Main site > MoneySavingExpert.com Forums > Essential Money > Pensions, Annuities & Retirement Planning > Can I "cash-in" my personal pension som... (Page 1)

IMPORTANT! This is MoneySavingExpert's open forum - anyone can post

Please exercise caution & report any spam, illegal, offensive, racist, libellous post to forumteam@moneysavingexpert.com

  • Be nice to all MoneySavers
  • All the best tips go in the MoneySavingExpert weekly email

    Plus all the new guides, deals & loopholes

  • No spam/referral links
or Login with Facebook
Can I "cash-in" my personal pension somehow ?
Reply
Views: 43,477
Thread Tools Search this Thread Display Modes
# 1
d4005
Old 22-05-2008, 10:08 PM
MoneySaving Convert
 
Join Date: May 2008
Posts: 18
Default Can I "cash-in" my personal pension somehow ?

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.
d4005 is offline
Reply With Quote Report Post
# 2
Retired I.F.A.
Old 22-05-2008, 10:17 PM
PPR
Serious MoneySaving Fan
 
Join Date: Oct 2007
Posts: 854
Default

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.
Retired I.F.A. is offline
Reply With Quote Report Post
The Following 2 Users Say Thank You to Retired I.F.A. For This Useful Post: Show me >>
# 3
Dick here
Old 23-05-2008, 9:14 AM
Serious MoneySaving Fan
 
Join Date: Aug 2007
Posts: 1,547
Cool

Quote:
Originally Posted by d4005 View Post
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...
Cue Ed... :rolleyes:
Don't trust Mighty Deals !
Dick here is offline
Reply With Quote Report Post
# 4
d4005
Old 23-05-2008, 9:20 AM
MoneySaving Convert
 
Join Date: May 2008
Posts: 18
Default

Quote:
Originally Posted by Retired I.F.A. View Post
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.
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.
d4005 is offline
Reply With Quote Report Post
# 5
Dick here
Old 23-05-2008, 9:26 AM
Serious MoneySaving Fan
 
Join Date: Aug 2007
Posts: 1,547
Default

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.
Don't trust Mighty Deals !
Dick here is offline
Reply With Quote Report Post
The Following User Says Thank You to Dick here For This Useful Post: Show me >>
# 6
d4005
Old 23-05-2008, 9:35 AM
MoneySaving Convert
 
Join Date: May 2008
Posts: 18
Default

Quote:
Originally Posted by Dick here View Post
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.
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.
d4005 is offline
Reply With Quote Report Post
# 7
CLAPTON
Old 23-05-2008, 9:43 AM
Deliciously Dedicated Diehard MoneySaving Devotee
 
Join Date: Mar 2006
Posts: 29,868
Default

Quote:
Originally Posted by d4005 View Post
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.
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.
CLAPTON is online now
Reply With Quote Report Post
The Following User Says Thank You to CLAPTON For This Useful Post: Show me >>
# 8
d4005
Old 23-05-2008, 9:47 AM
MoneySaving Convert
 
Join Date: May 2008
Posts: 18
Default

Quote:
Originally Posted by CLAPTON View Post
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
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.
d4005 is offline
Reply With Quote Report Post
# 9
EdInvestor
Old 23-05-2008, 1:36 PM
Deliciously Dedicated Doubly Diehard MoneySaving Devotee
 
Join Date: Sep 2004
Posts: 15,682
Default

Quote:
Originally Posted by d4005 View Post
I'm in Germany

Ah. That makes a big difference...

http://forums.moneysavingexpert.com/....html?t=931111
EdInvestor is offline
Reply With Quote Report Post
The Following User Says Thank You to EdInvestor For This Useful Post: Show me >>
# 10
flisspops
Old 28-05-2008, 1:56 PM
MoneySaving Newbie
 
Join Date: Feb 2008
Posts: 5
Default

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?
flisspops is offline
Reply With Quote Report Post
# 11
dunstonh
Old 30-05-2008, 10:18 PM
Mega Magnificent Maxi-Meticulous Uber-MoneySaving Magnate
 
