Can I cash in my pension?

Johnny_Tightlips

lotusblue wrote: »

Hi,

I have two frozen pension plans from previous employers, at present a total pot of approx £18k. I am 54 now and wondered if i can withdraw all of this next year when 55.
An £18k pot would give very little annuity so hoped i could withdraw all and re-invest in some other way.

Under trivial pension rules, if your TOTAL pension pot is less than £18,000 you can take it all as a lump sum. If the total of your pensions are over £18,000 though (so your two frozen pensions + any other pensions you may have) you must take it the normal way, i.e. buy an annuity.

RichandJ

Johnny_Tightlips wrote: »

Under trivial pension rules, if your TOTAL pension pot is less than £18,000 you can take it all as a lump sum. If the total of your pensions are over £18,000 though (so your two frozen pensions + any other pensions you may have) you must take it the normal way, i.e. buy an annuity.

However, you have to be 60 to do this. So the answer to lotusblue is, no, you can't do this next year. You can start drawing the pensions from 55 though, usually with a tax free payment of up to 25% of the pot value and an income from the rest.*

* There are certain caveats to this.

clucky01

I am new to the forum so forgive me if my post goes over a few things I havnt read all 11 pages relating to the first post.
But i have done a fare amount of research to do with the question. I have also been in discusion with the TREASURY minsisters office in relation t the original question to no avail. I am not a financial expert but have come to the conclusion that pensions come down to two things.
1- Is the payment AUTHORISED? i.e within the scheme rules, are you the right age? has the pension run its course?
2- Is the payment UN AUTHORISED? does it fall outside what would be AUTHORISED. Please advise if this is wrong.

With that, I have a SCOTTISH WIDOWS pension with a tansfer value of sixteen and a half thousand pounds that is fozen/paid up, I also have a police pension and i am a current serving police officer with eight years service. Ive looked at the normal transfer options and they were no really viable for me as the pot would only buy me 231 days service at the end of my career. But like most people asking this question I have a young family of three boys and a wife to look after and wished to CASH IN my old pension. In the long run I was told no by SW and the TREASURY.
SW would not give me the money as this would constitue an UN AUTHORISED payment and they would be punished financially by the TREASURY, The TREASURY said no just no as the didnt have the time to take my case into acount "we dont look at things case by case, we dont have the time" I was told, no one could make the decision. Even thought the penalties are within the pensions legislation they were not willing to enforce them????? I received a letter from MARK HOGAN the treasury minister basically saying NO and dont ask again. I asked tem to consider making an amendment to the current legislation to make un authorised payments authorised if the receiver was willing to acept the penalties within the legislation and was open and transparent in their application to the treasury for the fund they wished to receive. I felt they just didnt want the extra work and fobbed me off.
Long story short You CAN cash in your pension, they just dont want you too and will make it difficult for you to do so.

dunstonh

In the long run I was told no by SW and the TREASURY.

That seems to fit with what you have told us.

SW would not give me the money as this would constitue an UN AUTHORISED payment and they would be punished financially by the TREASURY, The TREASURY said no just no as the didnt have the time to take my case into acount "we dont look at things case by case, we dont have the time" I was told, no one could make the decision.

SW are correct. It would be a breach of HMRC rules. There is no discretion on this.

I asked tem to consider making an amendment to the current legislation to make un authorised payments authorised if the receiver was willing to acept the penalties within the legislation and was open and transparent in their application to the treasury for the fund they wished to receive. I felt they just didnt want the extra work and fobbed me off.

Why should the Govt spend tens of millions of pounds on a new finance act that would also cost industry many millions in consultation. let alone implementation just for your benefit?

Long story short You CAN cash in your pension, they just dont want you too and will make it difficult for you to do so.

No you cannot cash your pension in. An unauthorised payment is unlawful. HMRC can fine you and require you to put the money back. You can also be prosecuted for tax evasion potentially. It is either authorised or unauthorised. No grey areas. No discretion. It is one or the other.

clucky01

It wouldnt be a new finance act it would only take an amendment to the current act to allow millions of people aces to the pensions they have and for the government to rais much needed funds through the taxation of the paid funds. Im not just doing this for me but for the masses who need the money now. Im going to be financialy sound when I retire some 22 years away, but am living month to month at the minute and the SW pension would allow me to live a bit more comfortably today.
I have said I am willing to pay the penalties and im aware that they could amount to 55% of the fund all be it an unlawful payment as you have pointed out the penalty would be paid. SW would n ot be liable for a fine as I had applied to the government and declaired my intentions. What would be wrong with that? please advise. Dunstonh.

dunstonh

It wouldnt be a new finance act it would only take an amendment to the current act

amendments are laid out in new finance acts. This is not some tweak but would be a major legislation change.

to allow millions of people aces to the pensions they have and for the government to rais much needed funds through the taxation of the paid funds.

and allow people to rob their retirement to pay for their debts now. Therefore just delaying the inevitable increase in benefits that it would lead to.

