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Q&A; Your money queries are answered by Trevor Clark, director of Newcastle-based chartered financial planners Rutherford Wilkinson Ltd.

QI HAVE received a letter from a "pension adviser" stating that they can help me access the funds held in my personal pension (which, I confess, would prove useful). I am in my mid-thirties and had believed I could not access my pension until I retire. Is their offer, therefore, too good to be true? A In short, yes. As a rule, you cannot access your pension savings until you reach the minimum retirement age (which is currently age 55) or you are forced to retire early due to ill-health. There are limited exceptions to cater for people in unusual circumstances, for example professional sportspeople.

Schemes which purport to enable people to access their retirement savings before the minimum retirement age are often referred to as "pension liberation" schemes or "pension unlocking" schemes.

Pension liberation schemes involve a member transferring their accrued pension benefits to a new scheme. Some or all of the funds are then made available to the member by means of a cash payment (either directly or indirectly). The payments are sometimes structured as loans under which the member is notionally required to repay the funds which have been paid to them.

However, whilst converting your pension savings may sound attractive (especially if money is required urgently), if something appears too good to be true it invariably is. There are a number of drawbacks including the fact the member is likely to be poorer in retirement and, more often than not, will incur significant fees. Importantly, if a person liberates their pension they must inform HMRC and they will have to pay tax on the funds received, which is punitive. If they fail to inform HMRC and/or HMRC contacts the individual first, they are likely to be charged interest and penalties in addition to the tax.

Furthermore, in December 2011 the High Court held that pensions liberation schemes were illegal. The Pensions Regulator has been consulting with Government regarding pensions liberation and is about to launch a campaign intended to eradicate such schemes.

I would urge you to resist the temptation to enquire further. If you have any doubts, I recommend you seek assistance from an independent financial adviser.

QI AM 48 and have been a member of my employer's final salary pension scheme for almost 20 years. The scheme's trustees have informed me that my civil partner is entitled to limited "spouses" benefits upon my death. However, a friend has told me that the trustees must provide full spouses benefits, as they would if I were married. Can you offer assistance? A The Civil Partnership Act requires the trustees of an occupational pension scheme to provide surviving civil partners with "spouses'" benefits, but only in respect on the deceased member's service from December 5, 2005 (and in respect of contracted out benefits from April 6, 1988).

This is based upon the "logic" that the parties could not have entered into a civil partnership before that date. In contrast, a surviving spouse would receive spouse's benefits calculated by reference to the total length of the deceased's pensionable service, regardless of when they married.

However, the Equality Act 2010 requires occupational pension schemes to have non-discrimination rules read into them (if they aren't there already). This prevents discrimination against a person who may become a member of the scheme, such as a surviving spouse or civil partner.

Many occupational schemes have amended their scheme rules so that they treat spouse and civil partners equally, whereas others have made just the amendments required to comply with the Civil Partnership Act.

There have been a couple of recent cases concerning this issue, both of which have been backed by Liberty (the civil rights organisation). In both cases it has been argued an employer's failure to amend the scheme so as to treat civil partners in the same manner as spouses contravened the European Convention on Human Rights. In the first case, the employer agreed to provide to civil partners the same benefits as spouses shortly before the matter came to trial, although they refused to accept that their practice had been discriminatory.

In the more recent case of Walker v. Innospec, the employment tribunal found in favour of Mr Walker (although that the judgement is likely to be appealed).

Therefore, it is a matter of debate whether your employer's pension scheme must provide full spouse's benefits to your civil partner in the event of your death.

However, in light of the recent case law, it is likely that an increasing number of schemes will treat surviving civil partners as they would a spouse.

?To request a free consultation with one of our expert advisers or if you have any questions you would like answered, please contact me at Rutherford Wilkinson Ltd, Northumbria House, 21/23 Brenkley Way, Blezard Business Park, Newcastle upon Tyne, NE13 6DS. Telephone 0191 217 3340 Website Rutherford Wilkinson Ltd is authorised and regulated by the Financial Services Authority.
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Publication:The Journal (Newcastle, England)
Date:Feb 9, 2013
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