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  • FIRST POST
    d4005
    Can I "cash-in" my personal pension somehow ?
    • #1
    • 22nd May 08, 10:08 PM
    Can I "cash-in" my personal pension somehow ? 22nd May 08 at 10:08 PM
    I know that the general rule is that money in a pension is locked in there until you retire, although you're free to transfer it to another pension.

    I really regret having funded my pension so much and would like to get the current transfer value out in cash to manage myself. Considering that the contributions made into it were tax-free, I fully expect that I'd have to take a tax hit when I cash out (if it's even possible) but I'm prepared to accept that. I'd basically be saying I changed my mind and wished I'd not made any contributions into it in the first place.

    Is there any way I can do anything with that money that's locked in there, other than transfer it to some other pension? This question is related to my other question I posted about the retirement law changing from 50 to 55, hence my plans getting screwed up somewhat.
Page 1
  • Retired I.F.A.
    • #2
    • 22nd May 08, 10:17 PM
    • #2
    • 22nd May 08, 10:17 PM
    it's not a general rule it's law. the only way to get at it now and then only 25% tfc and an income from the rest is if you were in an employment where the retiement age was far younger ie footballer, jockey etc or you can if you are terminally ill.

    if you merely want better choices of investment speak to an ifa and possibly transfer it to a sipp or a pp with bigger fund choices and free switching between them.
  • Dick here
    • #3
    • 23rd May 08, 9:14 AM
    • #3
    • 23rd May 08, 9:14 AM
    I know that the general rule is that money in a pension is locked in there until you retire, although you're free to transfer it to another pension.

    I really regret having funded my pension so much...
    Originally posted by d4005
    Cue Ed... :rolleyes:
    http://forums.moneysavingexpert.com/showthread.php?t=5121033&highlight=
    Do not use Tesco Direct !
  • d4005
    • #4
    • 23rd May 08, 9:20 AM
    • #4
    • 23rd May 08, 9:20 AM
    it's not a general rule it's law. the only way to get at it now and then only 25% tfc and an income from the rest is if you were in an employment where the retiement age was far younger ie footballer, jockey etc or you can if you are terminally ill.

    if you merely want better choices of investment speak to an ifa and possibly transfer it to a sipp or a pp with bigger fund choices and free switching between them.
    Originally posted by Retired I.F.A.
    Thanks for that. So it is as I suspected. That money is locked in there until I'm 55 (13 years away currently, and by the time I get there it might have changed again, talk about a moving target).

    OK, that leads me to two further questions.

    Is there at least a way that when I do reach the minimum age, I can get it all in one 100% lump sum ? Or is it limited to 25%?

    Is there a chart somewhere that shows how much the reduction is on what you can take out based on how many years before the official retirement age you retire? Not sure if that question is clear. What I'm imagining is, if the official retirement age is 65, and you retire at 64, then you get 98% of what you'd get it you waited till 65. At 63 maybe it's 96%, going down year by year, perhaps to the level where at 55 maybe I'd only get 75% for example.
  • Dick here
    • #5
    • 23rd May 08, 9:26 AM
    • #5
    • 23rd May 08, 9:26 AM
    That depends on the rules of the scheme. Taking 5% off per year of early retirement isn't unknown though, e.g. retiring at 55 you'd only get 50% of what you'd get at 65. Of course, when you retire, retirement age will be 66 at least.
    http://forums.moneysavingexpert.com/showthread.php?t=5121033&highlight=
    Do not use Tesco Direct !
  • d4005
    • #6
    • 23rd May 08, 9:35 AM
    • #6
    • 23rd May 08, 9:35 AM
    That depends on the rules of the scheme. Taking 5% off per year of early retirement isn't unknown though, e.g. retiring at 55 you'd only get 50% of what you'd get at 65. Of course, when you retire, retirement age will be 66 at least.
    Originally posted by !!!! here
    Thanks. I suppose I need to look around at different pension schemes then, to see which one penalizes the least for early retirement. Perhaps some of them even allow full withdrawal, rather than 25% lump minimum.
    • CLAPTON
    • By CLAPTON 23rd May 08, 9:43 AM
    • 38,116 Posts
    • 26,828 Thanks
    CLAPTON
    • #7
    • 23rd May 08, 9:43 AM
    • #7
    • 23rd May 08, 9:43 AM
    Thanks. I suppose I need to look around at different pension schemes then, to see which one penalizes the least for early retirement. Perhaps some of them even allow full withdrawal, rather than 25% lump minimum.
    Originally posted by d4005
    none allow 100%, the 25% is maximum the law allows

