what would you do

savinglikemad

Hi I have been told a pension fund I paid into now worth £6110 is winding up and I have been given three options:

1. transfer the value into an individual account to a section 32a buy out policy staying with legal and general
2. transfer the value to a pension arrangment of my own choice (I currently work for NHS and am part of their own pension scheme)
3 Commute the value of the fund for a cash sum on the grounds of triviality first 25% tax free remainder taxable.
I am normal rate tax payer, and own my own house with mortgage, £14000 left 8 years to run on repayment. Not a clue what to do pay off some of mortgage , invest it in ISa leave it where it is I don't know any ideas suggestions welcomed

EdInvestor

You can probably forget about Option 3 as preumably you are not yet 60 and your othetr pension at the NHS is worth more than 16,000.

Option 2 depends on whether or not the NHS will accept the funds.If they will, that is probably the best option as it is very small.

What are the investment choices and charges if you go for Option 1?

savinglikemad

no not sixty yet just feel it 47 going on sixty, other nhs pension only started year ago at £ 60 per month so not much in fund, just seem to favor cashing in and reducing mortgage but need advice as pensions seem so complicated also if I let pension run but get small weekly payout don't goverment take it off any top up they may have to make, therfore is it really worth it

savinglikemad

oh re option three the letter i have received from my pension fund says I can cash all of it in now as the fund is winding up so will have first 25% tax free and pay tax on balance letter does not mention my age or any variations due to my age so guess they mean all of it now

savinglikemad

hi update I just received a cheque for £5080.60 gross was £6235.900 freepay was £1558.98 taxable £4676.92 but was taxed £1155.30 that is surely not right what % should I have been taxed Advice please as I think it should be about £128 less

EdInvestor

I've heard they tax triviality payouts on an emergency code so you will probably have to claim it back.

Ickle_Maisie

Triviality has a hefty tax on it im afraid with 25% tax free, then different rates for each few hundred after. If you feel like you've been over taxed contact the inland revencue and ask for form p53. Triviality is only for clients aged between 60 to 75 with a fund less than £16,000.00 this goes up every year so it may not be a triviality payment but a surrender payment you recieved in which case it will be taxed differently. Google triviality for a list of the taxes and try and work it out. Sorry I don't know the different amounts off by heart!

DavidLaGuardia

Ickle_Maisie wrote: »

Triviality has a hefty tax on it im afraid with 25% tax free, then different rates for each few hundred after.

You are mistaken. The tax is simply applied on it as if it were earned income. The chance are that you are just giving HMRC back the proportion that your received from them in the first place (or less even if taxed at a lower rate when taking benefits fom it)