Pensions Queries at 55

KTH99

Hi
I haven’t posted before but have been reading a lot of the queries on this Pensions Forum and have been very interested in replies. I have a few questions of my own on this subject and would really appreciate any thoughts you have on these.
Background I will be 55 this year, have paid off mortgage but have a little personal debt (credit cards/loans) to pay off. I have two private pensions with the same pension company, with values from last statements (July 2018) of circa £26K and £16K respectively. I also have two LGPS pensions one with previous employer and one with current employer, values from last benefit statements are £8K (as of March 2015) + £5K lump sum and £2.5K (as of March 2018). My salary just tips into the 40% tax bracket and I’m not intending to retire or reduce hours within next two years at least.
Questions

• If I cash in the two private pensions when I am 55, will I be restricted to only paying in £4K pension contributions with my current employer – I pay anything between £330 and £380 a month from my salary into my current LGPS pension?
• I’ve recently queried why I’ve not got an updated benefit statement from my first LGPS pension and was told that they hadn’t been notified that I had left this employment. This is being rectified, but am I right in thinking I shouldn’t combine the two LGPS pensions, as my first employment paid a lot more than the second?
• At 55, can I take 25% tax free sum (thereby not incurring 40% tax on the rest) from my two personal pensions and the first LGPS pension from previous employer, without plans to retire or reduce hours with current employment?
• If the answer is yes to above, what happens to the rest of monies in these pension pots – do they carry on building in value, minus sum taken out?

Sorry to sound naïve in these matters, I am contemplating my 55th year, with the opportunity of being totally debt free, hence me posting on here!!

Marcon

KTH99 wrote: »

Hi
I haven’t posted before but have been reading a lot of the queries on this Pensions Forum and have been very interested in replies. I have a few questions of my own on this subject and would really appreciate any thoughts you have on these.
Background I will be 55 this year, have paid off mortgage but have a little personal debt (credit cards/loans) to pay off. I have two private pensions with the same pension company, with values from last statements (July 2018) of circa £26K and £16K respectively. I also have two LGPS pensions one with previous employer and one with current employer, values from last benefit statements are £8K (as of March 2015) + £5K lump sum and £2.5K (as of March 2018). My salary just tips into the 40% tax bracket and I’m not intending to retire or reduce hours within next two years at least.
Questions

• If I cash in the two private pensions when I am 55, will I be restricted to only paying in £4K pension contributions with my current employer – I pay anything between £330 and £380 a month from my salary into my current LGPS pension?The Money Purchase Pension Allowance - currently £4,000 a year - applies to contributions made to a money purchase (defined contribution) scheme. The LGPS is a final salary scheme. The restriction would only apply if you made contributions to a money purchase (defined contribution) AVC arrangement, not to the main LGPS
• I’ve recently queried why I’ve not got an updated benefit statement from my first LGPS pension and was told that they hadn’t been notified that I had left this employment. This is being rectified, but am I right in thinking I shouldn’t combine the two LGPS pensions, as my first employment paid a lot more than the second?Ask for a quote to be quite sure
• At 55, can I take 25% tax free sum (thereby not incurring 40% tax on the rest) from my two personal pensions Yesand the first LGPS pension No - you have to take your pension at the same timefrom previous employer, without plans to retire or reduce hours with current employment?
• If the answer is yes to above, what happens to the rest of monies in these pension pots – do they carry on building in value, minus sum taken out?Yes

Sorry to sound naïve in these matters, I am contemplating my 55th year, with the opportunity of being totally debt free, hence me posting on here!!

Please see above

KTH99

Perfect, thanks very much for reply!

Audaxer

If you are already in the higher tax bracket, I don't think it is a good idea to cash in the two private pensions, incurring 40% tax. Maybe worth taking out the 25% tax free amounts to clear existing debts.

As you are a higher rate tax payer it would also be worthwhile looking into starting a SIPP - see link below:
https://www.hl.co.uk/pensions/tax-relief
"If you pay 40% income tax, you can claim back up to an extra 20% on your tax return. That means a £10,000 pension pot could effectively only cost you £6,000."

As you will be 55, the additional benefit of a SIPP is that you can access the money straightaway if you wish. Seems a no-brainer to me but it would be worthwhile having a look at the HL site and other posts on this forum about starting SIPPs if you are over 55.

KTH99

Great advice, many thanks.