Cash in Pension at 55 advice

bobster316

I have multiple personal pension plans which i would like to cash out when i'm 55 next year. I understand i can withdraw 25% of each of the pension values but will have to pay 40% capital gains tax.

Is there anyway I can reduce the amount of tax i have to pay.

I believe the balance of the pension pots have to be re invested.
Where can i find more information on the best way to handle this without losing out.

coyrls

You do not have to pay capital gains tax on the 25% Pension Commencement Lump Sum, where did you get that idea from?

kidmugsy

bobster316 wrote: »

I have multiple personal pension plans which i would like to cash out when i'm 55 next year.

Why do you want to cash them all in in the same tax year?

Not that I wish to dissuade you; the Treasury could always do with more tax.

dunstonh

I have multiple personal pension plans which i would like to cash out when i'm 55 next year. I understand i can withdraw 25% of each of the pension values but will have to pay 40% capital gains tax.

Just because you can, does not mean you should. What objective do you have? (noting the high number of pension withdrawals being made by people doing the wrong thing. Even the FCA have concerns and are looking into it).

sandsy

With personal pension plans, you can withdraw 25% of each pot free of tax. Any additional withdrawals are assessed as income in the year you take them and incur income tax. So you need to watch out for withdrawals that can push your income into a higher tax bracket.

However, in general, you should only access the money when you need it. It it's left inside the pension, it can still earn investments returns free of tax and is outside of your estate for tax planning in the event of your death. If you withdraw it and leave money sitting in the bank, it's likely the value will be eroded due to inflation.

squirrelpie

Where can i find more information on the best way to handle this without losing out.

You could try
https://protected.fscs.org.uk/banking/pension-advice-a-guide-for-beginners/
https://www.moneysavingexpert.com/savings/discount-pensions/

atush

personally, i wouldnt.

Id leave it til it was needed in retirement.

OldMusicGuy

bobster316 wrote: »

I have multiple personal pension plans which i would like to cash out when i'm 55 next year.

First thing, find out exactly what the pensions are. Are they defined contribution (DC) or defined benefit schemes (DB)? The rules for what you can do are different. It sounds like they are DC plans but "personal pension plans" could mean anything, especially if these are older pension products.

bobster316 wrote: »

I understand i can withdraw 25% of each of the pension values but will have to pay 40% capital gains tax.

For DC pots you can withdraw 25% tax free. You then have several options as to what you do with the rest. If you withdraw all of the remaining 75% it will be subject to income tax, which could be quite a lot depending how much the pensions total to in any one year.

Good info on the different options here: https://www.pensionwise.gov.uk/en/browse/taking-your-pension-money

bobster316 wrote: »

Is there anyway I can reduce the amount of tax i have to pay.

Yes, don't cash everything in at once. You may pay more income tax than you would have to if you phased the withdrawals or did something else (like leave it invested).

bobster316 wrote: »

I believe the balance of the pension pots have to be re invested.

Incorrect, although some older pension products may not allow flexible drawdown. You can move these to a pension platform that does allow this if you want.

bobster316 wrote: »

Where can i find more information on the best way to handle this without losing out.

If you are over 50, get an appointment with Pensionwise, https://www.pensionwise.gov.uk/en. They will explain all the options you have, although they will NOT advise you what to do. You need to decide that once you understand all the options available to you.

AnotherJoe

bobster316 wrote: »

I have multiple personal pension plans which i would like to cash out when i'm 55 next year.

Why? I understand i can withdraw 25% of each of the pension values but will have to pay 40% capital gains tax. Wrong.You will likely have to pay income tax.

Is there anyway I can reduce the amount of tax i have to pay.
Dont take it all out at once

I believe the balance of the pension pots have to be re invested. Wrong
Where can i find more information on the best way to handle this without losing out.

Pensionwise. Or ask questions here with some rationale behind your wish. eg if you said "i wish to jump out of a window" everyone might say "dont" until it turns out the buildings on fire and you're on the ground floor.

So people would need to know your plans for the money, your financial circumstances (are you employed? Got a mortgage?), why you want it all out and what you'd do with it etc.

xylophone

And check your new state pension statement for planning purposes.

https://www.gov.uk/check-state-pension