Confused about pension

tingles59

Hi,
I hope someone can advise me.
I'm 60 in Oct and have a pension pot of approx £49,000. The pension is one I had with a company I worked for for 12 years, I no longer work for them. I would like to repay my mortgage as soon as possible and would like to know how I go about releasing this money, who do I approach in the first instance?
I think I can take 25% tax free and pay normal tax rate on the rest, but am I allowed to withdraw it all? I think that next April I will be able to do that tax free, but even with 75% taxed, it would still make econic sense as far as I can see, my mortgage is 5.9% interest and still has 3 years to run.
I am employed p/t at present so would the tax on the pension be increased to above basic?
I would value advice thats uncomplicated please.
Thank you.

xylophone

You are sure that this was a defined contribution rather than defined benefit scheme?

https://forums.moneysavingexpert.com/discussion/comment/65616250#Comment_65616250 see post 4


The legislation has now been passed to pave the way for the single tier state pension. https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/181237/single-tier-pension-fact-sheet.pdf

If you wish to draw your pension, you will need to contact the administrator.

atush

You will have to pay tax on the 75% next year or any year. So timing wont help you. only 12,250 will be tax free in total.

What will help you is the switch your mtg to a lower rate one as 5.9% is very high.

So your option is to take 25% TF now and draw down t he rest next year. But be careful- depending on your income the 75% could put you into Higher rate tax and you'll lose 40% of it? Which is easy to do as it is 36K.

Not to mention how you will fund retirement.

Your_Hero

tingles59 wrote: »

Hi,
I hope someone can advise me.
I'm 60 in Oct and have a pension pot of approx £49,000. The pension is one I had with a company I worked for for 12 years, I no longer work for them. I would like to repay my mortgage as soon as possible and would like to know how I go about releasing this money, who do I approach in the first instance?
I think I can take 25% tax free and pay normal tax rate on the rest, but am I allowed to withdraw it all? I think that next April I will be able to do that tax free, but even with 75% taxed, it would still make econic sense as far as I can see, my mortgage is 5.9% interest and still has 3 years to run.
I am employed p/t at present so would the tax on the pension be increased to above basic?
I would value advice thats uncomplicated please.
Thank you.

The first thing you should do is to protect your pension fund. Your pension is likely to be invested in shares/bonds, so it would be advisable to move this into a cash or equivalent money market fund to protect the value from adverse movement in the stock market.

I would like to echo the points raised by atush and you should reconsider cashing out your pension. If you think it is right for you, speak to your pension provider in the first instance. Your current pension plan and provider may not allow you to take out the 25% tax-free cash and defer the remainder 75% until next year (these are normally vested together).

If this is the case, you may need to transfer the plan to a pension that will allow 'drawdown' so that you can do this. If in doubt, speak to a reputable IFA local to you who can arrange all this for you in return for a fee.