cashing in pension to pay off mortgage?

another

ok so ive been looking at my my pension statement and is says "value of your personal account is..." does this mean that amount is the actual value? if so i would like to cash it in and pay off the rest of my mortgage with it. how do i go about doing this i have no idea.
Please help

greenglide

How old are you? You need to be at least 55.

What sort of pension is it? Occupational pension? Defined Benefit (final salary) or Defined Contribution?

Are you still paying into it?

Why are you trying to do this?

runninglea

Watch channel 4 at 8pm

another

greenglide wrote: »

How old are you? You need to be at least 55.

What sort of pension is it? Occupational pension? Defined Benefit (final salary) or Defined Contribution?

Are you still paying into it?

Why are you trying to do this?

its a contribution pension, i no longer pay into it. im 35 i would love to be able to relax and work less due to my ill health and this would enable me to pay off a large proportion of the the mortgage. also a little money to get married (not a silly amount registry office and social club do)

greenglide

You can't access it until you are 55 (it will actually be 57 by then) unless you claim under serious illness rules which means a diagnosis of less than 1 year to live.

atush

No, you can't.

mgdavid

and IF you could, what will you live on when you are older / at retirement age?

jamesd

Yes, it's the actual value.

If you have been diagnosed with a fatal illness and life expectancy below one year you can contact your pension provider and tell them this and that you want a severe ill health pension lump sum. This will pay you the whole pot tax free. This is only available if you haven't yet taken any money out of the pension.

If you are at least 60 years old you can take some pots now, please say more about the values of all of your pension pots and work defined benefit pensions so we can say which rules apply to you.

If you are at least 55 years old and have annuities or a work defined benefit pension that combined with any state pension you're getting total at least £12,000 a year you can use flexible drawdown to take out 25% tax free and the remaining 75% as fast as you like as taxable income. Not all pension providers offer this option, you can transfer to one which does.

If you are at least 55 years of age you can take a 25% tax free lump sum now and about 6% of the remaining 75% under capped income drawdown. You can continue to take that roughly 6% each year until there's nothing left or you switch to flexi-access drawdown.

From 6 April 2015 if you are at least 55 you can use an uncrystallised funds pension lump sum (UFPLS) to take out any amount from the pot with 25% being tax free and the remaining 75% added to your taxable income. You can take it all out at once if you want to.

From 6 April 2015 if you are at least 55 you can use flexi-access drawdown to take up to 25% tax free lump sum from any portion of it and the remaining 75% of the portion you take is added to your normal taxable income. You can take it all out at once this way if you want to.

If none of those applies you can't take it unless your scheme is being wound up by the pension provider.

Use caution with taking it all. because 75% is added to your taxable income you can end up paying 45%, 40% income tax and if the total income is over £100,000 losing some or all of your tax free personal allowance as well. Usually the best policy will be to take it out so that the taxable part is just using the basic rate tax band.

Some people may want to use venture capital trust investing to help reduce the tax cost of taking the money more quickly than the basic rate band allows. These give you 30% income tax relief capped at the income tax actually paid in the year and you have to hold the investment for at least five years or repay the tax money. Much of the investment returns form these comes from tax free dividend payments so holding times should really be more like 8+ years than 5 but that isn't a requirement if you don't mind the risk of a capital loss for selling relatively early.

That's what is possible, next is whether it's wise. Usually using pension money to pay of a mortgage normally makes you worse off than you could be because investments in a pension tend to grow faster than mortgage interest rates. The main exception to this is interest only mortgages where extra pension contributions were made specifically to build up a larger pension to use to repay the mortgage.