One of the main reasons provided to The Pensions Office by pension scheme members wanting to take an immediate tax free cash lump sum is the repayment of debts.

These debts might include expensive credit cards, bank loans or overdrafts, mortgage arrears or money owed to creditors pressing for repayment. Even where a bank might be prepared to offer assistance interest rates might be punitive or arrangement fees might be unacceptably high – or both. We are aware that some of our clients have also been asked, for personal guarantees, sometimes secured on the family home.

There can be little surprise, therefore, that some people consider the option of using their pension scheme benefits as a source of finance if, of course, they are old enough (currently at least 50 years old, but from April 2010 the minimum age rises to 55). The tax free lump sum is the most obvious part of the pension benefits to consider but some people also look towards part of the regular pension to help meet ongoing commitments such as mortgage or other loan repayments.

A few years ago - just when we thought we had ‘seen it all’ in this respect – a client told us of his financial plans for the future, after using his tax free lump sum to pay off his business debts. This client partially regretted the need to use part of his pension fund in this way but considered his financial difficulties would only be temporary. He thus planned to repay the cash into his pension fund as soon as he could afford to do so. He closely followed this plan, making frequent lump sum payments into his pension policy over the years, benefiting further from tax relief on these new contributions (which, though, he considered to be loan repayments). Indeed, his contributions continued at a substantial level until, last year, he used the pension scheme once again to ‘borrow’ money to meet a short term financial difficulty.

So the options are almost endless, for almost any purpose.

If you want to consider using your pension scheme to help provide an answer to your financial needs…….