Do I cash in my private pension

Debkew

I currently have a private pension as well as a works pension . As I am over 55 I can cash in my private pension which would pay off my mortgage.  I currently earn 43000 per annum and would get approx 53000 from my private pension. Does anyone know how this would affect my taxable pay

MallyGirl

yes it would. The first 25% would be tax free and you would pay tax on the rest so some at 40% if you took it all at once. More importantly, once you take even 1 penny of taxable pension you are then limited by MPAA to contributing no more than £4k pa into a pension for the rest of your working life.
Paying off a mortgage which is likely to be low interest rate is a short sighted move. Your pension is likely to be growing, on average, more than the pension.

SonOf

75% of it would be added to your income and taxed at 40%.
In most cases, paying off your mortgage at that age, using your pension is not a good thing to do.  You are robbing your retirement years (by around £4000 a year) to pay something that is actually costing you less than the investment returns you are gaining on the pension.   Losing nearly a third of the pension in tax to pay the mortgage is a bad idea unless there is sufficient other justification.     Are you in financial difficulty at the moment?

ffacoffipawb

SonOf said:

75% of it would be added to your income and taxed at 40%.
In most cases, paying off your mortgage at that age, using your pension is not a good thing to do.  You are robbing your retirement years (by around £4000 a year) to pay something that is actually costing you less than the investment returns you are gaining on the pension.   Losing nearly a third of the pension in tax to pay the mortgage is a bad idea unless there is sufficient other justification.     Are you in financial difficulty at the moment?

Looks like the first £7,000, post PCLS, could be taxed at 20% then the rest at 40%. Assumes not a Scottish taxpayer where higher rates apply.

xylophone

Is your workplace pension Defined Contribution?  Will you need to consider the MPAA if you take the taxable element (75%) from the private pension?
https://www.moneyadviceservice.org.uk/en/articles/money-purchase-annual-allowance
You could book an appointment with Pension Wise to discuss your options.
https://www.pensionwise.gov.uk/en/appointments?gclid=EAIaIQobChMIjPKx1_S_5wIVCLLtCh3rWAbREAAYASAAEgIWpvD_BwE