When can you unlock your pension?

[CattyMouse]

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?

[MrChips]

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?

[EdInvestor]

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.

[Andy L]

Originally Posted by EdInvestor

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

[jesselivermore]

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]

Some schemes let you take back your contributions but anything contributed by the emplyer would not be refunded to the client.

[EdInvestor]

Originally Posted by jesselivermore

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.

[i love cats]

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]

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.

Go to the pension board here. Log in and click on “forum tools” and select “post a new thread”

[i love cats]

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]

Originally Posted by ptd

I did this to help secure my house. xxxxxxx who I would thoroughly recommend. Its not the right solution for everyone, but they will go over every detail and help you decide if its right for you.

Reported as spam

[Ginger Red]

Originally Posted by jenwa

I work with Grove Pension Release - and they specialise in, guess what, Pension Release or unlocking. There are indeed pros and cons for pension release, but as with everything it is worth talking to a professional - whomever you go with.

What you have to remember is that your pension is there for you to plan for that rainy day with. That day when you can no longer work but you still need money to live off. Therefore digging into it now, hoping that you will win the lottery at some point, is not a good idea. If you have bank accounts that would make Simon Cowell look like the Battersbys, then releasing from your pension might simply be a nice way of getting at that cash now and enjoying it.

Whatever you do, you should consult someone in the know AND think about your future without a pension. Could you live without one?

If anyone has substantial bank accounts, why would they need to dig into the pension that is intended to be there to support them in retirement ?

[cashbackproblems]

Originally Posted by jesselivermore

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'?) ?

This is the case in my companies pension scheme (its the one where u pay 5% and they pay 15%) where if you leave within 2 yrs you can cash it in, but as pointed out its only if you do it when you leave.