Can I cash in my pension?

Linda_Russell

My husband has been trying to cash in his pension work since the new Government laws in April! He has tried one Financial Advisor who came back after 2 months to say his Company thought it was in my husband's best interest to leave his pension where it is and take out a personal loan instead!! We don't know where to go from here as all we want is for it to be transferred out of his company scheme into a private scheme so he can access the money. He can still go back into his work pension after getting the money now, and that will be for another 10 years until he retires so we have no problems with taking the money out now and don't agree with what this Company has said. The Financial Advisor also said we could do a insistent client basis whatever that means? Any help and advice would be appreciated.

dunstonh

He has tried one Financial Advisor who came back after 2 months to say his Company thought it was in my husband's best interest to leave his pension where it is and take out a personal loan instead!!

Not sure why you have exclamation marks as that is a text book answer to someone who doesnt have a strong retirement fund is looking to access the money early (typically for not a strong reason).

We don't know where to go from here as all we want is for it to be transferred out of his company scheme into a private scheme so he can access the money.

Why?

He can still go back into his work pension after getting the money now, and that will be for another 10 years until he retires so we have no problems with taking the money out now and don't agree with what this Company has said.

Why dont you agree?

The Financial Advisor also said we could do a insistent client basis whatever that means?

As the adviser would have told you if you had asked them, it means you can disregard the advice of the adviser and do something different. However, it means you get less consumer protection when you find out later it was a bad thing to do.

Paul_Hyland

if your life expectancy is less than 1 year then Aegon should pay it all to you as a lump sum, regardless of how outdated your contract is.

doberryfirkin

Before anyone says it - yes I do know there's a sticky and I have read the articles but I am still slightly confused.
I am a higher rate taxpayer and PAYE
I want to cash in some of a money purchase scheme pension plan from a previous employer.
I don't quite understand how tax is applied to any lump sum withdrawn.
If I withdrew £25k from a purchase plan currently valued at £100k, is that £25k (being 25%) tax free OR is it 25% of the £25k tax free with the remainder of the lump sum taxed at the higher rate?
Thanks

atush

you will lose 40% of your pension if you take it all in cash. AS all of it over the TFLS is added to your income It could even put you up into 45% tax rate.

If you just took 25% of it, and are over 55, then it can be your TFLS. However, take a penny more and it will affect your ongoing contributions (ie lower them to only 10K PA).

Next time, with a separate query, start your own thread as you might get more relevant replies/

coyrls

doberryfirkin wrote: »

If I withdrew £25k from a purchase plan currently valued at £100k, is that £25k (being 25%) tax free OR is it 25% of the £25k tax free with the remainder of the lump sum taxed at the higher rate?
Thanks

If you crystallised the entire £100K, left £75K in Flexi-drawdown and took out your £25K tax free Pension Commencement Lump Sum (PCLS), you would pay no tax on the £25K.

If you took £25K as an Uncrystallised Funds Pension Lump Sum (UFPLS), 25% of the £25K would be tax free and the remainder would be added to your taxable income for the tax year.

doberryfirkin

coyrls wrote: »

If you crystallised the entire £100K, left £75K in Flexi-drawdown and took out your £25K tax free Pension Commencement Lump Sum (PCLS), you would pay no tax on the £25K.

If you took £25K as an Uncrystallised Funds Pension Lump Sum (UFPLS), 25% of the £25K would be tax free and the remainder would be added to your taxable income for the tax year.

Ok I realise that at some point someone will say - 'seek professional advice'. But if I asked the provider to 'crystallised the entire value of the scheme and left a proportion in Flexi-drawdown' they'd know what I was talking about? Do they hold onto the Flexi drawdown? Can I take out more than the £25k and still do it tax free - or is there a % limit or threshold on how much I can take tax free - presumably the 25% of the value of the scheme?

Thanks

mgdavid

it's entirely possible that the current provider doesn't offer drawdown at all. You would then need to transfer the whole fund to another provider that does. Or you could open a SIPP and transfer into that, then manage the drawdown personally (but I think you may be a little way off that in terms of the learning curve).

atush

the TFLS is 25% of the whole pot at the time of crystalisation.

So 25K if the pot is 100K, 50K if 200K etc.

dunstonh

But if I asked the provider to 'crystallised the entire value of the scheme and left a proportion in Flexi-drawdown' they'd know what I was talking about?

Possible but the most likely outcome is that the product you hold does not support drawdown and would require transfer to a new product. Especially with workplace schemes.

Can I take out more than the £25k and still do it tax free - or is there a % limit or threshold on how much I can take tax free - presumably the 25% of the value of the scheme?

The 25% tax free lump sum is known as such because its 25% tax free. If you could get more then it wouldnt be referred to as 25% tax free.