Pension release at 55 advice please.

tony_coleman

Hello. I have recently become redundant.

I will be 55 next month and I am thinking about taking some money out of my pension pot, which is not big and then use the money to set up working for myself.

I am aware of 25% being tax free and the rest taxed but want to know if my redundancy money will be affected by this.
My redundancy payout is £10.000.

Thank you. Tony.

atush

No, your redundancy is based on your service with yoru ex employer.

You do need to find out if your pension will allow you to take the TFLS, and leave the rest- many dont. So you may need to transfer to one that does. And beware of taking more than 25%.

If you do, future contributions allowed will decrease. And you will need to make up the ones you spend now?

Have you signed up for JSA?

reg091

Apologies to OP for slightly hijacking this thread but I have a quick question. My last company scheme (closed final salary scheme) doesn't pay out until 65 but do the new laws mean that now they have to pay out from 55?

mgdavid

reg091 wrote: »

Apologies to OP for slightly hijacking this thread but I have a quick question. My last company scheme (closed final salary scheme) doesn't pay out until 65 but do the new laws mean that now they have to pay out from 55?

Obtain a copy of the Scheme Rules for the final salary scheme as the answers will all be in there; alternatively phone the trustees' administrators and ask them.
Many schemes allow you to take the pension early with an Actuarial Reduction, typically of the order of 5% per year.

reg091

mgdavid wrote: »

Obtain a copy of the Scheme Rules for the final salary scheme as the answers will all be in there; alternatively phone the trustees' administrators and ask them.
Many schemes allow you to take the pension early with an Actuarial Reduction, typically of the order of 5% per year.

The scheme rules did specifically state that, other than in exceptional circumstances, the pension could not be accessed until 65. My query is: has the new pension legislation meant that they will have had to change that, or does it only apply to schemes where you could always get access at 55 anyway?

kidmugsy

reg091 wrote: »

Apologies to OP for slightly hijacking this thread but I have a quick question. My last company scheme (closed final salary scheme) doesn't pay out until 65 but do the new laws mean that now they have to pay out from 55?

Your apology is hypocrisy! You know that hijacking this thread with an entirely different question is rude.

tony_coleman

atush wrote: »

No, your redundancy is based on your service with yoru ex employer.

You do need to find out if your pension will allow you to take the TFLS, and leave the rest- many dont. So you may need to transfer to one that does. And beware of taking more than 25%.

If you do, future contributions allowed will decrease. And you will need to make up the ones you spend now?

Have you signed up for JSA?

Thankyou Atush for the reply.`

What does TFLS mean ?. I did phone Scottish Widows to ask them if I could take out some of pension, they said yes but I would have to remove the remaining to a new scheme and that someone would advise me on this.

My pension pot at present is £47.000. I want to have £20.000 and to do this approx £27.000. would be used from pot, the £7.000 being the tax.

At present I have not yet applied for Job seekers allowance.

reg091

kidmugsy wrote: »

Your apology is hypocrisy! You know that hijacking this thread with an entirely different question is rude.

Excuse me, I didn't see it that way when I thought a simple one post answer would be the end of my query. I take your point and will bow out.

atush

tony_coleman wrote: »

Thankyou Atush for the reply.`

What does TFLS mean ?. I did phone Scottish Widows to ask them if I could take out some of pension, they said yes but I would have to remove the remaining to a new scheme and that someone would advise me on this.

My pension pot at present is £47.000. I want to have £20.000 and to do this approx £27.000. would be used from pot, the £7.000 being the tax.

At present I have not yet applied for Job seekers allowance.

Tax Free Lump Sum

you will get 11,750 tax free. any more will be taxed. And will reduce the threshold for further contributions- which you will need to make if you w ant to retire.

Paying a large amount of tax, just to take your pension early, is a bit bonkers. Dont you have any other savings? What will you live on? What makes you think you can earn enough to live on with the new business?

tony_coleman

Hi Atush.

I agree with you it does sound bonkers but its a gamble im prepared to take. If I were to leave my pension pot until I retire the monthly payback would not be much. At present I really could do with the money and if working for myself does not work out then I will just go and find a job that pays a basic monthly wage.

xylophone

You may need to transfer to a scheme that facilitates drawdown.

If, for example, you transferred to an HL SIPP, you would be able to take 25% as a PCLS ( say £11,750)- any other amounts would be taxed as income in the tax year you took it.

Remember that taking income affects the amount you can pay into a pension subsequently.

https://www.pensionwise.gov.uk/