    its not a penalty to get less because you retire early.
    its simple maths that if you retire early your pension is paid for more years so all pensonal pension schemes will do an acturial reduction for early retirement. 4-5 % per year is normal
    Last edited by CLAPTON; 23-05-2008 at 9:49 AM.
  • d4005
    • #8
    • 23rd May 08, 9:47 AM
    • #8
    • 23rd May 08, 9:47 AM
    none allow 100%, the 25% is maximum the law allows

    its not a penalty to get less because you retire early.
    its simple maths that if you retire early your pension is paid for more years so all pensonal pension schemes will do an acturial redunction for early retirement. 4-5 % per year is normal
    Originally posted by CLAPTON
    Thanks. This forum is great. I'm learning so much. I'd have popped into see an IFA, but I'm in Germany and only get back to the UK once a year.
  • EdInvestor
    • #9
    • 23rd May 08, 1:36 PM
    • #9
    • 23rd May 08, 1:36 PM
    I'm in Germany
    Originally posted by d4005

    Ah. That makes a big difference...

    http://forums.moneysavingexpert.com/showthread.html?t=931111
  • flisspops
    I've been thinking about asking Martin to start a new revolution - no doubt with the blessings of his Money Savers - to challenge existing pension withdrawal laws (vis a vis credit crunch, potential stagflation, future inflation). What do you think readers?
    • dunstonh
    • By dunstonh 30th May 08, 10:18 PM
    • 82,594 Posts
    • 47,686 Thanks
    dunstonh
    I've been thinking about asking Martin to start a new revolution - no doubt with the blessings of his Money Savers - to challenge existing pension withdrawal laws (vis a vis credit crunch, potential stagflation, future inflation). What do you think readers?
    Originally posted by flisspops
    The Govt gives tax relief on contributions and tax free growth as well as the pension being outside of the estate for IHT purposes (as well as other protections) to allow people to put money aside for retirement. It isnt there for people to take out early because they want to pay for another holiday in Spain or their short term problems. The taxpayer isnt there to fund mistakes of the individual in their own spending.
    I am an Independent Financial Adviser (IFA). Comments are for discussion purposes only. They are not financial advice. Different people have different needs and what is right for one person may not be for another. If you feel an area discussed may be relevant to you, then please seek advice from a Financial Adviser local to you.
  • Dark Pariah
    The Govt gives tax relief on contributions and tax free growth as well as the pension being outside of the estate for IHT purposes (as well as other protections) to allow people to put money aside for retirement. It isnt there for people to take out early because they want to pay for another holiday in Spain or their short term problems. The taxpayer isnt there to fund mistakes of the individual in their own spending.
    Originally posted by dunstonh
    Quite right! The way you need to look at a pension fund in this regard is that Her Majesty's Revenue and Customs (HMRC) make special allowances so that people can save now, to secure an income when they can no longer work so it is a "gift" from HMRC not a personal right and that since pensions first began (in their statutory form) the HMRC have made it clear that there are conditions to their "generous" treatment of pension funds - one being that it is almost impossible to take the fund back as a cash lump sum, - Pensions are not the same as a high interest bank account.

