best way to cash in pension?

funnymonkey

Hello...can you please help me?
I have a 55k private pension which I can draw upon in a years time but as Im still working Im not sure of the best way to get the money in my bank account.
Ive heard of 25% can be tax free but Im not too sure of the details....can anyone be so kind as to offer me advice as to how the pensions work.
Thank you in advance

AnotherJoe

Why do you want to "get the money in my bank account"?

Do you have an immediate use for it ? If not, just leaving it where it is is probably your best option.
Even if you do, leaving it where it is might still be your best option.

dunstonh

I have a 55k private pension which I can draw upon in a years time but as Im still working Im not sure of the best way to get the money in my bank account.

It is far more efficient to have the money in the pension and not the bank account. So, if you are only putting it there, then it is likely to be a bad idea.

.can anyone be so kind as to offer me advice as to how the pensions work.

That would be a very very long answer.

It would be better to tell us what you are trying to achieve and why and then we can filter out the stuff you dont need to know and focus on the stuff you do.

BTW, if you take it now, whilst working, what are you going to live on in retirement?

atush

What will you live on in retirement if you take the money now?

Do you realize that 75% of the money will be taxed as income, and could push you into HRT? Do you really want to flush 40% of your pension down the toilet?

maximumgardener

the whole point of your pension is to fund you in retirement ......so its a very bad idea to deplete it early

maybe you have a very good personal reasons e.g. very poor health?

everyones circumstances are different

Turquatic

There may be good reasons to cash in a smallish pension, had the rules changed 8 years ago, my sister could have cashed hers and a better standard of life until her SPA, instead of buying an annuity that pays sub£2000 p.a. but that puts her £8 a week over the limit for full rent and council tax benefit - meaning she has to pay £30 a week towards them from her £149 state pension.

dunstonh

Turquatic wrote: »

There may be good reasons to cash in a smallish pension, had the rules changed 8 years ago, my sister could have cashed hers and a better standard of life until her SPA, instead of buying an annuity that pays sub£2000 p.a. but that puts her £8 a week over the limit for full rent and council tax benefit - meaning she has to pay £30 a week towards them from her £149 state pension.

That was largely avoidable. The trivial commutation cap was £18k when your sister did it. So, her pension was over 18k. She could have left in the pension and not commence it. The benefits agency would only have considered the nominal income it could provide and they would accept RPI, joint life with 10 year guarantee figures (i.e. the lowest income level). It didnt mean she had to buy that annuity. It is just what they would accept. This would have allowed her to qualify for the benefits.

On the other hand, had she been able to cash it in, it would show as capital in the means test and that could have led to other reductions.

xylophone

https://forums.moneysavingexpert.com/discussion/comment/71205307#Comment_71205307

The OP should be aware that anything over the 25% PCLS taken from the pension will be taxable as income and could push her into a higher tax bracket.

She should also see http://www.telegraph.co.uk/pensions-retirement/tax-retirement/autumn-statement-closes-pension-tax-relief-loophole-over-55s/

funnymonkey

Thank you for all of your answers...
Just to clarify I fully intend to move overseas and rent my house out which will give me far greater income that my pension would do but in order to do this I would need to pay off the last 50k on the mortgage in order to have 100% ownership so thats where my pension would be going and not wasted....thank you

dunstonh

Just to clarify I fully intend to move overseas and rent my house out which will give me far greater income that my pension would do

That is unlikely. Rental yields are broadly similar

in order to do this I would need to pay off the last 50k on the mortgage in order to have 100% ownership so thats where my pension would be going and not wasted.

Paying off a mortgage that is probably a couple of percent with an investment that is likely growing at 2-3 times that amount. Paying significant tax on withdrawing the pension to repay a debt which will in turn increase the tax you pay on the rental income. Are you sure its right to do?

meer53

funnymonkey wrote: »

Thank you for all of your answers...
Just to clarify I fully intend to move overseas and rent my house out which will give me far greater income that my pension would do but in order to do this I would need to pay off the last 50k on the mortgage in order to have 100% ownership so thats where my pension would be going and not wasted....thank you

Have you worked out how much you will get after paying tax on 75% ? You may not have enough to repay the mortgage.