Join Date: Apr 2004
Location: Norfolk
Posts: 73,814
Default

Quote:
Originally Posted by flisspops View Post
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?
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 a Financial Adviser. 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.
dunstonh is online now
Reply With Quote Report Post
The Following User Says Thank You to dunstonh For This Useful Post: Show me >>
# 12
Dark Pariah
Old 31-05-2008, 11:52 AM
MoneySaving Convert
 
Join Date: May 2008
Posts: 21
Default

Quote:
Originally Posted by dunstonh View Post
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.
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.
Dark Pariah is offline
Reply With Quote Report Post
# 13
EdInvestor
Old 31-05-2008, 1:57 PM
Deliciously Dedicated Doubly Diehard MoneySaving Devotee
 
Join Date: Sep 2004
Posts: 15,682
Default

Quote:
Originally Posted by Dark Pariah View Post
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

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.
EdInvestor is offline
Reply With Quote Report Post
# 14
averageguy11
Old 31-05-2008, 9:13 PM
MoneySaving Stalwart
 
Join Date: Apr 2006
Posts: 361
Default

Totally agree ED...slightly pompous post from dark pariah
averageguy11 is offline
Reply With Quote Report Post
# 15
Retired I.F.A.
Old 31-05-2008, 9:33 PM
PPR
Serious MoneySaving Fan
 
Join Date: Oct 2007
Posts: 854
Default

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.
Retired I.F.A. is offline
Reply With Quote Report Post
# 16
EdInvestor
Old 31-05-2008, 10:57 PM
Deliciously Dedicated Doubly Diehard MoneySaving Devotee
 
Join Date: Sep 2004
Posts: 15,682
Default

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.
EdInvestor is offline
Reply With Quote Report Post
# 17
Retired I.F.A.
Old 31-05-2008, 11:13 PM
PPR
Serious MoneySaving Fan
 
Join Date: Oct 2007
Posts: 854
Default

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
Retired I.F.A. is offline
Reply With Quote Report Post
# 18
Dark Pariah
Old 01-06-2008, 1:02 PM
MoneySaving Convert
 
Join Date: May 2008
Posts: 21
Default

Quote:
Originally Posted by averageguy11 View Post
Totally agree ED...slightly pompous post from dark pariah
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).
Dark Pariah is offline
Reply With Quote Report Post
# 19
chesky369
Old 01-06-2008, 1:31 PM
Fantastically Fervent MoneySaving Super Fan
 
Join Date: Mar 2006
Location: West London
Posts: 2,537
Default

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.
chesky369 is offline
Reply With Quote Report Post
The Following 2 Users Say Thank You to chesky369 For This Useful Post: Show me >>
# 20
EdInvestor
Old 01-06-2008, 2:51 PM
Deliciously Dedicated Doubly Diehard MoneySaving Devotee
 
Join Date: Sep 2004
Posts: 15,682
Default

[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:
EdInvestor is offline
Reply With Quote Report Post
Reply

Bookmarks
 
 




Thread Tools Search this Thread
Search this Thread:

Advanced Search
Display Modes

Posting Rules
You may not post new threads
You may not post replies
You may not post attachments
You may not edit your posts

BB code is On
Smilies are On
[IMG] code is On
HTML code is Off

 Forum Jump  

Contact Us - MoneySavingExpert.com - Archive - Privacy Statement - Top

Powered by vBulletin® Copyright ©2000 - 2014, Jelsoft Enterprises Ltd.

All times are GMT +1. The time now is 11:31 PM.

 Forum Jump  

Free MoneySaving Email

Top deals: Week of 23 July 2014

Get all this & more in MoneySavingExpert's weekly email full of guides, vouchers and Deals

GET THIS FREE WEEKLY EMAIL Full of deals, guides & it's spam free

Latest News & Blogs

Martin's Twitter Feed

profile

Cheap Travel Money

Find the best online rate for holiday cash with MSE's TravelMoneyMax.

Find the best online rate for your holiday cash with MoneySavingExpert's TravelMoneyMax.

TuneChecker Top Albums

  • VARIOUS ARTISTSNOW THAT'S WHAT I CALL MUSIC! 88
  • ED SHEERANX (DELUXE EDITION)
  • BARS AND MELODYHOPEFUL

MSE's Twitter Feed

profile
Always remember anyone can post on the MSE forums, so it can be very different from our opinion.
We use Skimlinks and other affiliated links in some of our boards, for some of our users.