Taking part of pension at 55

Gareth147

Hi all, I am looking at taking 25% from one of my pension pots, it’s value 67k I am married with a mortgage until 65.
Are there any pitfalls I should be wary of ?

MallyGirl

as long as you only take the 25% tax free and not a penny of taxable income then the main pitfall is possibly not having enough money in retirement.
Without more detail on your circumstances it isn't really possible to say much more.

sevenhills

Gareth147 said:

Hi all, I am looking at taking 25% from one of my pension pots, it’s value 67k I am married with a mortgage until 65.
Are there any pitfalls I should be wary of ?

I have shares within a SIPP(self invested personal pension) and a mortgage, but I am not paying my mortgage off yet because my mortgage interest rate is fixed at 3% and the stock market is rising at 10%/15%

So I would not benefit from paying off my mortgage.

jamesd

No problem taking just the tax free lump sum as long as you have some productive purpose. If it's to blow it on things without long term benefit you might want to plan to replace it with new contributions (and new tax relief on them) but that's a choice for you. It can be entirely legitimate to say spend that much on a nice holiday if you've plenty of total money so it makes no practical long term difference to your plans.

If you use UFPLS to take a mixed 25% tax free and 75% taxable lump sum you will then be limited to the MPAA no more than £4k for DC (not final or average salary) pension contributions per tax year from the day you take it for the rest of your life. This is a major disadvantage if you're still working at a time when it's common for people to want to and benefit from increasing pension contributions as far as possible, including moving savings and ISA money into pensions to maximise the tax relief.

If the 4k MPAA isn't triggered you're subject to the usual dual limits for personal contributions: your gross pay and for all contributions: 40k annual allowance plus unused annual allowance carry-forward from past years. Pay has to be current year only, no carrying forward allowed for that rule.

Albermarle

Gareth147 said:

Hi all, I am looking at taking 25% from one of my pension pots, it’s value 67k I am married with a mortgage until 65.
Are there any pitfalls I should be wary of ?

I guess you are already aware that a pension pot of £67K is not very big and minus 25% it will be even less. If you have not got other sources of income when you retire ( such as rental property or a big savings account or another pension)  then even with the state pension , your income will not allow much of a retirement .
If you have got other potential sources of income when you stop working ( or a rich wife/family ) then no problem !

JJC1956

Gareth147 said:

Hi all, I am looking at taking 25% from one of my pension pots, it’s value 67k I am married with a mortgage until 65.
Are there any pitfalls I should be wary of ?

How many pension pots do you have? And how much are the others worth?

Gareth147

I have 4 others totalling approximately 120k so a total of 187k

Dazza1902

Much in the way of final salary pension, savings or Isa's ?

Cus

If you access a pension then you are restricted in what you can save into your pension going forward.

Edit - been said above...

Gareth147

The pension I am looking at taking 25% from is no longer being paid into, so does the balance continue to be invested or is it frozen at the point I take 25% ?

MallyGirl

The remaining 75% should stay invested as it was before