What would be wrong with that? please advise. Dunstonh.

If you have financial problems now then face up to them now. You have a number of options available to you where your pension is protected. You could consider a negotiated payment scheme such as an IVA. Worse case scenario, you could look at bankruptcy. Robbing your retirement when other more suitable options are available is silly. You are just putting it off to another day.

As for advice, what has your debt counsellor suggested you do? If things are that bad one assumes you have spoken with one and discussed the options available to you. Put your effort into that. Not some futile exercise on getting the law changed (which even if they considered looking at it, you would expect a couple of years of consultation, a year to get through parliament and maybe another year to allow for implementation even if you got your wish).

clucky01

and allow people to rob their retirement to pay for their debts now. Therefore just delaying the inevitable increase in benefits that it would lead to.


I know the government would never allow general access to pensions for that reason. But as i have stated I have provisions for my financial well being in the future via my police pension which by the way is also being messed with.
The pension i have with SW is not worth me transfering or keeping and I wish to have the benifit. If it takes years it takes years I cant touch it for another twenty years anyway. Im not in any financial difficulty that you have stated in your last post, Its just that when looking at the options open to me in relation to the SW pension I looked into cashing it in.

1- I have a current pension, that would negate any financial burden on the government in the furure.
2- I am willing to pay any penalty owed for the redemption of the fund to the treasury.

It may be a bit more complicated than tat but im struggling to see why the government wouldnt allow this to happen. They have already held a consultation with industry over a year ago but his was not put into the public realm. I wonder why not????

Zelazny

clucky01 wrote: »

and allow people to rob their retirement to pay for their debts now. Therefore just delaying the inevitable increase in benefits that it would lead to.


I know the government would never allow general access to pensions for that reason. But as i have stated I have provisions for my financial well being in the future via my police pension which by the way is also being messed with.
The pension i have with SW is not worth me transfering or keeping and I wish to have the benifit. If it takes years it takes years I cant touch it for another twenty years anyway. Im not in any financial difficulty that you have stated in your last post, Its just that when looking at the options open to me in relation to the SW pension I looked into cashing it in.

1- I have a current pension, that would negate any financial burden on the government in the furure.
2- I am willing to pay any penalty owed for the redemption of the fund to the treasury.

It may be a bit more complicated than tat but im struggling to see why the government wouldnt allow this to happen. They have already held a consultation with industry over a year ago but his was not put into the public realm. I wonder why not????

As has been mentioned, the whole point of pensions is to save up for your retirement. It is not a savings account.

That said, it could be regarded as technically within the discretion of the Trustees of the scheme whether or not to pay an unauthorised payment. You say that you're willing to pay any financial penalty owed, so let's have a look at what that would be:

up to 55% of the amount you receive
PLUS the scheme itself faces a charge of up to 40% of the amount you receive

So you'd lose up to 95% of it in tax charges. Is that really what you want?

Added to that, if a scheme makes too many unauthorised payments (and I have no way how that's determined - it could be entirely up to HMRC) then the whole scheme can be deregistered, and the whole of their assets would then face a 40% tax charge. I don't know which fund you're in but I'd be shocked if they held less than £1m in funds, which would mean a tax charge of at least £400k.

So in short, would you really be willing to take your pension now if it meant that (a) you'd only get 5% of the value and (b) you might be liable for a £400k+ charge?

chewback

This is why you shouldn't pay into a pension, too inflexible!! How do you know when you are in your mid twenties what your life will be like when you are in your 30s, 40s or 50s or even next year? Yet you are expected to lock money away till you are 55. I know you get tax relief but is that enough to offset the inflexibility. I know of people who have hundreds of thousands of pounds in their pensions but cant pay the mortgage due to redundancy. They loose the family house but hey hoy you might get a paultry annuity when you are 55. Put it in ISA's or property.

dunstonh

This is why you shouldn't pay into a pension, too inflexible!

The clue is in the name.

Also, we dont know how the pension fund value was built up. Certainly some of it is tax relief. Some of it is tax rebates due to tax free gowth. However, there could also be contracted out rebates and/or employer contributions in there.

Yet you are expected to lock money away till you are 55.

Which is the whole point of retirement planning.

I know of people who have hundreds of thousands of pounds in their pensions but cant pay the mortgage due to redundancy.

They should have have taken out insurance to cover them or built up an emergency fund using savings.

They loose the family house but hey hoy you might get a paultry annuity when you are 55.

The problem isnt the pension but their bad planning.

Put it in ISA's or property.

Even when a pension is miles better?