Dipping into pension pot to pay off credit card debt.

underboyleheating

lisyloo wrote: »

Who has given you this advice please?
Is it the prudential? or someone independent like an IFA?

To be fair the information came from my Prudential advisor. He obviously said that I am free to check with an IFA, Royal London or Standard Life to see what else is on offer. However, although biased, he did indicate that Prudential are currently one of the most competitive on the market. I will listen to what Prudential say and take that information to a IFA for a comparison. Although at the end of the day they will all charge a similar commission on any deal.

It would streamline my pension from 3 to two providers, with Prudential potentially being the main one that I pay into.

coyrls

wjr4 wrote: »

Please go and see an IFA and not a salesperson from Prudential - they are not independent - of course they want your money. IFAs are unbiased and will tell you what is in your best interests rather than just how much money they can make from you. Well, that's what I would do anyway!

Are you sure that there would be enough incentive for an IFA to take on a client who wants to crystalise a pension to pay off a credit card debt?

lisyloo

he did indicate that Prudential are currently one of the most competitive on the market

They may but it's not just about that !
There could be uncompetitive transfer penalties on your old pensions.
Or perhaps some benefits (guarantees) that were built in.


An advisor would need to get details information on your old schemes and transfer values to research this.

Did your prudential advisor look into your old pensions (you would have needed to sign an authorisation letter and it would have taken some time so I'm guessing not).
If this hasn't happened, then how do you know if there are any large penalties or any great benefits to keeping them?
A. you don't.


One of my pensions has a MVA (market value adjustment) of about 32% before age 65.


Have they even asked for transfer values (I'm doubting this given the timescales involved).

It would streamline my pension from 3 to two providers, with Prudential potentially being the main one that I pay into.

There is more to it that just getting the best pensions going forward.
Are there any existing benefits you would forgoe or any penalties you need to be aware of.
Given the timescales I doubt this has been looked into.

lisyloo

coyrls wrote: »

Are you sure that there would be enough incentive for an IFA to take on a client who wants to crystalise a pension to pay off a credit card debt?

Depends if there's a chance they'll get on going business.

wjr4

coyrls wrote: »

Are you sure that there would be enough incentive for an IFA to take on a client who wants to crystalise a pension to pay off a credit card debt?

I wasn't actually saying that I would recommend that they do that anyway... I'm saying see an IFA as you get a proper review of the existing pensions rather than seeing a salesperson who may not take into account the client's overall situation.

I've done business before that means we hardly earn anything but I am not looking for clients to make huge fees from. We charge clients a lot less than other firms and still have a good (& profitable) business model - without the need to charge them thousands of pounds.

atush

I don’t have a savings lump sum to pay it off and I see this as a way of just clearing what I owe. Any advice is appreciated.

How big is the 1987 pension? will the 25% pay off your CC debt? If so, taking the TFLS from that one could be an idea. You can leave the rest (if that pension allows it) for retirement. If it doesnt, you'll have to transfer it. Make sure there are no valuable guarantees. And dont take a penny more than the 25% or it will reduce the amount you can pay into oher pensions each year.

Second, you are living above your means if you have no savings and 5K in Debt. So you really need to cut back your spending or increase your income. At the very least, once you have paid off the CC, put th 120 per month you used to pay on the cC into savings. You need to build a cash fund of at least 3 months spending.

underboyleheating

lisyloo wrote: »

They may but it's not just about that !
There could be uncompetitive transfer penalties on your old pensions.
Or perhaps some benefits (guarantees) that were built in.


An advisor would need to get details information on your old schemes and transfer values to research this.

Did your prudential advisor look into your old pensions (you would have needed to sign an authorisation letter and it would have taken some time so I'm guessing not).
If this hasn't happened, then how do you know if there are any large penalties or any great benefits to keeping them?

Have they even asked for transfer values (I'm doubting this given the timescales involved).

There is more to it that just getting the best pensions going forward.
Are there any existing benefits you would forgoe or any penalties you need to be aware of.
Given the timescales I doubt this has been looked into.

He knows about my other two pensions as I recently had a pension review with him (he quickly looked over the end of year statements from those). I haven’t signed an authorisation letter, however, I would if he requires this to check the costs/details involved in any potential transfer. Apart from a small monthly payment to my pension they Prudential wouldn’t be gaining any more business from me. I would only be moving one pension (Royal London) to the Prudential. My Standard Life pension will remain untouched. I’m purely doing this to clear my 5k credit card debt.

lisyloo

he quickly looked over the end of year statements from those

That is not the same as establishing a transfer value (and any penalties) or establishing if they have any valuable guarantees that are worth keeping.


In thoery you could ask the questions yourself but the difficulty here is knowing the right questions to ask includng terminlology.
I can give you a relevant example.
I asked whether one of my pensions had any guaranteed benefits and the answer was no. It turns out it does have a benefit (increased lump sum due to A-day rules) but it's not guaranteed. Because I didn't ask the right question I didn't get the information I wanted.
So I think it's hard for you to do this yourself.



Ideally you need these facts establishing, but as one person has alluded to it's difficult/impossible to get this done for free.
Getting it wrong could cost you big time and that's my fear for you.

I’m purely doing this to clear my 5k credit card debt.

Do you have any other options?
Can you cut your budget elsewhere?
Could you try doing a second job over the Xmas period for a bit of extra cash?


You still have the general problem that you need proper advice on your pensions and to get that you have to pay for it.

enthusiasticsaver

Can you continue to add to a pension once you have taken the PCLS? I was not aware you could do that as surely it has been crystallised?

xylophone

https://www.hl.co.uk/pensions/drawdown/faqs

Can I make additional contributions to my HL SIPP after drawdown has commenced?

Yes, you can make further pension contributions and will receive tax relief on personal contributions provided you are within your contribution limits and you are under age 75. Pension contributions are normally subject to a £40,000 annual allowance. This applies to any benefits you are building up in defined benefit (e.g. final salary) or money purchase (e.g. personal, self-invested) pensions.

However, within the standard allowance there is a money purchase annual allowance (MPAA). Under current rules the MPAA is £4,000 per tax year. The MPAA will be triggered once pension benefits are first flexibly accessed, for example by taking an income from a flexible drawdown plan, meaning future contributions into SIPPs and other money purchase pensions will be restricted from that point. Just taking tax-free cash will not trigger the MPAA.