Cashing small pension in early due to financial difficulties - can it be done?

Paul_Herring

AHK wrote: »

[...]and also because I'd read somewhere that if the total in a scheme was less than £18,000 or 1% of £1.8m then there wouldn't be a problem cashing it in, though I accept this may be wrong.

It's not wrong - it's just subject to the usual age limit of 55.

RichandJ

Paul_Herring wrote: »

It's not wrong - it's just subject to the usual age limit of 55.

Between 60 & 75 actually (unless it's a wind-up lump sum).

jh2009

AHK wrote: »

I do hope, once I'm out of the financial mess I'm in, to contribute to my pension, and my employer does offer a scheme but because I need the cash now I don't contribute, so perhaps in 6 months time I'll start contributing again (or restart the Friends Provident one I currently have).

FYI the fund I currently have would entitle me to a yearly taxable pension of only £235!

I hope you sort out things soon.

If/when you resume pension payments, then you'd be better to pay into the company scheme first, as that generates an employers contribution.

AHK

Thanks again for all you advice/help/encouragement - Friends Provident basically told me the same things you all did (maybe they monitor this board too?!). AHK


A copy of their message is below:
Unfortunately the earliest that you can withdraw anything on your pension is 55. The only circumstances that we would consider allowing anyone to take their pension earlier would be through serious or ill health.

The minimum age you can withdraw your pension as a lump sum is 60 – and to qualify for this all of your private pensions must come to under £18,000. Otherwise you can withdraw 25% of your pension as a tax free cash lump sum and the rest will be used to pay you a smaller pension which you will receive for the rest of your life.

We always recommend getting financial advice with regards to taking your pension benefits.

AHK

Bendix - i know all about you! from reading the other posts on the forum, I'm quite happy you were in a good mood yesterday! And thanks to all the other informed regulars who have helped me in this question/post.
AHK

bendix wrote: »

I'm in a very good mood today. No really, I am.

bendix

Dont worry about me, AHK. I'm a big softie really.

System

It's not such a daft question. I used to belong to a local government scheme, and it was certainly the case in 1975 that early leavers were allowed to receive their contributions back.
Perhaps the rules were changed at some point.

SallyG

13 December 2010
Government issues a call for evidence on allowing early access to pension savings

Financial Secretary to the Treasury, Mark Hoban MP, today launched a call for evidence document on early access to pension savings. As set out in the Coalition Agreement, the Government is committed to exploring whether early access could provide an incentive to encourage higher levels of private pension saving.
The Government is keen to receive evidence on the potential benefits and risks of allowing early access to pension savings, how it could be offered, and to what extent a reform would be welcomed by pension schemes, providers, individuals and other interested parties. The Government will make a decision on whether to develop more detailed proposals in this area in light of the responses received.
Mark Hoban said:
“The Government is committed to encouraging saving and wants to give individuals the maximum flexibility and responsibility to save for retirement.
Early access is an idea we are keen to consider,
and so today we ask pension schemes, providers and individuals to offer their evidence on the possible merits of any reform in this area.”
Early access would be a further step in giving additional flexibility to individuals over their savings,
following the publication last week of the draft legislation and summary of responses on removing the requirement to annuitise by age 75."

RichandJ

Clifford_Pope wrote: »

It's not such a daft question. I used to belong to a local government scheme, and it was certainly the case in 1975 that early leavers were allowed to receive their contributions back.
Perhaps the rules were changed at some point.

That is because <quote>

Protecting early leavers

The introduction of the Social Security Act 1973 (SSA 73), saw a significant improvement in the members retirement benefits within an employers pension scheme. Prior to this Act members had no statutory rights to any benefits accrued in an occupational pension scheme for early leavers. When the Act was introduced on 6 April 1975 it allowed for the preservation of a members pension rights, known as preserved benefits, after 5 years of service and would include both employee and employer contributions. For less than 5 years service the scheme member was entitled to a refund of contributions that they had personally made to the scheme.

This term was reduced in the Social Security Act 1986 to 2 years and a refund of contributions being made with less than 2 years service. However, Tax and a contribution to purchase membership of the state pension scheme will be deducted from the refund before payment. The Finance Act 1981 introduced the first pension transfer product in the form of section 32 policies, allowing the early leaver an opportunity to transfer out of an occupational pension scheme.

<quote>

bendix

people can still get contributions back, if they leave the scheme within two years of it starting (dunstonh will confirm).

However, they will receive only their own contributions and NOT those of their employer OR the contribution of the tax man.