Can I cash in my pension?

Zelazny

mrbilbs wrote: »

So like most people at the moment times are hard. I have 2 company pensions (companies I am no longer with) that total around £6k. At the moment this money is doing nothing.

I have responded to an advert that mentioned being able to release the money.

You are correct about the fees etc as I would see £3600 out of the £6k.

As you can imagine this would make a huge difference (despite the loss to the pot) as we have 2 kids, mortgage etc. I still have about 29 years to work and my wife is a teacher so her pension will be quite substantial for us both in years to come.

Im in a quandry as what to do - would I be taxed on the £3600 or the full £6k that was sitting there?

They told me that it was legal (and obviously didnt mention any tax). Any advice - financial or otherwise would be greatly appreciated.

I hope you can understand why this is tempting. :cool:

I can understand why it's tempting, but it's also illegal - just read through the thread. Worst comes to worst, you could have to pay fees/tax and possibly even pay back the money.

Any tax charges could be based on the full value of the pension pot.

System

jamesd wrote: »

You can only transfer a pension pot to another name in these situations:

1. You're dead and a spouse or other beneficiary inherits the pot.
2. As a result of a pension splitting order as a consequence of divorce.

I have just been reading about Family SIPPs, where apparently growth in one pension pot in excess of pension requirements can be transfered into another family member's pot.

mrbilbs

SippTechie wrote: »

I think the scheme Steve k refers to has crossed my desk in the past.

To put some meat to the bones, assuming it is the same scheme the structure is:

Stage 1 - A UK company is set up for the single purpose of holding pension funds with the member as sole owner and director/secretary. A trust is also set up for the benefit of that company's employees by the individual.

Stage 2 - UK company sets up UK pension. The individual, as the solitary employee of the company, becomes the solitary member of the pension scheme. The individual then transfers all their pension schemes to this pension scheme.

Stage 3 - The individual then surrenders all their rights under the scheme.

Stage 4 - The company receives this surplus as a payment to the trust and makes a loan of this amount to the individual.

This isn't exactly the same thing as a pension reciprocation plan and that is a very basic explanation.

The legal opinions I've seen suggest this works within the rules, at least for now. The issue, which I think has been highlighted above, is that as soon as any scheme of this type reaches a tipping point in terms of popularity, HMRC takes steps to close the door.

I don't know the identity of the company or companies promoting the plan as the information I received had been cleaned to remove these details for reasons I won't speculate on....

I think this is where the company who spoke with me today were coming from with their proposal. In the conversation we briefley had there was a mention of a trust fund being set up in my name.

atush

mrb,

if times are hard, you will be better off reducing spending and increasing income rather than cashing in a pension (even if it were legal). So look to the Old time board and the Debt free and budget boards for suggestions on how to lower your outgoings. Using tomorrow's money to pay for today is never a good idea.

In any case, it isn't 'doing nothing' it is hopefully (depending on what you chose to invest it in) increasing over time. If it isn't increasing, look to transfer it to another provider, or change the investments it is in.

mrbilbs

atush wrote: »

mrb,

In any case, it isn't 'doing nothing' it is hopefully (depending on what you chose to invest it in) increasing over time. QUOTE]

I know atush - what u say makes sense - we have done the cost cutting - its just the tempation of having a lump sum that I could use now that is the thing that gets me.

somethingcorporate

But you cannot use it now since you cannot access it.

mrbilbs

somethingcorporate wrote: »

But you cannot use it now since you cannot access it.

Thats the problem in my head, this company are saying I can via the method above (please see previous post with long quote)

My problem is is it legit it sounds different to some of the 'illigal' ways of obtaining your pot. :question:

Aegis

mrbilbs wrote: »

Thats the problem in my head, this company are saying I can via the method above (please see previous post with long quote)

My problem is is it legit it sounds different to some of the 'illigal' ways of obtaining your pot. :question:

All ways of accessing your pension prior to age 55 are illegal unless you are retiring or commuting on health grounds. Work on this assumption and you're unlikely to run into trouble with HMRC.

xylophone

http://www.thisismoney.co.uk/money/pensions/article-2185349/Watch-pension-loan-firms-Britons-handed-220-million-unregulated-companies.html

dunstonh

xylophone wrote: »

http://www.thisismoney.co.uk/money/pensions/article-2185349/Watch-pension-loan-firms-Britons-handed-220-million-unregulated-companies.html

That article irritated me. It says it is unregulated firms/individuals but them blames unscrupulous advisers. Advisers are regulated individuals/firms. If an adviser does it then the consumer has protection and the adviser wouldnt have a leg to stand on. The problem is that it is not advisers that are doing it. It is unregulated scams, mostly based abroad.