Small Pension Pot - what to do?

Andrew31

atush said:

Andrew31 said:

atush said:

By all means access your TFLS with this pension.  But dont take a penny of the otehr 75%, otherwise you will be restricted to 4K PA pension allowance.

And it isnt really the point of pensions to pay for a new kitchen.  You should really save for these items in advance.  So seems you may not have enough emergency cash savings for now or pension years.  So whatever you do, save more cash and not take more than your TFLS.

Pensions are a form of savings.  What is wrong with buying a kitchen with PCLS?  if circumstances suit

other savings should be used. And if there arent other savings to pay for it, that is a red flag. Pensions are for retirement, not redecoration.

Disagree, seems like this guy has a fairly good retirement and if wants to use a small proportion to buy a kitchen or even a car for that matter it is fine.  
Pensions are for retirement is a very backward view.   ISAs are for retirement, BTL are for retirement.  everything is for retirement once you stop working, it doesn't mean that pensions have to be kept under wraps until they actually "retire".  They can be used sensibly and this seems sensible. 

xylophone

other savings should be used. And if there arent other savings to pay for it, that is a red flag. Pensions are for retirement, not redecoration.

The OP appears to have ample retirement provision outside this modest AVC.

OK, I have several pensions but my main pension is with BT who I was with for 20 years and will provide me with a good pension. I have two AVC's tied in with my BT pension that will provide additional sums (but nothing to really write home about).

Whiterose23

atush said:

Andrew31 said:

atush said:

By all means access your TFLS with this pension.  But dont take a penny of the otehr 75%, otherwise you will be restricted to 4K PA pension allowance.

And it isnt really the point of pensions to pay for a new kitchen.  You should really save for these items in advance.  So seems you may not have enough emergency cash savings for now or pension years.  So whatever you do, save more cash and not take more than your TFLS.

Pensions are a form of savings.  What is wrong with buying a kitchen with PCLS?  if circumstances suit

other savings should be used. And if there arent other savings to pay for it, that is a red flag. Pensions are for retirement, not redecoration.

Surely it's up to the OP to make a decision regarding what he/she wants to use the money for. This response detracts from the OP's original question.

SonOf

I did speak to the Pru who advised me to 'invest' the remainder into a draw-down pension. The problem is that the Pru state this can ONLY be setup using an IFA (money for nothing IMO). They advised on using their own IFA or I can use my own. As I say, I feel this is slightly unfair as I did speak with their IFA and they stated they would take 3% of the remaining pot value.
Pru do not employ IFAs.  Ironically, using an IFA may well result in a cheaper option than leaving it where it is.

Surely it's up to the OP to make a decision regarding what he/she wants to use the money for. This response detracts from the OP's original question.
A pension is just a tax wrapper.    So, when you need to make a withdrawal, you look at your overall savings and investments and draw from the most appropriate place/tax wrapper.   Sometimes, that will be cash savings, sometimes S&S ISA or GIA or pension.   Pension is less common because of the tax efficiency of leaving it where it is.  However, a non-earner not yet at state pension age can draw large chunks each year without paying tax.    
So, best source to pay certain bills will vary with different people.

The op is only 55.  Which is a very early age to start drawing from the pension when you are still working.   The pension could double in value over the next 10 years but if you have eaten the 25% at 55, you will get a smaller amount than you would have had you left it to later. So ripping out one of the major tax benefits now could result in greater tax later on.

If there is money elsewhere (such as S&S ISA or cash savings) then they are almost certainly likely to be better sources for the withdrawal than the pension wrapper.

greatkingrat

SonOf said:

The op is only 55.  Which is a very early age to start drawing from the pension when you are still working.   The pension could double in value over the next 10 years but if you have eaten the 25% at 55, you will get a smaller amount than you would have had you left it to later. So ripping out one of the major tax benefits now could result in greater tax later on.

If there is money elsewhere (such as S&S ISA or cash savings) then they are almost certainly likely to be better sources for the withdrawal than the pension wrapper.

If a S&S ISA and a pension are both growing at the same rate, then most of the time it will make no difference which one you withdraw from first, you will end up with the same net total either way. The only time it may make a difference is if the pension withdrawal is going to push you into a higher tax band.

bluenose1

OP- think if you take over the 25%  that will restrict you to £4k per annum pension contributions in future.