lump sum at age 55

penguin10

I will soon be 55.  NHS worker since 1990 and in that pension scheme.
Some years ago I bought AVC through Standard Life and paid in for a few years.  Nothing paid in for maybe 25 years or so.
Got a  letter Standard Life recently - says my pension pot is £6,500.  Retirement date is 2030.
Booklet mentions taking some/all of the pot at age 55.
Very basically my question is - can I take the whole £6,500 once I am 55 and continue to work?  Pay tax only on 75% of it?  Would Standard Life take fees from it also?
Thinking that my NHS will be enough so would be interested in perhaps cashing in on this one early.
Any simple answers to my question please?

Thanks 

p00hsticks

If you take more than the 25% TFLS then your annual pension allowance (the maximum you and your employer combined are alllowed to contribute to your pensions in future) drops from £40,000 to £4,000.

garmeg

penguin10 said:

I will soon be 55.  NHS worker since 1990 and in that pension scheme.
Some years ago I bought AVC through Standard Life and paid in for a few years.  Nothing paid in for maybe 25 years or so.
Got a  letter Standard Life recently - says my pension pot is £6,500.  Retirement date is 2030.
Booklet mentions taking some/all of the pot at age 55.
Very basically my question is - can I take the whole £6,500 once I am 55 and continue to work?  Pay tax only on 75% of it?  Would Standard Life take fees from it also?
Thinking that my NHS will be enough so would be interested in perhaps cashing in on this one early.
Any simple answers to my question please?

Thanks 

p00hsticks said:

If you take more than the 25% TFLS then your annual pension allowance (the maximum you and your employer combined are alllowed to contribute to your pensions in future) drops from £40,000 to £4,000.

As the sum is under £10.000 it can be taken as a 'small pot' whence the drop in allowable pension contributions does not apply.

Dox

p00hsticks said:

If you take more than the 25% TFLS then your annual pension allowance (the maximum you and your employer combined are alllowed to contribute to your pensions in future) drops from £40,000 to £4,000.

The £4K Money Purchase Annual Allowance, as its name suggests, only applies to defined contribution schemes - and OP is in the NHS defined benefit scheme.

xylophone

As the sum is under £10.000 it can be taken as a 'small pot' whence the drop in allowable pension contributions does not apply.

https://adviser.royallondon.com/technical-central/pensions/contributions-and-tax-relief/money-purchase-annual-allowance/

It wouldn't apply to a DB Scheme in any event.

What about DB?

Accrual under defined benefits (DB) arrangements is not tested against the MPAA, but will be included in the test of total contributions against the AA/TAA:

penguin10

Thanks guys but I am still none the wiser!
Is there a simple answer like yes I CAN take the whole £6,500 when I am 55 even if I continue to work and the only downside is I have to pay tax on 75% of it?
Not worried about getting less pension when I actually retire.

xylophone

https://www.pensionsadvisoryservice.org.uk/content/publications-files/uploads/Taking_small_pensions_Quick_SPOT012_V1.7.pdf
Under
Special rule for non occupational schemes only.

garmeg

xylophone said:

As the sum is under £10.000 it can be taken as a 'small pot' whence the drop in allowable pension contributions does not apply.

https://adviser.royallondon.com/technical-central/pensions/contributions-and-tax-relief/money-purchase-annual-allowance/

It wouldn't apply to a DB Scheme in any event.

What about DB?

Accrual under defined benefits (DB) arrangements is not tested against the MPAA, but will be included in the test of total contributions against the AA/TAA:

He / She may change jobs in future and be in a DC scheme.

OP just take the cash as a small pot if you want to take it. I presume it is nothing to do with your current NHS service?

junglejim2

Above is a perfect example of the bull**** surrounding pensions.
Surely there must be a simple answer to what looks to me like a simple question!

garmeg

junglejim2 said:

Above is a perfect example of the bull**** surrounding pensions.
Surely there must be a simple answer to what looks to me like a simple question!

The simple answer Is to take it as a "small pot". Google the term.

hyubh

penguin10 said:

I will soon be 55.  NHS worker since 1990 and in that pension scheme.
Some years ago I bought AVC through Standard Life and paid in for a few years.  Nothing paid in for maybe 25 years or so. 

Current NHS AVC plans at least have little real connection to the NHS scheme proper, and in particular, can be taken separately, put into drawdown, etc. I think (though worth double checking) there will be no difference with one taken out 30 years ago, or at least, only difference is that you may need to transfer the AVC out to access it flexibly.

Very basically my question is - can I take the whole £6,500 once I am 55 and continue to work?  Pay tax only on 75% of it?

Sure, you can take what pensions you want and continue to work. The only restrictions will be in the context of an occupational pension that says you must leave your current employment to draw a pension that arises from the latter. But that will be a matter of (DB) scheme rules, not drawing a pension in general.

As the others have said though, there will likely be more than one way of drawing the whole lot, in particular via the 'small pots' rule vs. the 2015 rules for DC pensions of any size. For reasons of not closing off what you might contribute to a new DC pension later on (however unlikely), the former would be preferable and is what (I think) the letter from Standard Life is alluding to.

However, if you do take the whole lot in one go, then whatever way you do it, it will count towards your taxable income for a single year. If that puts you into the higher rate tax band when you weren't before, then it might be worth accessing it 'flexibly' instead, i.e. over two tax years (say). However at only £6.5K, that might not be a big concern.

Thinking that my NHS will be enough so would be interested in perhaps cashing in on this one early.

Drawing a DC pension 'early' is a pretty common strategy if you have a decent DB pension as well (which is then later drawn at its normal pension age), nothing unusual in that.