Pension poser

By jumping the gun and withdrawing from your pot early

whenever you like. But if the decision to take it too early, when you perhaps don’t really need it, costs you money in extra tax payments then perhaps you need to think about how else you could access that cash.

The starting point is to ask why you are withdrawing the money from your pension in the first place.

It’s not enough to say: “Because I can.” The fact you can do something doesn’t always mean that you should do something.

There is clear evidence now that more people are accessing cash from pensions early and, in some cases, moving money from guaranteed final salary schemes to more flexible but riskier personal pensions so that they can do so.

In many of these cases there could have been other ways to get hold of money and it may well have made more sense to do that and leave the money in pensions intact until later. If you have money in an ISA or a savings account in the bank or if you have shares or even a second property that you rent out, then it might be better to use that money before you take money out of your pension.

It might even be better to borrow money that is lying around in your house by using some sort of equity release mortgage.

What is really important is that you understand the tax implications of all the decisions you make regarding the way you access money when you stop work or get close to stopping work and how these decisions impact the money that you will eventually pass on to your children or other dependents.

It usually makes sense to sit down and talk to a properly qualified financial planner who can help you

Make sure you understand the tax implications of taking money out of your pension. Read all the way through any contract you are signing BEFORE you sign it.

make the best decisions. In order to arrive at the best thing to do, you will need to be able to talk to your adviser about your plans.

And this is where things sometimes come undone.

If you’re only 55 then you might not have decided when you want to stop work, and you probably won’t know how much you will need to have as an income when you do stop work.

But you do need to start thinking about these things and putting together a strategy to make sure that the assets you have built up as a 55-year-old can grow and work for you to provide an income when you stop work, whether that is next year or in fifteen years’ time.

Email your problems to Or post them to The Money Doctor, Daily Record, One Central Quay, Glasgow, G3 8DA Unfortunately Fergus can’t reply to every question in person.