My Pension Scheme has been Wound Up!

doombug

Hi All

I have a bit of a dilema. A pension that I was contributing into from my previous employer has been wound up by the administrators. I am 38 and have a fund of approx 10k, and according to the literature I have been sent under these circumstances anyone under the age of 55 can withdraw their money subject to tax, provided your total pot is less than 18k

This is tempting to me as I have a loan that would be paid off with this money, or I could take a lump out of my mortgage and move myself into a better LTV!

I also have a pension running with my current employer that I am pretty sure I could transfer my fund into, but just wandered what the advice was for each of the options?

I could certainly do with the cash now, but dont want to do myself out of loads of money later on??

Any help or pointers appreciated!!

CannySaver_2

Hi

I've never heard of someone being under the age of 55 and being offered their money back in the case of a scheme wind up. The £18,000 is the triviality limit for people aged over 60 and with no other pensions.

If you have been a member of an occupational pension for less than two years then it is possible to get a refund of contributions if you leave. This refund is of your contributions only and is subject to income tax.

How long were you a member of the scheme for?

I'd also have a re read of the documents to check the age on the refund below £18,000 option.

The Canny Saver

RichandJ

CannySaver wrote: »

Hi

I've never heard of someone being under the age of 55 and being offered their money back in the case of a scheme wind up. The £18,000 is the triviality limit for people aged over 60 and with no other pensions.

If you have been a member of an occupational pension for less than two years then it is possible to get a refund of contributions if you leave. This refund is of your contributions only and is subject to income tax.

How long were you a member of the scheme for?

I'd also have a re read of the documents to check the age on the refund below £18,000 option.

The Canny Saver

This is a winding up lump sum CS and is perfectly ok. OP would get 25% of the fund tax free & the rest taxed under PAYE. It's quite different to a normal < 2 year refund.

Usually the other option is for the fund to be transferred either to a provider of the Trustees' or individual's choice.

doombug

Thanks guys for the very quick responses, and for confirming the situation.

Now, I know that the choice is totally mine and nobody can steer me down one route or another, but given the size of my pot (approx 10k before tax) my age (38) would i be completely cutting my long term nose off to spite my short term face if I took the money out and ran (well, either paid off my home improvement loan or paid a chunk off my mortgage to get better ltv) instead of transferring the sum (tax free?) into my current occupational pension?

Just wanted the opinions of others if you were in my shoes.

Thanks again, and great forum!

Lokolo

Whats in your current pension and how much is being contributed to?

If you only have say 20k then adding the 10k will make a big difference but if you have 100k and contributing 1k a month then that 10k will make little difference.

molerat

CannySaver wrote: »

Hi

I've never heard of someone being under the age of 55 and being offered their money back in the case of a scheme wind up. The £18,000 is the triviality limit for people aged over 60 and with no other pensions.

If you have been a member of an occupational pension for less than two years then it is possible to get a refund of contributions if you leave. This refund is of your contributions only and is subject to income tax.

How long were you a member of the scheme for?

I'd also have a re read of the documents to check the age on the refund below £18,000 option.

The Canny Saver

Winding up lump sums are not lower age limited and not counted towards any triviality exercised at the normal time.

http://www.hmrc.gov.uk/manuals/rpsmmanual/rpsm09105110.htm

doombug

Thanks again for the responses. I have had a check on my existing pension that I am contributing to in my current job, and that is approx 30k,, and I contribute 4% while they contribute 8%.

Weighing everything up I am most likely going to withdraw the 10k, pay the tax and pay a lump off my mortgage. This way I think I get some benefit earlier on, then with the advantages of paying mortgage off a bit earlier, I can ay more into my pension in the later years.

Lets face it, theres no guarantee that we'll all live to pension age anyway!