When can you unlock your pension?

Hi, maybe this is a silly question but, we have a few with quite a bit of money in them and really wondering if you always have to wait till 50 / 60 to get your money?
Is there another way of getting it? For instance to help purchase a property etc?
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  • MrChips
    MrChips Posts: 1,010
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    If you are under 50, you won't be able to access it until you are 55 (assuming it is in an approved scheme) unless you suffer from ill-health.

    "Unlocking" isn't usually a good idea - would you really want "unlock" your retirement income and "relock" it again into an illiquid investment like property with no diversification?
    If I had a pound for every time I didn't play the lottery...
  • EdInvestor
    EdInvestor Posts: 15,749 Forumite
    Pension funds cannot be accessed at all before the age of 50 - 55 from 2010.After 50 you can take benefits, obtaining 25% of the fund in tax free cash.

    The rest of the fund can be converted into a taxable income via an annuity, or can be left invested. You can take an income from the invested fund, or simply leave it to accumulate until you need it later.

    Other than the tax free cash, the money in a pension fund can never be accessed by the investor.It's one of the disadvantages of pensions.If you don't like this, save in an ISA instead,no restrictions there.
    Trying to keep it simple...;)
  • Andy_L
    Andy_L Posts: 12,766
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    EdInvestor wrote:
    the money in a pension fund can never be accessed by the investor.It's one of the disadvantages of pensions.

    Or, arguably, one of the advantages if you're worried about bankruptcy or a lack of self-discipline to not touch the money early
  • I am well under 50 and would like to liquidate several very small pension schemes for cash i need now.

    I've read that if you were at a firm for less than two years you can redeem your pension scheme for cash?

    is there a difference between contributions made by one's employer and those made by the employee ('voluntary contributions'?) ?
  • nearlyrich
    nearlyrich Posts: 13,698
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    Some schemes let you take back your contributions but anything contributed by the emplyer would not be refunded to the client.
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  • EdInvestor
    EdInvestor Posts: 15,749 Forumite
    I've read that if you were at a firm for less than two years you can redeem your pension scheme for cash?

    Only if it's an occupational scheme and you need to do it when you depart.You can't escape from group personal pension schemes.
    is there a difference between contributions made by one's employer and those made by the employee ('voluntary contributions'?) ?


    Yes - if you do leave a pension scheme you will only get your own contributions back, not the company contributions, and you will also be docked for the amount needed to buy you back into the state 2nd pension if the scheme was contracted out.
    Trying to keep it simple...;)
  • Hi
    I am 45 and have just been advised that my ex employers pension scheme has been wound up (Money Purchase). They are offering for me to commute my benefits as a lump sum as long as my personal account is under £17,500 (which it is). I have checked various web sites and from what I can tell I am able to do this even though I am under 60 due to the fact it is a wind up situation. If this is the case in order to make this decision do I purely take the £17K (transfer value) and get 25% of it tax free and then pay tax on the remainder? Or is the transfer value different to what the lump sum value would be? Are there any pitfalls to do this? Thanks for your help.
  • SnowMan
    SnowMan Posts: 3,350
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    edited 9 August 2009 at 9:17AM
    Yes, the scheme can offer you a lump sum on triviality grounds at age 45 on wind up.

    The basic question on whether it is allowed is answered here on the Pensions Advisory Service website (see the last question).

    Detailed information is available here on the HMRC website.

    I would guess that the transfer value and trivial commutation lump sum (before tax) are the same but you would need to check with the scheme.

    I’ve not come across this in practice so this is just my reading of the position.

    The 75% element is treated as an addition to your taxable income in the tax year it is received. One pitfall to look out for then is that the amount could put you into a higher tax band for this tax year.

    However if you are a basic rate tax payer (and the 75% element treated as income keeps you as basic rate) then I am guessing that if you are able to get the money back into a pension (within the contribution limits) which you should be able to do at some point at least, you can claim the tax relief on the full amount, and you end up in “profit” to the extent of the 25% that is not taxed on the way out but gets tax relief on the way back in, so a 5% “profit” on the total lump sum (i.e. 25% x 0.2). There are recycling rules to stop this sort of thing happening for people taking benefits including lump sum after age 50 and then immediately investing the lump sum back into a pension but I doubt they would extend to this situation (although I don’t know for sure).



    You have more chance of getting replies to questions by posting a new thread (albeit this thread is relevant). Although you probably just chose this thread as it was started by another cat lover. :rotfl:

    Go to the pension board here. Log in and click on “forum tools” and select “post a new thread”
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  • Thank you snowman, hadn't thought of the tax angle on the 25% bit, interesting.

    I have posted this as a new thread so hopefully will get more responses.

    Thanks again.
  • Amanita_2
    Amanita_2 Posts: 1,299 Forumite
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