25% Lump Sum

Ylinski999

I wonder if you can help... I am 55 and was thinking of using my 25% lump sum to give to my daughter so that she can bring her mortgage payments down to a manageable level. At present she can only get a mortgage using me as me as Guarantor. But most mortgage lenders will only go to a maximum of 19 years (as 56 at next birthday) so this makes the mortgage repayment to high.... so i wonder if you can answer the following questions
1. Am I allowed to do this?
2. Am I still able to contribute to my company pension even though i have taken the lump sum?
3. Will affect my daughters chances of getting the mortgage ?
4. Will she be liable to pay tax on the lump sum, if so would this alter if i used my 25% as a part ownership of the property?
many many thanks

Smellyonion

If this money goes to you. Then you try
transfer it to your daughter. I don't understand where there are
any tax implications. So long as you satisfy the terms of your pension.

HappyHarry

Ylinski999 wrote: »

I wonder if you can help... I am 55 and was thinking of using my 25% lump sum to give to my daughter so that she can bring her mortgage payments down to a manageable level. At present she can only get a mortgage using me as me as Guarantor. But most mortgage lenders will only go to a maximum of 19 years (as 56 at next birthday) so this makes the mortgage repayment to high.... so i wonder if you can answer the following questions
1. Am I allowed to do this?
2. Am I still able to contribute to my company pension even though i have taken the lump sum?
3. Will affect my daughters chances of getting the mortgage ?
4. Will she be liable to pay tax on the lump sum, if so would this alter if i used my 25% as a part ownership of the property?
many many thanks

1. Yes
2. Yes - but only take the 25% and no more
3. It would obviously help her as she would have a larger deposit / need a smaller mortgage.
4. No she wouldn't be liable to tax on it.

cfw1994

HappyHarry wrote: »

1. Yes
2. Yes - but only take the 25% and no more
3. It would obviously help her as she would have a larger deposit / need a smaller mortgage.
4. No she wouldn't be liable to tax on it.

On 2, I didn’t realise you could take the tax-free lump sum but continue to pay in: I though you were then subject to the MPAA. I realise now that only applies when you start to take income from the pension: thanks for that, HappyHarry!

Only thing I would add to OP is not to forget the fact that this is money for your retirement!! It is great to be in a position to help our children, but don’t leave yourself exposed to financial issues of your own later through this action!

One more minor thing is the “7 year rule” on gifts before death....hopefully no chance of being relevant here, just keep on living a happy life!!

Mnd

Just to confirm, if you take 25% TFLS you will not trigger the MPAA.

Just go careful that you do not fall foul of any recycling rules if you a) take more than 7500 tax free in one calendar year, and b) want to substantially increase your pension contributions in the next few years

Ylinski999

Many thanks all just to confirm your comments
The recycling rule... I already pay salary sacrifice and will continue to do so but will this fall foul of the recycling rule on the 25%
Regarding the eventuality of a pension income my daughter will pay us back at a monthly rate but still so much cheaper than the guarantor mortgage just means the family holiday with lump sum will go by the wayside ... swings and ....

Brynsam

cfw1994 wrote: »

On 2, I didn’t realise you could take the tax-free lump sum but continue to pay in: I though you were then subject to the MPAA. I realise now that only applies when you start to take income from the pension: thanks for that, HappyHarry!

We're assuming this is a defined contribution scheme...? Even so, OP needs to check the terms on which their membership of the scheme can continue - if it's a basic stakeholder/personal pension and quite an old style contract, they may need to start a new policy and company contributions could be less generous for 'new' members.

Silvertabby

Brynsam wrote: »

We're assuming this is a defined contribution scheme...? Even so, OP needs to check the terms on which their membership of the scheme can continue - if it's a basic stakeholder/personal pension and quite an old style contract, they may need to start a new policy and company contributions could be less generous for 'new' members.

... but if it's a DB (final salary/CARE scheme) then it's almost certainly all or nothing.