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can i cash out a private pension early?

want2bmortgage3
Posts: 1,966 Forumite
hi, several years back i paid into a pension with a previous employer, i think they contributed the same as me, probably for around 6 months.
i heard on the radio someone had cashed in their pension early but took a hit of 55% tax on it. is this possible for me to do? i'm 32 at the mo. thanks for any replies.
i heard on the radio someone had cashed in their pension early but took a hit of 55% tax on it. is this possible for me to do? i'm 32 at the mo. thanks for any replies.
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Comments
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You probably heard on the radio it was illegal too?
If you are age 55 or over you can commence your pension (and take 25% in cash) and if you are likely to die int he next year, you could get the money paid out.
If neither, then no you can't cash in your pension.
If you are in debt, see the debt free forum.
If you don't like it sitting around on it's own, transfer it to your new pension. If you dont' have a new pension, you probably should.0 -
Atush has given you the helpful answer but perhaps we are supposed to refer you to the sticky thread that we said was really a waste of time as users would not notice it.
https://forums.moneysavingexpert.com/discussion/48966500 -
hi atush, you say probably should, but since the plan i mention above, i have not had any other pensions. instead i have been putting money into property, paying down a mortgage. no one has ever explained to me why a pension is good, all i ever hear is negative things like 'it will end up being worth nothing or lose value'. the impression i get is i put money away out of my control and trust that whoever is investing it and whatever they are investing it in, it will give me a big return when i want to retire. so far the idea hasn't appealed to me.0
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They are useful as one element of your retirement plan - not least because you can't cash them in early.
One thing is for sure though, leave that one as it is and it WILL end up being worth next to nothing.“In any moment of decision the best thing you can do is the right thing, the next best thing is the wrong thing, and the worst thing you can do is nothing at all.” - Roosevelt0 -
want2bmortgage3 wrote: »hi atush, you say probably should, but since the plan i mention above, i have not had any other pensions. instead i have been putting money into property, paying down a mortgage. no one has ever explained to me why a pension is good, all i ever hear is negative things like 'it will end up being worth nothing or lose value'. the impression i get is i put money away out of my control and trust that whoever is investing it and whatever they are investing it in, it will give me a big return when i want to retire. so far the idea hasn't appealed to me.
People who say those things know nothing about pensions.
Pensions are a tax wrapper (like ISAs) and hold investments (like S&S isas). They get tax relief, so every 100 you put in costs you only 80. And if you pay 40% tax, every 100 you put in costs you only 60.
Employers contributions- this can double the oney in your pension or more. And all companies have to offer a pension soon so join it. WE call the Free Money, and if you aren't int he pension, you don't get it.
pensions can pay less than you hoped for, but mainly if you don't put enough in. They are invested for decades, so should not lose money in the long term, but gain.
Pensions invest in what YOU choose so are in your control.
For instance, I just got a statement from one of ours, and it is up 20% this year. No accounts you can think of will do that for you? And the growth is tax free.
They should not be used alone, everyone should try to own their own property in retirement (so you aren't paying rent/mtg) you should have a cash emergency pot, you should have pension income, and you should have other outside equity investments (such as S&S isas).0 -
Pensions are a major benefit to the government because they provide people with an ongoing income in retirement. As such they are taxed accordingly i.e. very favourably.
The risks associated with them are that you cannot access your money early (55 at present) excluding very specific circumstances and that the pension rules may change.
Do not use pension liberation (taking your pension before 55). The typical fees for companies are 20% of the pension pot, then you need to pay the tax due on your pension (55%) and if you don't notify HMRC you may also be liable to further fines. This is the best case scenario. The worst case scenario is the pension liberation company runs off with your money, the pension regulator freezes the liberation companies assets and the money is returned to your pension less losses and fees. So again, please do not do this.
If you do not want the inflexibility of using a pension use a stocks and shares ISA (another tax efficient vehicle but more flexible than a pension).
Long term investing in stocks is not risky. The odds of getting a return of over 6% p.a. on the American stock market over 20 years investing monthly is 87.26%. Using a few tricks and having some flexibility it is unlikely to get a lower return.Hi, we’ve had to remove your signature. If you’re not sure why please read the forum rules or email the forum team if you’re still unsure - MSE ForumTeam0
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