Two private pensions - not sure what to do?

andygb

I now realise that I have two smallish private pension plans which will be worth only a few hundred quid a year when they mature.
As I posted recently, I want to cash one of them in to pay off part of my remaining mortgage.
Is there anything stopping me from cashing in both of them, as I also have one pension (local government) which is quite good, and which I am not allowed to cash in.

PeacefulWaters

How old are you?

What is the value of each pot?

What rate of interest are you paying on the mortgage?

When do you expect to retire?

andygb

PeacefulWaters wrote: »

How old are you?

What is the value of each pot?

What rate of interest are you paying on the mortgage?

When do you expect to retire?

One is £7K, the other around £16K. I am 57 and I don't anticipate retiring until at least 70 at this rate.
I think the interest is around 4.9% (not worth remortgaging because there is only two years to go).

kidmugsy

The trick is to avoid making yourself a higher rate taxpayer when you cash them in. So, for example, for many basic rate taxpayers it might make sense to cash in the little one in this tax year, and split the cashing in of the bigger over 17/18 and 18/19.

It would also be wise to consider deferring cash-in until you've retired. That might also allow you to retire early, i.e. before your LGPS retirement date, and withdraw the money tax-free then. Another strategy would be to take out only the tax-free lump sums now and use the money to contribute to personal pensions (the timing of the contributions to depend on the Budget announcements on March 16th), again with a view to later getting the money out tax-free in the gap between retiring and drawing the LGPS pension.