Company Pension and still work?

edited 30 November -1 at 1:00AM in Pensions, Annuities & Retirement Planning
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davidscotdavidscot Forumite
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Our company is currently changing pension providers ( I will post a thread looking for advice on this later when we have more details) Anyway, the question is, is it possible to access our company pension from the current provider when we reach 55. Then can we continue to work and contribute to the new providers pension? Could we for example take 25% of our fund tax free and put the remaining 75% elsewhere. Then we would continue to work and contribute to the new pension providers scheme. I realise we would have to watch out for tax etc but this is just a question that was getting floated about at work and we wondered if anyone could help. hope I have explained myself here and any help is appreciated.

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  • jamesdjamesd Forumite
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    Is the existing scheme defined benefit (final salary, average salary or similar) or defined contribution (no guaranteed value, investments that have a value that changes)?

    If it's defined benefit it will depend on the scheme rules and there would be a very substantial reduction in the value if 55 is earlier than the normal retirement age for the scheme. For some schemes you can't work after taking the pension, or get a reduction based on earnings if you do - the ones with this restriction are really intended to be actual retirement only.

    If it's defined contribution the answer is almost certainly yes. Not only that, you can almost certainly take an income from it and recycle that income into more pension contributions, which can be beneficial if your new scheme uses salary sacrifice to save NI. However if you do take more than the 25% tax free lump sum your annual pension allowance for personal pensions will be reduced from £40k to £10k.
  • davidscotdavidscot Forumite
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    It must be a defined contribution scheme as we have no guarantee value and the funds we choose have values that change as we have to keep an eye out for these ourselves and choose accordingly. So if we can get to our 25% lump sum and use that, how do you mean 'recycle' our remaining 75%?
  • edited 1 December 2014 at 1:11PM
    jamesdjamesd Forumite
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    edited 1 December 2014 at 1:11PM
    You can take an income from the 75%. If doing it now, using capped income drawdown. If doing it from 6 April 2015 using that or flexi-access drawdown, which has no cap. So you could increase your pension contributions up to the £10,000 reduced limit and subsidise that with income being taken from the older pension pot.

    A person who is 55 before 6 April 2015 and who starts capped income drawdown can take the capped income as well as the 25% without triggering a reduction in the annual pension contribution allowance from £40,000 to £10,000. This includes all pension pots put into drawdown later. Those who will not be 55 by 60 April 2015 don't have this opportunity and anything more than the 25% will trigger the reduction.
  • davidscotdavidscot Forumite
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    Still got a couple of years to go before 55 but this was just a question that was floating around. If, as you say, we can access the current providers fund and take 25% and use the remaining 75% to supplement the new providers fund then for me its a no brainer. It would just be a case of juggling contributions for tax implications and thresholds. We will be getting the choice to move our existing funds into the new providers scheme but information on this has not been issued yet, costs, etc.
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