Can ANYONE aged 55+ cash in Pension?

GeneHunt59

Hi,

I'm new to the site and this is my first post. I have a pension from a previous employer to buy an annuity at retirement. I have recently turned 55 & the current retirement date for the policy is 65.

I have read what I can on annuities, but am confused. Somewhere I read that only people who 'retire' at 55+ can draw down from their pension pot. Can anyone confirm whether a person who is still working, or even unemployed can draw from their pot? From what I read it seems like you have to retire to benefit from the new rules.

Many thanks in advance for any assistance.

xylophone

What kind of pension/policy is this?

thenudeone

In most schemes, there is no official definition of "retirement".

In any case, any clause which tried to stop people from doing paid work after deciding to draw a pension would be very difficult to enforce even if it were legal (which it probably isn't).

A possible exception may be enhanced pensions paid in some schemes on the grounds of ill health - If such a person suddenly magically "recovered", and started working again, the scheme would seek to claw back any enhancements which were never rightly due.

But to answer your question - you do not have to "retire" to obtain the new pension freedoms at age 55+, BUT pension schemes do not have to offer access to them. If you want to access the new freedoms, you may have transfer it to a scheme which does offer them. That may not be possible in every case.

GeneHunt59

xylophone wrote: »

What kind of pension/policy is this?

I'm not sure of the exact name, but it was a company pension (not final salary), I imagine defined contribution? I paid a percentage of my salary into the scheme and my employer paid double that amount. The scheme is now administered by an external pension provider & the scheme currently has a retirement age of 62, when an annuity can be bought with the pension, i.e, I won't get a pension from my fomer company, but will have to buy my own annuity from the pot. I just checked and the scheme is known as 'Money Purchase Scheme 2003'. I hope this helps.

greenglide

So you don't have to buy an annuity, you haven't need to for many years now.

However the particular scheme may have this as the only option they do so for anything you may need to transfer to another scheme.

You need to ask the pension provider what the options are from them.

xylophone

http://www.pearson-pensions.com/downloads/library/new_joiners/explaining_your_benefits.pdf

Is it the above by any chance?

kangoora

It's reasonably well known (well, on here anyway ) that quite a number of pension companies imply that your only option is to buy an annuity on retirement. That is because that company does not offer a drawdown option.

As far as I know, you are entitled to transfer your pension to another provider who will allow drawdown.

GeneHunt59

xylophone wrote: »

Pearson Scheme...

Is it the above by any chance?

Yes it is (sorry I'm not allowed to post links). Another question, sorry. I have read conflicting statements regarding minimal annual income to be able to draw down your pension. One source states that you need a minmum annual income of £12,000 p.a. from other sources to draw down, but I have also read that this is to be reduced to zero, i.e. scrapped in April. Can anyone confirm which is correct?

greenglide

Currently you need £12,000 of pension income to use "flexible drawdown" but "anyone" can currently take capped drawdown which has limits on the amounts you can withdraw.

Capped drawdown does have costs attached which, hopefully, will become redundant after April.

xylophone

Page 8 of the scheme booklet (link in previous post) covers what happens to early leavers.

"Two or more years
If you leave with two or more years’ qualifying service you have two
options:
You may leave your Pension Fund invested in the Plan until
retirement.You won’t be able to pay any more contributions into
your Pension Fund but it will still remain invested. Fund management
charges will be deducted from your Pension Fund.You should
regularly review your investment choices and will still be able to
switch your choice of funds. Full details of how you can change your
investment choices can be found on page 5.
Or (if there is at least one year to your normal retirement date).
A transfer of the value of your Pension Fund, including the
Company’s contributions, to another registered pension
arrangement."

It may well be that if you wish to access this pension under the new rules, you will need to transfer out to another pension scheme.

You need to contact the administrators and make enquiries.

jamesd

Anyone with a defined contribution or personal pension pot can take money from age 55. These are the types with individual investments and pot sizes, not the types that mention average or final salary pension or 1/80ths or similar of pay.

The pension income options include:

1. Buy an annuity. Has been optional for almost ten years now, just transfer if you don't want to and aren't given a choice, though watch out for guaranteed annuity rates and penalties.
2. Capped income drawdown. Available now, allows the 25% tax free lump sum then up to the GAD limit income each year, currently in the 6-8% a year range at common retirement ages. Being removed as a new use option from 6 April 2015 but those who already have it can continue. Its advantage is that the drawdown does not trigger the annual allowance reduction from £40k to £10k after 6 April 2015.
3. Flexible drawdown. Used to require £20k guaranteed income being paid, now £12k. Made obsolete by flexi-access drawdown on 6 April 2015. Usual 25% tax free lump sum.
4. Flexi-access drawdown from 6 April 2015 allows the usual 25% tax free lump sum and drawing of any amount without any specific other income requirement. Income is added to normal taxable income for the year so the income tax cost discourages high withdrawing levels.
5. Uncrystallised Pension Funds Lump Sum (UPFLS) a fixed 25% tax free and 75% tax withdrawing available from 6 April 2015. Mainly intended for schemes that don't allow flexi-access drawdown, as a simple way to get the money out. Flexi-access drawdown offers more flexibility in the taxed/untaxed balance ad is probably the better choice.