Cashing in small pensions at 55

sb44

Hi folks, I have a few questions regarding personal pensions plans, if anyone could please take the time to take a look.

I have a couple of small pensions that I can cash in when I am 55 (couple of weeks time).

As at today the surrender(?)value of one is £10,095, the other £5401.

So, in the general scheme of things, not a lot compared to other members pension pots.

My husband is paid the minimum wage (big drop due to redundancy) we get working tax and child tax credit (one income).

Most of mortgage paid off and debts paid off with small redund payment.

Am I correct in thinking 25% of the pension pots will be deducted at source and then 20% of remaining will be due to the tax man, or will I not be liable for the 20% if we only have an income of £14,000 gross.

Also, if I request online to cash in at the beg of November, is the value calculated at the date that the request is accepted or the actual day that the payment is due?

I would have thought it would be the day it is due, but not sure.

I was going to ring the companies back but spent ages waiting in queues, so thought it would be quicker to come here.

Thanks.

molerat

The value will be at the date of payment.

You are entitled to 25% of each amount tax free and the remaining 75% subject to tax. The tax will be taken on an emergency tax basis as if the £7571 and £4050 have been earned in one month and, as you currently have no income, you will need to reclaim the excess tax paid. https://www.gov.uk/claim-tax-refund/you-get-a-pension

sb44

molerat wrote: »

The value will be at the date of payment.

You are entitled to 25% of each amount tax free and the remaining 75% subject to tax. The tax will be taken on an emergency tax basis as if the £7571 and £4050 have been earned in one month and, as you currently have no income, you will need to reclaim the excess tax paid. https://www.gov.uk/claim-tax-refund/you-get-a-pension

Thanks for taking the time to reply molerat. Much appreciated.

OldBeanz

If you search the forum you will find the form to complete which will allow you to reclaim the tax as son as the money is received. You need to consider the impact on your benefits of taking that amount of money.

dunstonh

My husband is paid the minimum wage (big drop due to redundancy) we get working tax and child tax credit (one income).

Taking the pension as a lump sum will mean that the amount is treated as income that year. So, your benefits/credits will be reduced/removed.

xylophone

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

could be worth a look.

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

bigadaj

Why not take one pension in the next few weeks and the other after April next year?

sb44

bigadaj wrote: »

Why not take one pension in the next few weeks and the other after April next year?

Because I would rather have the money as soon as it becomes available before the bubble bursts and the markets plummet .

sb44

dunstonh wrote: »

Taking the pension as a lump sum will mean that the amount is treated as income that year. So, your benefits/credits will be reduced/removed.

We only get a small amount in tax credits and the child one ends in 9 months when my daughter finishes college.

Thanks for the advice.

sb44

OldBeanz wrote: »

If you search the forum you will find the form to complete which will allow you to reclaim the tax as son as the money is received. You need to consider the impact on your benefits of taking that amount of money.

I rang the tax office today and they said to ring them a few days after I have received the payments and they will contact the companies concerned. They said their system takes a few days to update after I have received money and I wouldn't have to complete any paperwork as all of the details would be on their system.

Thanks for the advice.

dunstonh

I rang the tax office today and they said to ring them a few days after I have received the payments and they will contact the companies concerned. They said their system takes a few days to update after I have received money and I wouldn't have to complete any paperwork as all of the details would be on their system.

Strange as they dont do it by phone. They ask you to fill in the appropriate P form.