Advice please - should I cash in

camhav

Hi there

I just received notification of an old pension which is being wound up and that I have the right to take a lump sum payment - I only worked for this company for 9 months about 10 years ago so the fund is only at £3900 - at the moment I am 40 & a stay at home Mum so v. tempting to take this option as don't think will be worth much come retiring age - is there anything I should be considering before cashing it in re the long term?

Any advice would be great thanks.

atush

Yes, first of all do you have any other pensions? IF not, what will you retire on? Savings?

You wont get back all fo the 3900. They will tyake back the company's miney and the tax releif. So you could get as little as 1K back.

To get th full 3900, ask if you can transfer the money to another pension. One of your existing ones, or open a new PP or stakeholder. As a non tax payer you can py in 2800 per year and it will be grossed up to 3600 by givt tax relief. So do this while you are not working. Or at least save into ISAs.

molerat

The pension is being wound up so the op is entitled to all the fund less tax on 75% so around £3315 assuming standard tax. I cannot see any problem with taking the whole amount as cash then putting back into a pension so getting £4143 in the fund.

xylophone

It looks as though the OP does not want to contribute any monies arising from the wind up to another pension scheme.
http://www.pensionsadvisoryservice.org.uk/workplace-pension-schemes/final-salary-schemes/winding-up
http://www.thepensionsregulator.gov.uk/codes/code-early-leavers.aspx#s1883
With regard to taxation, she says that she is a "stay at home mum" and therefore might be a non tax payer. See http://www.hmrc.gov.uk/manuals/rpsmmanual/RPSM09105150.htm re any reclaim of tax.

camhav

Thanks for your contributions - I do have another couple of old pensions from when I worked one which were both paid into over a longer period , though really current plan is to retire on my husbands pension & downsizing our home. The pension in question was just with a company I worked with for 9/10 months or so - really had just been seeking to establish if there were any major pitfalls of cashing in that I should be aware of - I am a stay at home Mum who very occasionally does photography work so I do pay NIC's & always am there or there abouts with my free pay allowance - some years I pay a bit of tax others I don't as I am still below threshold - does this mean any tax I pay should I opt for lump sum may be reclaimed if I am still below free pay allowance?

Thanks again for time in responding - much appreciated. :-)

xylophone

http://www.hmrc.gov.uk/manuals/rpsmmanual/RPSM09105150.htm
is addressed to the administrators winding up the scheme.
"Because of the way PAYE works on these lump sum payments often the member ends up paying too much tax. Where this happens, the member can claim the tax back in year. There is guidance for individuals on how to do this on the HMRC website at http://www.hmrc.gov.uk/incometax/overpaid-thro-pension.htm. The problem is that many of the people affected won’t know that they may have paid too much tax and so are entitled to a tax refund. To help the people affected please include advice on how to claim a refund when you issue the lump sum payment. There is some suggested wording that you could use shown below. This will also help you by reducing the number of enquiries you may get on how the lump sum has been taxed and claiming refunds."

See http://www.hmrc.gov.uk/incometax/overpaid-thro-pension.htm