can i cancel my pension?

lukemed1 · 22 January 2006 at 1:10PM

hi everybody!

just a quick question

i currently have a stakeholder pension with virgin worth about £2000, could i in anyway 'cancel' this to use the money to pay off some debts?

best regards

Luke

nearlyrich · 22 January 2006 at 1:22PM

The short answer is NO sorry you can't access any money in a pension fund until you reach the age it becomes payable. You might be able to suspend your payments to divert the premium into paying off your debts??

margaretclare · 22 January 2006 at 1:24PM

Hi Luke

You should have some paperwork about your stakeholder pension - dig it out and have a read of what it says.

AFAIK once you start a pension and are still under 50 (or 55?) you can't take the money out - this is because of the concessions given you from the Inland Revenue. You can of course stop paying into it and re-start any time. But I don't think you can take the £2000 out.

The £2000 is growing where it is - leave it alone and one day you'll be glad of it!

Aunty Margaret

lukemed1 · 22 January 2006 at 1:36PM

ok!

thanks alot for your replys guys!!

thought i wouldnt be able to access it!

regards

Luke

EdInvestor · 22 January 2006 at 5:39PM

:wall:

Yet another one.

Note to Moneysavers:

If you are thinking of saving up in a personal pension (rather than a company one with free money from the employer) and you are a basic rate taxpayer, then consider instead using an ISA.

Both of them offer tax relief, but with an ISA you can take out both the capital and the income tax free any time, while you can't ever take the capital out of the pension and the income is not available until you are aged 55, when 75% of it is taxed.

Be warned!

lisyloo · 22 January 2006 at 6:21PM

I agree to an extent with what Ed says but it's one side of the story.

You get tax relief on a pension so if you put in £78 you get £100 in your pension, so you get a 28% uplift.
It's true that you would have to pay 22% tax on 75% of that but the whole lot would have grown in that time, so apart from 25% tax free, you get capital growth on 128%.

So in summary I would like to point out that
1) flexibility is better in an ISA, but there are greater tax benefits to pensions.
2) Cash ISAs are limited to £3K per year per person.
3) Some people are already using ISAs.
4) Some employers match contributions in pensions which makes them even better.

I am not trying to say pensions are great.
In fact I think there are some huge downsides, however I wanted to balance up the discussion a bit as only one side of the argument had been put.

Other downsides with pensions are that you currently HAVE to take an annuity and rates are rubbish at the moment and likely to get worse.
You are also at the whim of governements. The tax laws could changes at any time (same could be said for ISAs).

Also bear in mind that if you fall on hard times, then your ISAs will count against you for means tested benefite. Pension assets will not.

I agree with you Ed but what you said is only one factor in a much bigger picture.

ReportInvestor · 22 January 2006 at 6:25PM

lisyloo wrote:

4) Some employers match contributions in pensions which makes them even better.

Other downsides with pensions are that you currently HAVE to take an annuity and rates are rubbish at the moment and likely to get worse.

I agree with you Ed but what you said is only one factor in a much bigger picture.

Ed specifically excluded pensions where employers make a contribution from his post.

Good point about annuity rates.

The big stories that won't go away in this weekend's press are how we are going to be surprised that 18% stock market growth in 2005 may still result in lower pension estimates on our annual future estimates

.

dunstonh · 22 January 2006 at 6:51PM

Other downsides with pensions are that you currently HAVE to take an annuity and rates are rubbish at the moment and likely to get worse.

Although post 65 annuity rates are better than savings rates.

There are lots of pros and cons with a pension and an ISA which is why most sensible people will do both at some point in their working life. Doing nothing is the worst thing.

EdInvestor · 22 January 2006 at 8:32PM

Hi lisyloo

lisyloo wrote:

...so apart from 25% tax free, you get capital growth on 128%.

Actually this makes no difference at all.It's a common misconception that there's additional growth on the tax relief, but there isn't.

Cash ISAs are limited to £3K per year per person.

The equivalent ISA investment to a pension would be a Stocks and Shares ISA, max 7k a year.

Also bear in mind that if you fall on hard times, then your ISAs will count against you for means tested benefite. Pension assets will not.

Fair point.

The main thing I wanted to remind Moneysavers about was that once the money is put into a pension, you can't get it out. About once a week we get someone coming on here asking about cashing in their pensions, it's quite clear this doesn't get pointed out when they start it - or if it is, they don't take it on board.

dunstonh · 22 January 2006 at 9:28PM

The main thing I wanted to remind Moneysavers about was that once the money is put into a pension, you can't get it out.

Some people need that tie in. It isnt necessarily a bad thing.

thor · 22 January 2006 at 11:15PM

There is a problem with ISAs in that the amount you can stash per annum is variable. It has been 3K pa for mini cash isas so far but after 2010 whoever is the chancellor can decide if they want to change that figure. Also they can even cease to be altogether - although some kind of tax free savings vehicle would probably be offered instead as were ISAs themselves when they began to replace their predecessors the TESSAs.
Having said all this, I've gone for ISAs instead of a pension as they are so much more flexible.

can i cancel my pension?

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