The more I read the less I know

cripplegate

I was self-employed and have over £100k in my pension pot insurance.
Can I take it all out by having 25% tax free and paying tax on the rest regardless of who the insurance company is?
I do not want a monthly annuity as it is a waste for me and I could do with the whole amount.
I am well past pension age. Time is not on my side.

dunstonh

I was self-employed and have over £100k in my pension pot insurance.

Which is not great in reality. Someone who has been self employed their whole working life with less than £120k in a pension has actually gone backwards (£120k is required to make up the lost state pensions that an employed person gets).

Can I take it all out by having 25% tax free and paying tax on the rest regardless of who the insurance company is?

Yes on the 25%. No on the rest.

jamesd

You can't take it all out in a lump, just the 25% plus some capped income level. The amount above 25% that you take out is taxed as normal income. I give the current cap levels in this post. Use the 2.5% row to get £66 a year per thousand Pounds left in the pension pot for a 70 year old man. That's £4,950 a year or £412 a month on £75,000.

If you have at least £20,000 a year in guaranteed pension income from annuities, work final salary or similar pensions and the state pensions combined you could use flexible drawdown to take out the whole amount. If you did that 25% would be tax free and the remaining 75% would be taxed as income this year, so you'd end up paying 40% tax on it. You could stagger it over a few years to keep it all in basic rate tax and save a lot of money. But you probably don't have the required amount of guaranteed income.

You wrote that time is not on your side. Is that just age and normal health? Or do you have some medical diagnosis that means that you have been told that you are likely to die within a year? If so you could take the whole pension as a lump sum. If not within a year, do you have something that reduces life expectancy, like being a smoker, heart disease, overweight, working outside most of your life or anything else? There are annuities that pay a higher rate in such cases.

About half of 65 year old men in normal health can expect to live to at least 88 years old.

simonr1100gs

dunstonh wrote: »

Which is not great in reality. Someone who has been self employed their whole working life with less than £120k in a pension has actually gone backwards (£120k is required to make up the lost state pensions that an employed person gets).

I have read this a few times now about self employment, I assume this is based on not paying any class 2 nic contributions. May seem a silly question, but am self employed and currently trying to sort out my pensions. Thanks

TH1878

simonr1100gs wrote: »

dunstonh wrote: »

Which is not great in reality. Someone who has been self employed their whole working life with less than £120k in a pension has actually gone backwards (£120k is required to make up the lost state pensions that an employed person gets).

I have read this a few times now about self employment, I assume this is based on not paying any class 2 nic contributions. May seem a silly question, but am self employed and currently trying to sort out my pensions. Thanks

Self-employed Class 2 and Class 4 NIs just entitle you to the Basic State Pension, not the additional State Pension (S2P or SERPS)

xylophone

http://citywire.co.uk/new-model-adviser/state-pension-proposals-qanda-with-ros-altmann/a484479
might be of interest.

simonr1100gs

TH1878 wrote: »

Self-employed Class 2 and Class 4 NIs just entitle you to the Basic State Pension, not the additional State Pension (S2P or SERPS)

I was advised to opt out of serps when I was 18, now 40, understand that you could opt back in in 2002, but was told to stay opted out. became self employed in 2005. understand S2P finishes 2012, not sure what It will all mean to me, trying to get the heads up before I see an IFA. Thanks

TH1878

simonr1100gs wrote: »

I was advised to opt out of serps when I was 18, now 40, understand that you could opt back in in 2002, but was told to stay opted out. became self employed in 2005. understand S2P finishes 2012, not sure what It will all mean to me, trying to get the heads up before I see an IFA. Thanks

When you became self-employed in 2005, your contracting out would have ceased and you would not have built any additional S2P benefits up.

You will have protected rights in a pension from when you were employed though.

The changes this year will not affect you much as you cannot contract out if you're self-employed anyway. However, your protected rights will be converted to non-protected rights and the restrictions attaching to them (must provide a spouse's pension etc) will also be removed. This means that you will have more flexibility over the way you take benefits at retirement.