Cashing in a small pension

gingerfurball

I've been going through all our papers and have come across a pension that my DH for a while back in 1996. Its only about £1500. We stopped it because we could not afford it! Can you cash in pensions like you can life assurance...I know you were not able to but maybe things have changed. Any thoughts?

dunstonh

only if you are aged over 60 and your total value of all your pensions doesnt exceed 1% of the lifetime allowance (£15,000 for 06/07) can you get paid the value.

maks_3

Hi,

My father is in the similar position; he has 2 small pensions that are due to be paid in April. Combined they are worth £10,000. So he want so take it as a lump sum. However he also has another pension fund that will mature in 3 years when he will be 65(he has already retired), this one is worth £16,000.

Therefore can he take the 2 smaller pensions as lump sums in April and then decide what he wants to do with his 3rd pension when he is 65, as the life time allowance for this year is £15,000. Also, would the lump sums be paid tax free, or simply taxed on whatever is over his yearly allowance?
Thanks
M.

margaretclare

Hi M

AFAIK - and I'm no expert - it's if your total pension provision comes to below £15,000 that you can take what's called 'trivial commutation'. Your Dad's total provision appears to be above £15,000, with the 2 this year and the one in 3 years' time.

Read some of the other threads on this board, and it may become a bit clearer to you.

In my opinion - and it's only my opinion, remember - there is a lot to be said for NOT taking all your available income in the early retirement years i.e. 60 - 70. You don't know what you'll need in a few years' time. Too many people are going to be trying to live on the same income for the final 30 - 40 years of their lives.

But as I said, it's only my opinion.

Margaret Clare

dunstonh

Trivial commutation can only be used if all pensions are taken within a 12 month period and the total is less than 1% below the lifetime allowance, which is 1.5 million in 06/07. (therefore 15,000 is the 1%). This figure will rise annually with announcements in the budget (although the early years have already been set, although could be changed).

Ken68

I see trouble ahead, I think millions if not billions are involved in very small pensions having to be paid out as from April 6th.
The financial market will not be able to cope.
Does anyone know the drop-out rate of new pensions.???

dunstonh

I dont see it personally. The inflows of money into pensions is far inexcess of the potential outflows.

EdInvestor

The inflows of money into pensions is far in excess of the potential outflows.

Not any more, because there is so little new business: each inflow to one provider is accompanied by an outflow from another, as the money just gets recycled round the industry via transfers.

Great for the advisers,more commission every time they do a transfer, terrible for everyone else - the provider makes a loss, and the investor pays the charges twice.

Can't see it lasting much longer myself.