    I can sympathise with d405, what is the use of having a large sum locked away until you are older, when you need money now to buy neccessities? An associate of mine explained (in relation to paying into AVCs) like this:

    You have less money now, and you are still going, thanks to your salary. When you are no longer able to receive a salary, you will be able to appreciate your foresight in making sure that your pension fund was made sufficiently large than your standard of living does not diminish that greatly.
  • EdInvestor
    Quite right! The way you need to look at a pension fund in this regard is that Her Majesty's Revenue and Customs (HMRC) make special allowances so that people can save now, to secure an income when they can no longer work so it is a "gift" from HMRC not a personal right and that since pensions first began (in their statutory form) the HMRC have made it clear that there are conditions to their "generous" treatment of pension funds - one being that it is almost impossible to take the fund back as a cash lump sum
    Originally posted by Dark Pariah

    It is not a gift.

    75% of the tax is simply deferred, you pay it back after you retire.Only the 25% cash lump sum can be described as a " gift from HMRC". And in return for that, you lose control of your capital forever and until very recently were forced to lock yourself into a poor retirement income via an annuity.

    Many people look this gift horse in the mouth for good reason.

    Unless an employer's contribution is available and you are a higher rate taxpayer, ISAs should be preferred to pensions. Pensions can be accessed later in life if appropriate without loss.
    • averageguy11
    • By averageguy11 31st May 08, 9:13 PM
    • 372 Posts
    • 96 Thanks
    averageguy11
    Totally agree ED...slightly pompous post from dark pariah
  • Retired I.F.A.
    ISA's may not survive, the whole concept of tax free saving other than pensions is a fairly new thing and should be considered as a tempory idea instigated by politicans out for a vote winner.

    The pension tax exemps status however has been with us for many many decades and there is not one political party or politician that is not in favour of retaining said status.

    For many currently a stocks and shares ISA can be built up and still be put into a pension but only since the laws passed in '06. No doubt in the future they will change again perhaps back to a maximum contribution far lower than now and without carry back.

    The odds are way way more in favour that come retirement in 10 20 30 years from now the pension route will have provided far more.
  • EdInvestor
    ISAs and PEPs have been around for more than 20 years now, are popular, and the Govt has committed to keeping them for the long term.

    The fact is that a pension is not really affordable for many young people because it is so expensive to buy a home. They are also unattractive because of the annuity problem.Hence the rush into buy to let as an alternative retirement investment.

    Pensions have their place but in future they are likely to be less important in the overall scheme of asset accumulation IMHO.
  • Retired I.F.A.
    IMHO That's a first eh Ed?

    Does this sudden humility mean we can one day see you posting a "Sorry, I got it wrong." somewhere? ;D
  • Dark Pariah
    Totally agree ED...slightly pompous post from dark pariah
    Originally posted by averageguy11
    I am sorry - In retrospect - very pompous of me.

    I suspect that the HMRC would say that to their mind, the treatment of taxation of pensions is a gift - until 1921, contributions and increases in fund values within Pension Funds were subject to tax - although (going back to the orignal question) depending on the rules of the Scheme, you could take all your money out of the scheme as a lump sum as a result.

    I would not be surprised if you all correct me, but I think that Employer Funded Retirement Benefit Schemes (EFRBS) are a modern restatement of the pre 1921 rules. If you are not registered with HMRC, then you pay the tax on any contributions you or your employer makes at the time, increases in fund values are taxed and the pension is taxed as well (in some cases plus National Insurance Contributions).
  • chesky369
    I don't see why the pension withdrawal law should be changed, simply because some people don't understand what a pension is meant to be. If you want to be able access your money, start a saving scheme.

    And yes, I'm probably being pompous too.
  • EdInvestor
    [quote=chesky369;11368987]I don't see why the pension withdrawal law should be changed, simply because some people don't understand what a pension is meant to be. If you want to be able access your money, start a saving scheme.[quote]

    The options available now make rational savings and investment choices possible. No problem with that.

    But up until the late 80s that wasn't the case. There were no PEPS or ISAs. Company pensions were often compulsory - a condition of employment. Some people were forced to save, others weren't.

    The advent of private pensions saw a large amount of misselling - and it looks pretty clear even now that many people still aren't being told at the point of sale that once money gets put into a pension, it can't be taken it out.

    Thus I wouldn't hold my breath waiting for a fall in complaints about money being trapped in pensions - especially when you look at what some of the insurance companies have done with the money over the years.... :rolleyes:
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