There are various ways to generate cash in these recession hit times and one such way is a service offered by and regulated by the called pension unlocking.

In it’s simplest form, pension unlocking involves taking a lump sum of money from any or all inactive pension funds you have.

Obviously, with such a process, that isn’t the be all and end all. Rules and regulations set down by the FSA need to be adhered to by IFAs that specialise in pension release. As advisers, IFAs are expected to determine whether someone looking to release or “unlock” money from their pension funds meets certain criteria that ensures that the customer doesn’t jeopardize their financial wellbeing in retirement.

Generally, the guidelines are,

the individual must be aged over 50 (from April 2010, the minimum age will increase to 55)

the individual cannot be receiving any pensions from which they wish to release cash.

the maximum amount an individual can release in your first year is 25%

There are other guidelines that IFAs have to adhere to but the above the major guidelines that they must work with.

The IFA will then talk over pay-out options with the individual. pension release funds can be given as a tax-free lump sum, or as a regular income. Again, due to FSA rules, the way the an individual receives the money is established by criteria - for example, the regular income option is dependant on age, health, and required death benefits.

Once the eligibility for pension release has been determined, the IFA will then undertake all the necessary research and paperwork to progress the unlocking of the funds.

As mentioned, the FSA regulate this service strictly to ensure that individuals do not overstretch themselves come retirement. While this article hopes to outline the method, the best advice can be found from an IFA. Companies such as Grove Financial Planning Ltd have websites with extensive reading material on pension unlocking. Companies like Grove also keep up-to-date with all happenings in the pensions industry and can advise on new criteria as they come about.

While there is a lot to consider when looking into pension unlocking, the service should not be ruled out as a potential seed of capital when looking to invest in such ventures as property development, or in an effort to cancel out lingering debts. With current economic climates as they are, individuals have to consider all options for their financial future.