Can I cash in my pension?

jem16

thistledome wrote: »

I still can't get my head round it though. So supposing he takes £15k as a trivial lump sum (i.e., the whole of his 2 pension pots). He'd pay tax on 75% of that sum and 25% of it would be tax free.

Then he'd put £10k of it into a new pension scheme and take that £10k as another trivial lump sum in the next tax year (but still within 12 months of the first one). So he'd get 25% tax free again and pay tax on the remaining 75%.

The maximum allowed for trivial commutation is £18k so he wouldn't be allowed £15k then £10k.

Mania's link suggests that although he can contribute to another scheme, he can't exercise triviality again so worth checking up on.

atush

But if those are his only 2 pensions, and he spends them what will he retire on?

Might be best to put in more into a pension, within recycling rules. Even if he can no longer use triviality.

atush

That is so sad.

Can you at least convince him to invest the pensions into S&S isas and take income from them?

At least less likely to spend them all at once, and to have money for the future?

That income of a few hundred pounds could have been spread between the months to buy little luxuries he can't afford on a pension, or to pay bills in the months he was short.

dricer

Am I right in saying that tax free lump sums from your pensions are only legal if you are 55 or over? Anything below can be taxed?

dunstonh

dricer wrote: »

Am I right in saying that tax free lump sums from your pensions are only legal if you are 55 or over? Anything below can be taxed?

You can only take the tax free lump sum from 55 (or earlier if scheme has protected early retirement age). Any payment made earlier than that (other than protected schemes) is an unauthorised payment that can see HMRC tell you to refund the money back to pension, tax you upto 55% and also potentially charge you interest on top for tax evasion.

gadgetmind

dricer wrote: »

Am I right in saying that tax free lump sums from your pensions are only legal if you are 55 or over? Anything below can be taxed?

After 55 you can take max of 25% tax free. Under 55, anything you take out is an unauthorised payment and is subject to punitive taxation.

bluey1234

Zelazny wrote: »

In 1983, Pensions preservation rules only applied if you had more than 5 years of service. It's possible you were both able to get a refund of contributions (rather than "cashing in") if the 5 years was actually nearly 5 years (or possibly exactly 5 years). From 1988 the rules changed so that any benefit in excess of 2 years was preserved, so you are correct that this would not be allowed now.

It's worth noting that while you would have got back what you paid in, you would have had to pay any tax/NI that was due on that money at the time, so would end up no better off than if you'd never joined the scheme in the first place.

Thanks zelazny again for this.

However my husband had 4 years police plus 2 years cadet service - sept 1977 to sept 1983 so this was I think in excess of the five years (Thames valley police - cadets at 75% I think...)

From my research though I now understand there was also another rule at the time as well - the 26 year age rule, where it could not be preserved if aged below 26 years, as we were.:(

Unfair as we would have kept it if we could but rules are rules! - shame and I think a bit ageist even in those days!

Thanks again.

Zelazny

bluey1234 wrote: »

Thanks zelazny again for this.

However my husband had 4 years police plus 2 years cadet service - sept 1977 to sept 1983 so this was I think in excess of the five years (Thames valley police - cadets at 75% I think...)

From my research though I now understand there was also another rule at the time as well - the 26 year age rule, where it could not be preserved if aged below 26 years, as we were.:(

Unfair as we would have kept it if we could but rules are rules! - shame and I think a bit ageist even in those days!

Thanks again.

I'd forgotten about the 26 year rule - that ended in 1986, so it would have applied in your case. It still seems a little silly to me that they had such a rule - why would age make a difference to preserved benefits?

Incidentally there's a very handy guide to the changes in pensions law over time at http://www.pensionsadvisoryservice.org.uk/pensions-timeline

bexs2247

Hi, my stepdad told me the other day that if you have an old pension scheme that is under £2000, under new laws you can cash it all in (minus any tax).

He said it doesn't matter what age you are.

Does anyone know the rules regarding this? I have a pension from 10 years ago when I worked for Norwich Union which is just sitting there.

I am 32.

There is a section on the HRMC website that says you have to be over 55 to cash in a pension and then another section referring to small pensions where there is no age limit mentioned.

Apologies if this has been answered in this thread already but I haven't had time to read the whole thing!

Thanks

gadgetmind

bexs2247 wrote: »

then another section referring to small pensions where there is no age limit mentioned.

http://www.hmrc.gov.uk/pensionschemes/small-pen.htm

"You must be at least 60 years of age to take your pension pot as a lump sum."

You should read everything there rather than relying on extracts or summaries to make sure that you get it right.