Q. I'm a deferred member of the London Pensions Fund Authority, having left in 2008. I recently enquired about accessing my pension, which I understand is possible from the age of 55.
However, I was told that it does not apply to this scheme, and the earliest I can take the pension is at age 60. Is this correct?
A. The minimum age at which you can take money from a pension may be 55, but pension companies are able to set their own rules.
There are pros and cons to tapping into your pension pot early.Which? explains at what age you can access your pension and the factors you should take into account.
The age at which you can access your pension will depend on the type of scheme you're paying into.
The schemes will set their own rules for accessing the pension pot, and that may include a higher age threshold.
These schemes will set an age at which you can start taking the full benefits from your pension - known as the 'normal retirement age'.
This age will vary depending on the pension scheme you're enrolled in, and when you joined the scheme.
Other members remain under the older 1995 or 2008 sections; their normal retirement ages will be 60 and 65, respectively.
For your fund - the London Pensions' Authority scheme - your retirement age will be 65 if you joined prior to 2014, though it may be possible to access your pension at 60 if you joined before 2008 in certain circumstances. For members who joined after 2014, their normal retirement age will be tied to their .
If you want to access a , this will have an impact on the payout you receive for the rest of your retirement. The amount you're allowed to take as a lump sum, and the impact it will have on your future payments, is determined by the 'commutation factor'.
Essentially, the commutation factor tells you how much income you'd lose by taking a lump sum. So, if you have a commutation factor of 12, you'd give up £1 for every £12 of lump sum you took.
The commutation factor is worked out by the scheme's actuary, based on HMRC's rules on the maximum amounts you're allowed to withdraw.
As an example, let's sayyou have an annual income of £20,000 from a defined benefit pension with a commutation factor of 12. Using common calculations, you'll typically be able to take a tax-free lump sum of £85,714 and be left with an annual pension of £12,857.
This is likely to give you more flexibility, but there are risks involved, and you should think very carefully about the benefits you're likely to lose.
A offers you guaranteed income in retirement. Your income will keep pace with inflation, and will be protected from market downturns - unlike a defined contribution pension, which will be tied to underlying investments.
If you decide to transfer your final salary pension, the amount you'll receive is called the 'cash equivalent transfer value'. Essentially, the provider will determine how much it would need to hold today to cover the benefits you, or your spouse, would be entitled to receive in future.
You'll then need to reinvest this money intoa pension scheme with another employer, a personal pension, a stakeholder pension or a buy-out contract.
If your final salary pension benefits are valued at more than £30,000, you're obliged to speak to a financial adviser before transferring. But choose your adviser carefully. The recently that some companies are recommending transfers without making sure it's a suitable strategy.
As a general rule, your adviser should specialise in transfers andhold a G60 or AF3 advanceddiploma in financial planning, or equivalent.
Keep in mind that you might lose valuable benefits by transferring out of a final salary pension, so make sure you fully understand your options before making a decision. You can find out more in our guide to.