Cashing in pension from old employment

Liz65

Was looking for a bit of advice please?
My husband has a pension from a past employer that he hasnt paid into for years.  We asked about the cash in value as we would like to pay some or all of a loan we have on our house,  the problem he has already done the same thing with another pension around March and obviously got taxed 75%, would he be taxed more than the 75% if he cashed this one in as well in this year?  He still has a private pension with the company he is with now.  Thank you

tacpot12

Are you sure he paid 75% tax on the amount he had from his pension, or did he pay his normal rate of income tax (20% or 40%) on 75% of the amount he had from his pension, and have the rest tax-free? It makes a difference to the answer. 

Liz65

Thanks for the reply, yeah I meant't he paid tax on 75% of it. 

xylophone

You mention a pension with his current employer - is he still contributing to this?
Has he checked that he has not/will not trigger the MPAA?
See https://www.pruadviser.co.uk/knowledge-literature/knowledge-library/money-purchase-annual-allowance-mpaa/

Liz65

Hi, yes he is still contributing to his current pension

Marcon

Liz65 said:

Was looking for a bit of advice please?
My husband has a pension from a past employer that he hasnt paid into for years.  We asked about the cash in value as we would like to pay some or all of a loan we have on our house,  the problem he has already done the same thing with another pension around March and obviously got taxed 75%, would he be taxed more than the 75% if he cashed this one in as well in this year?  He still has a private pension with the company he is with now.  Thank you

I'm assuming you are talking about defined contribution rather than defined benefit schemes? If the last pension was cashed in during March it would have fallen into the last tax year. Therefore he'd get 25% of this 'past employer' pension tax free, the other  75% would be added to his taxable income for 2020-21 and he'd pay tax on it at his marginal (highest) rate.  

If you've not yet done so, do read Xylophone's link:

xylophone said:

You mention a pension with his current employer - is he still contributing to this?
Has he checked that he has not/will not trigger the MPAA?
See https://www.pruadviser.co.uk/knowledge-literature/knowledge-library/money-purchase-annual-allowance-mpaa/

penners324

Is he over 55? If not that's a huge mistake.

Liz65

yes he is over 55

NottinghamKnight

Liz65 said:

yes he is over 55

If he's taken any more than the tax fee lump sum from a pension then that limits total contributions to any pensions he still has to £4k per year so that needs to be considered not to fall foul of tax rules. 

dunstonh

NottinghamKnight said:

Liz65 said:

yes he is over 55

If he's taken any more than the tax fee lump sum from a pension then that limits total contributions to any pensions he still has to £4k per year so that needs to be considered not to fall foul of tax rules. 

Not only that, it needs to be reported to any pension that he contributes to even if under the limit. (exception if taken under small pots rule)

cisko65

I need some advice too. The title of my new thread would have been the same as this one ''Cashing in pension from old employment''. My situation is different thought: I worked as employee only for 2 years (2009-2011). After that I only worked as self-employed. I am on a very, very low income and I am exempted from NI contributions - and do not pay them voluntarily. 
I am now over 55 so I could cash the pension. I do not understand what the pros and cons are. I don't need money for anything specific now. I would just put it in a low interest bank account. Thank you.