Release pension cash

Malthusian

Assuming you only want the 25% tax free lump sum, you need to convert your pension to an income drawdown plan. Your current provider may allow this or if they don't you may have to transfer it to one that does.

You can DIY all this unless you have safeguarded benefits worth more than £30,000, in which case you will have to take advice. Even if you don't have to, you should seriously consider taking advice from an IFA to make sure that what you are doing is the most sensible option. When you are handling thousands of pounds the benefits can easily outweigh the cost.

The Government's Pensionwise service may be a good starting point.

bionictadpole

I have a pension with an old employer, that has a protected age of 50. (This would be due in 2 years time.)

The amount that it will grant me each year is negligible and I asked the pension administrator for a figure to cash in early due to ill health. They are refusing to give me a figure without signing various forms for access to medical records/agreeing to be poked and prodded etc.

All I want is a figure to be able to decide if I want to go down that route or not with various tax/benefit issues to take into consideration. Are they in the wrong or do I have to submit to yet more humiliation just to get a figure I might not act on anyway?

dunstonh

The amount that it will grant me each year is negligible and I asked the pension administrator for a figure to cash in early due to ill health. They are refusing to give me a figure without signing various forms for access to medical records/agreeing to be poked and prodded etc.

That would suggest that there is not a protected scheme age or they are misinterpreting the request and are checking you for a serious illness claim. Possibly as you are not 50 yet, the serious illness claim is more likely.

What type of pension is it? I mean, if its money purchase, then you dont need special figures supplied. Just look at the current value and go by that.

Silvertabby

If there are benefits to taking the pension before your NRA on ill health grounds (ie, no reductions for early payment in the case of a deferred DB pension) then they are unlikely to quote hypothetical figures.

Try asking for quote as at 50 (assuming that is your NRA) as that should give you a worse possible case scenario.

maw9960

I have found a small pension which I have decided to cash in early
. I am 57 and have been unemployed for just under a year. The value is approx £13k, I believe if I cash this in I will not pay tax due to me being unemployed this financial year. Is this correct?.

cloud_dog

maw9960 wrote: »

I have found a small pension which I have decided to cash in early
. I am 57 and have been unemployed for just under a year. The value is approx £13k, I believe if I cash this in I will not pay tax due to me being unemployed this financial year. Is this correct?.

If you have no taxable earnings this year then you will be able to take 25% of the £13k tax free (£3250), and as the remainder (£9750) is less than the £11500 personal income allowance for 17/18 it will ultimately be tax free.

'Ultimately' because as this is a first withdrawal the pension company is likely to apply standard or emergency PAYE codes. You will simply contact HMRC and explain and they will 'refund' any tax taken.

EDIT: Are you in receipt of any benefits? If you are then the drawing of the pension may have a bearing on these or the amounts involved.

maw9960

No benefits, currently living off my savings.

cloud_dog

maw9960 wrote: »

No benefits, currently living off my savings.

Are you entitled to any, or does your financial situation (i.e. savings) restrict you from claiming any?

Also, please note, (I'm not an expert in benefits but...) if you are not signing on as unemployed you will not continue to be credited with NI and therefore will not be adding to your state pension 'pot'.

To answer your original question, it looks like you can draw it all tax free (although you may need to reclaim the tax).

You may also benefit from posting some information on the Benefits board and make sure you are claiming all appropriate benefits and that you are protecting you state pension benefit.

ProDave

Personally given the date, I would draw the 25% tax free immediately. Draw half the remainder now (before April 5th) and then draw the other half of the remainder after April 5th, thus splitting it over 2 tax years.

Definitely sign on. You should at least get the basic jobseekers allowance, and more importantly NI credits to keep your state pension entitlement up to date.

Brynsam

ProDave wrote: »

Personally given the date, I would draw the 25% tax free immediately. Draw half the remainder now (before April 5th) and then draw the other half of the remainder after April 5th, thus splitting it over 2 tax years.

Definitely sign on. You should at least get the basic jobseekers allowance, and more importantly NI credits to keep your state pension entitlement up to date.

If the whole lot can be drawn tax free this tax year, why take the risk that tax would be payable if OP becomes a taxpayer after 5 April?