What to do with small windfall???

Jainey

I have recently received what to me is a large amount of money from a pension scheme which I did not know I had. This has come as a total surprise and at a time when I needed it most, my current situation is dire to say the least. I am 61, single, renting, working part time, low income, on benefits and so forth.
However, dreams do come true ! Suddenly I found out about pension owed to me and I took commutation. Whether right or wrong to do this, I don't know, I just know that after life I have led, it is better to take what is on offer now than wait, as you never know what is around the corner.
So, keeping some aside for paying off debts and personal use, I will have a about £12,000 in the bank which I don't know what to do with for the best.
I want to do the right thing with it, as will never again get the chance to have this amount of money land in my lap. I like the idea of premium bonds, just incase my luck really has changed !!! I appreciate I will not earn anything from the money unless I win, but, neither will I lose it.
So, being a total dimwit when it comes to money and not wanting to be persuaded to do the wrong thing with it, does anyone have any suggestions for me please. :j

xylophone

Have you applied for a new state pension statement?

https://www.gov.uk/check-state-pension

I assume that you mean that you took the pension in its entirety as a lump sum - did you overpay tax?

If you would be accepted for the accounts, you might open a (£2000) TSB Plus (set to paperless), a (£2,500) Nationwide Flex direct, a (£5000) Club Lloyds and a Tesco ( pays 3% on up to £3000).

You would need to make sure that you had two monthly DDs on the Lloyds.

You would set up the necessary back and forth SOs to fund the accounts and move the monthly interest into the Tesco. See post 4 https://forums.moneysavingexpert.com/discussion/comment/70911789#Comment_70911789

You would close the Flexdirect after a year and move the cash into a second Tesco current account.

Newly_retired

You say you are on benefits. Did you take advice before cashing this pension in? Do check that your capital is not over the threshold or you could lose your benefits, and find you have an amount to repay.

sunshinesadly

Please read the main MSE website re Premium Bonds. Completely waste of money. Yes you do lose with PBs - no interest is paid! It is possible to get at least 3% interest just from a high street bank with £12k, so you would be losing out!

xylophone

You say you are on benefits. Did you take advice before cashing this pension in? Do check that your capital is not over the threshold or you could lose your benefits, and find you have an amount to repay.

The OP has already received the cash?

The guidance below may be relevant.

https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/417473/pension-flexibilities-dwp-benefits.pdf

Jainey

Thanks for advice, will take time to digest it, as I really am a numpty with anything to do with money and its all double dutch to me. I have done the following as suggested
1/ I checked out the new state pension link and got an estimate of pension I will get in 2020 [is that what you meant me to do ? ]
2. I paid tax on 75% of the total commutation as they said that 25% was tax free, don't know if this was right or not, but, I wasn't going to complain as I was just so happy to get it.
3. I have only been receiving a small amount of Housing Benefit which I am stopping as of this month because my hours have increased sufficiently at work to enable me to do so,.
4. Advice on premium bonds taken on board.

Thank you for taking the time to reply to me, I am sorry that I find all this so hard to grasp, but, I have not taken any interest in pensions as I never thought I had any to worry about.
I am just trying to get along, working to pay my way in life , thinking that the only pension I am entitled to is the state pension when I am 66.
I had no idea at all that this pension had been sat waiting for me to claim it. So it is a totally new area for me.
As I said I will no longer be claiming benefits. I will inform Tax people about this money as I get Working Tax Credit, but, I have looked it up and it seems that this will not affect my claim. More than that I don't think I have to tell anyone else do I ??
I am just hoping that the money is mine, to now, squirrel away for emergencies, thus giving me some much needed peace of mind again.

xylophone

What did the State Pension Statement say?

25% of the pension would have been paid tax free but it is likely that the balance would have been taxed on a month 1 basis - this is likely to have led to an overpayment of tax - you can check this.

http://adviser.royallondon.com/pensions/technical-central/information-guidance/benefit-options/emergency-tax-and-lump-sum-withdrawals/

If you find that you have overpaid, you can either make an in year claim for repayment or wait until the new tax year when HMRC will assess your situation - see https://www.gov.uk/claim-tax-refund/you-get-a-pension

Jainey

Not sure why I am looking at State Pension ? It just tells me that I will be eligible for £133 or something in the year 2020, should I be looking for something else?
Rang Tax Office today about the Working Tax Credit I receive and was told this will stop as soon as I declare the receipt of the money as it is classed as taxable income for this year.
I received a P45 in the post today with details of the income.
Do, I now contact HMRC and tell the about the amount which has gone into my bank? Or do I have to do something else, or go and see someone else like citizens advice to tell me what to do. I hate bothering you on here as my level of knowledge is zilch ! Its a pity I will have to lose my working tax credit as my wages are very low and once my debts are paid off I will not have anywhere near the amount given to me initially.
But, I don't suppose there is anything I can do about this ???

xylophone

You are looking at state pension because it is likely to form a large part of your income when you reach state pension age.

Is there any reason why you will not qualify for the full new state pension?

Are you currently being paid or credited with NI?

https://www.gov.uk/new-state-pension/overview

With regard to the tax paid on 75% of the pension payment you have received, you should check whether you have overpaid tax - see my post above.

The 75% counts as income in the year that you receive it - presumably that is why you are losing your WTC?

You could put your question on the benefits board where there are posters who are very knowledgeable about means tested benefits.