usually take a cash sum as well as income. This tax free cash sum is known as the Pension Commencement Lump Sum or PCLS.
The income you receive will depend on several factors including where the money comes from – a personal pension or occupational scheme. To a certain extent you have much more choice about how the income can be paid from a personal pension compared with an occupational scheme. You have the option to surrender pension benefits without the need to take immediate income.
Even so, to release pension benefits through pension surrender, from any type of scheme, you need to consider your options thoroughly, which is where firms such as Frozen Pension Service can help.