taking lump sum pension

alan1955

I am 55 and want to take my lump sum pension, I have contacted my fund provider. And have received the necessary forms, one of which has to be filled in by an FCA registered financial advisor.
I don't want advice as I intend to pay off my mortgage, the pot is around £35,000 after tax .£25,000. Do I have to pay an f a £450. For advice that I don't want or need to get the form signed is this form a legal requirement. Any help would be appreciated.

Drp8713

If you are seriously planning to pay 40% tax on your pension by taking it all out at once, to pay off what is probably a mortgage with a low rate, then really paying somebody £450 to tell you not to do it until you stop working and/or phase thr withdrawls so you dont pay £10500 in tax is probably a good move.

dunstonh

one of which has to be filled in by an FCA registered financial advisor.

There is a requirement on funds greater than 30k with safeguarded benefits (usually valuable guarantees) to get advice to prevent people from making a silly mistake.

I don't want advice as I intend to pay off my mortgage

Something that is not normally a good idea to do with a taxed pension fund.

. Do I have to pay an f a £450. For advice that I don't want

£450? Thats a good quote. I wouldnt charge as little for that for someone asking what you want. Based on very limited info, the advice would not support what you want to do either (of course, there could be more to it but it is not normal to draw your pension, pay tax and clear a low interest debt).

At the moment, it appears the safeguards are working to prevent you from doing a potentially silly thing.

alan1955

Thanks for replies, I am in a low paid job and saving £80 per week on my mortgage would help my situation immensely. Is it a legal requirement to pay an f a for advise I don't want ?

ScottyLP

If that's the scheme rules. You could always transfer to a scheme that allows you to withdraw without advice, although you may need to get the transfer itself signed off.

Daniel54

ScottyLP wrote: »

If that's the scheme rules. You could always transfer to a scheme that allows you to withdraw without advice, although you may need to get the transfer itself signed off.

From April this year it is a legal requirement to have IFA written advice if you want to take a CETV and transfer out of a DB scheme -or any other pension with guaranteed benefits - if the CETV is over £30k.

It is therefore not dependent on the scheme rules,Dunstonh's post is in every way correct

jamesd

1. I can tell you how to reliably get 10% tax free ongoing income on the 25%, for some of it, depending on how high your taxable income is.

2. I can tell you how to get 10%+ on it taxable for now.

3. I can also tell you how to use the money to get an extra £650 a year just by making pension contributions and taking out the money a few weeks later (for others, 10k gross into Virgin Stakeholder pension, withdraw, make 6.5% on the deal, repeat each year). This one is guaranteed by the government.

What is your mortgage interest rate? What is the remaining term? How much is still owed? Would you be interested in increasing the term to further help to increase your disposable income?

Chances are that we can tell you how to get a good deal more for your money than your original plan if you tell us a bit more.

jamesd

alan1955 wrote: »

the pot is around £35,000 after tax .£25,000.

Is that a mortgage of £25,000?

Maybe you don' t know it yet but when you take taxable money from a pension pot it is added to your taxable income in the year that you take it. If you are on say £15,000 normally this means that you would be taxed this year as if you earned around £50,000 a year, paying higher rate income tax on a lot of the money.

One very easy way to make what you plan better is to take the 25% tax free lump sum then take the rest in pieces, so that it's all taxed at only basic rate, none at higher 40% rate. If you tell us you normal income and the pension pot size before tax we can work out how much extra money doing it this way would get you.

It probably is possible to come up with a plan that an IFA would agree with. However, it's not strictly necessary. You may be required to get advice but you are not required to follow it.

atush

alan1955 wrote: »

Thanks for replies, I am in a low paid job and saving £80 per week on my mortgage would help my situation immensely. Is it a legal requirement to pay an f a for advise I don't want ?

You may have a low paid job, but I assume you had one when you took out the mtg? And rates were higher?

You need to cut your outgoings, instead of wasting 10K of your pot. Do a full MSE, and cut your bills so you arent so tight for cash? Sell things on ebay, boost your income in other ways?

If that doesn't work, take your 25%, and use that to make life easier.

What % is your mtg, and when would it be paid off if you kept paying as normal? If you spent this money on your mtg, what will you live on in retirement? If you can't afford to live now, how will you afford it on the SP alone?

WiltshireLad_2

Hello - I am new user and not sure if it the correct etiquette to jump in with my question, but I cant see how to start a new subject.

I will be 55 in 18 months and plan to retire and take my pension, which should be around £30k per year uncommuted. I want to take out about £70k as lump sum to help our kids with deposits, etc, but that would commute the annual pension to just under £26k per year. We will soon have no mortgage, but my question is:

Should I take the lump sum from my pension, and be forever £260+ per month (and growing at each annual review) worse off compared to taking no lump sum, or should I take a £70k mortgage, interest only, with would cost £200 per month, if interest rates dont suddenly leap up? I have another pension that will come out at 60, which should be worth gross around £140k, and other lumps that could come later in my 60s or 70s (assuming I'm still around) that could pay off the mortgage

My feeling is that while it is nice to be mortgage-free, commuting any pension to a lump sum feels like a loan that will never paid off.

I would welcome any insights! Apologies if I have broken any forum rules

atush

There is a blue button in the top left of the main pensions page just above the green banner that says new thread? Copy/paste your Q into a new one?

If I were you, i would spend the next 18 months saving into a DC pension (as your old one seems to be DB/final salary) and use that as a lump sum. Or at least the 25% tax free bit. You can put into pensions as much a 40K or your full salary (and you can use past years unused allowances).

And if you did commute some of your pension, you dont have to commute a full 25%, you could commute less?

Borrowing some cash could be a good idea, while rates are low. If you can get your lender to do so (and at a good rate) as many dont like to loan to retirees. AS long as you know you can pay it off-

what kind of pension is the 140K one? If a DC pension, you could take 25% tax free at 55, which would be 35K.