Extra small pension pot

Prudent

I have taken early retirement at 50 due to ill health and have an occupational pension. The amount is within my tax free limit, although at present I pay a small amount of tax as I receive some ESA (reduced due to my pension).

When I reach state pension age my occupational pension plus my state pension is enough for day to day living and I also have savings for bigger items. I have paid off my mortgage.

I also have a small private pension pot which at present is worth £32,500. I have not paid into it for about 5 years now. I am wondering how best to use this pot.

I have been considering:

1) restarting the pension and paying in my £2,880 per year, but am not sure how beneficial the tax benefits would be as I would be taxed on it once I withdraw the money.

2) Taking 25% of the pot tax free at 55. This would leave me just over £24,000 which if I took an even amount between then and state pension age would give me about £2,000 a year. I would just be within my tax limit. I would not anticipate still being on ESA by then. I do not know anything about taking money from a pension and wonder if this is possible. I can't find any penalty clauses in my pension about taking money from 55.

My medical condition is not life limiting, so I would not qualify for more favourable annuity rates.

kidmugsy

It sounds to me to be an attractive idea. First check whether the pension provides a Guaranteed Annuity Rate, or any other advantage, and whether there is any penalty or charge for moving it. Assuming no problems on that front:-

If the provider of the personal pension doesn't allow you to do what you want, transfer to a provider who does. We use Hargreaves Lansdown, whose service is excellent and whose charges are reasonable for a sum like £30k. Other people here have had good experiences with some of their competitors.

The monevator blog compares online brokers, updating its comparisons a few times per year.
http://monevator.com/compare-uk-cheapest-online-brokers/

Prudent

Brilliant, thank you I will check the link and keep a copy of your post.

AnotherJoe

Prudent wrote: »

1) restarting the pension and paying in my £2,880 per year, but am not sure how beneficial the tax benefits would be as I would be taxed on it once I withdraw the money.

Put £2880 in it gets uplifted to £3600, a gain of 720. When you take the £3600 out, 25% or £900 is tax free. You pay 20% on the rest at most So, that's a free £180 for the next 25 years or until they change the rules. Rude not to.