Can I cash in my pension?

le_loup

So now good advice it lecturing.
Sounds like the Alex Salmon form of discussion!

jem16

le_loup wrote: »

Sounds like the Alex Salmon form of discussion!

No that would be bullying and scaremongering!

gadgetmind

WhatRecovery wrote: »

'at your marginal rate' sounds interesting but could you explain a bit more?

Basically it will be treated like income. Whatever fits within what you have left of your basic rate band will be taxed at 20% and the rest at 40%.

However, even if the legislation goes through, April 2015 is the earliest you could do this.

Alternatively, if you leave that money there, you'll be able to access it with far less of a tax hit (perhaps even no tax!) once you've retired, which is why you really should treat this as a last resort.

dunstonh

Thought I might get a simple answer instead of lectures. I'm un subscribing from this thread, and will look elsewhere!

This has got financial fraud written all over it. Wants to exercise an unlawful transaction. Willing to comment tax fraud and lose 55% of the value in the process. Needs to use a scam company and doesnt want to listen to warnings or reason. (that is the 2014 answer. April 2015 will be very different. I suspect that was what SW were thinking about).

jamesd

whitey012001 wrote: »

I think I can cash in my mortgage and pay 55% tax, but as I earn £37k would this put me over the 40% tax bracket or is it not linked to my earnings?

You can park illegally and pay a fine. That is the context in which the 55% charge exists: it is the penalty for doing something that you are not allowed to do. Unauthorised payments are subject to a 40% charge. If the amount withdrawn is 25% or more of the pension pot in one year there is an additional 15% penalty called the unauthorised payments surcharge to take the total to 55%.

On top of that there is also the scheme sanction charge that will normally be a 15% penalty that has to be paid by the pension scheme. A pension scheme making unauthorised payments would normally know about this and withhold that money from you so that you end up paying it, taking your total loss to 70% of the money you take out.

A pension scheme is not allowed to provide you the money. If you find one that will, that's the charge that will be levied to punish you and/or them for doing something that is not permitted. This is covered in part in the HMRC page about the unlawful pension liberation schemes that you are asking about, even if you didn't realise that is what you were doing.

If you were to find a scheme that is willing to pay you the money there would be no additional tax to pay beyond the total of 70%. If that seems punitive it's because it's supposed to be.

If you will be 55 after April 2015 and if you can wait that long there are plans to allow withdrawing of all of the money. The first 25% is to be tax free, the remainder will be added to your normal taxable income for the tax year in which the money is taken. That can mean 20%, 40%, 40% plus loss of personal allowance or loss of personal allowance and 45% income tax, depending on how much is taken.

If you can't get the money from a construction loan, ask the local estate agents for details of any wealthy individuals they know of in the area who are willing to provide short term finance. Such people do exist and they can solve problems like yours and at a far, far lower cost than 233% of the money received from them that you'd end up paying if you somehow managed to use the pension. You might pay as much as two or three percent a month plus valuation and setup costs. They expect to be repaid after construction using the proceeds of a normal mortgage on the property.

If you are an experienced property developer with security to offer then Assetz might be able to assist with funding.

If you haven't used all available borrowing for money secured on your own home and any others that you own that may be a possibility. You may also find that secured loan places will lend you money beyond what a mortgage lender will normally do, using a second charge on the property to do it.

If you haven't pushed your unsecured borrowing capability to its limits you may be able to borrow on credit cards at modest cost using 0% for purchases or money transfers deals, subject to a charge. I've seen developers with suitable records who've borrowed well over £100,000 on cards, though not many of them.

downshifted

Further to my earlier posts, and re the quote below - I'm afraid we weren't sure what he had either. But having sought more info it now looks like the following:

Transfer Value:

TDG is an occupational pension scheme. Joined 11/96. Left 7/98 NRD 1/9/16 Final pensionable salary £12,900. Pension at date of leaving £62.02pa

Total Transfer Value now £1852, all post April 97. Members contributions included in this TV £516. AVCs not included in transfer value £2425

For reference: 2013 Benefit statements say

- Targeted Life Path Fund Value of Units £3872
- Projected pension £120pa

- Targeted Lifepath Fund AVC Only - £2370
- Projected Pension £70pa

So, I guess the options are as follows:

Wait until 2016, make sure we get "Open Market Option" quotes for the AVCs to get the best deal and luxuriate in the pension of about £190pa (Doesn't seem worth taking a lump sum, inflation linking looks like Inflation up to 2.5%)

Transfer out and drawdown. But there will be charges in doing this I guess? Not sure it's worth it for a relatively small sum?

If the scheme decides to adopt the new Budget flexibility, which they are considering, we would take advantage of that. Seems unlikely - although I reckon it will cost them almost as much to administer the pension payments as they are worth

Any comments welcome

Thank you for your time

atush wrote: »

You called this money purchase so I thought you had 2 of these attached to a DB scheme (as money purchase ones dont have AVCs)

It looks like you just have a DB/final salary scheme and a money purchase AVC. Or somehow you have a MP scheme with an Avc which I have never heard of.



Basically I dont know what you have?

Golfoneliners

I wonder if anyone can help?

I am 55 years of age and am currently in a very good final salary pension scheme with my current employer, which I am planning to be with until I retire aged 66.

I have an old personal pension pot that is currently dormant and has been for around 20 years worth around £25k; which I would ideally like to cash in and use the proceeds to pay of the balance of my existing mortgage.

Is there any way this can be done without having to affect my current final salary pension scheme, as I do not want to affect this in any way shape or form?

Thanks in advance.

Linton

Golfoneliners wrote: »

I wonder if anyone can help?

I am 55 years of age and am currently in a very good final salary pension scheme with my current employer, which I am planning to be with until I retire aged 66.

I have an old personal pension pot that is currently dormant and has been for around 20 years worth around £25k; which I would ideally like to cash in and use the proceeds to pay of the balance of my existing mortgage.

Is there any way this can be done without having to affect my current final salary pension scheme, as I do not want to affect this in any way shape or form?

Thanks in advance.

Your two pensions are completely separate. Nothing you do to one can affect the other. Assuming this is a straight forward DC pension invested in standard equity or bond funds then you will be able to withdraw the lot from April, 25% tax free and the rest taxed as income. You should check that your provider will support drawdown, if not you will have to transfer the pension elsewhere first.

Whether this is a financially sensible thing to do is another matter . You should compare the return you could get from the pension against the interest on the mortgage. It doesnt make sense to pay off a 3% mortgage but lose 5% from investments.

Golfoneliners

Thanks for this, I will check with them if they do support drawdown, however if they do not, then I guess that I will have to transfer it to someone who does?

Re. your point on the mortgage, while this makes sense, I really just want to be rid. It probably does not make economic sense as my current rate if 0.16% above base!

gadgetmind

Golfoneliners wrote: »

It probably does not make economic sense as my current rate if 0.16% above base!

There really isn't any point in paying tax at 20%/40% on 75% of this money just to pay off such a cheap mortgage.

Is there any way to move it to the DB pension to form part of the AVC pot? I don't know if any/many schemes allow this, but having AVCs works well as you can use this for your 25% tax free lump sum.