Can I Crystallize one pension

Polareyes

Hello,

I am 54 years of age and have 2 pensions
1) 850k and invested with James Hay
2) 275k and still contributing into via work

As such I am already over the LTA which is frozen so should only get worse.

my question is can I Crystallize the 850k pension when I hit 55 and then leave it whilst still paying into my other pension to try and minimise effects of LTA? 

I don’t plan to retire until 58-60 years of age. My current pension that I am contributing into I pay 3% and receive 23% so I obviously want to continue with this.

is my line of thinking the best way forward?

MallyGirl

you can crystallise the £850k and withdraw the 25% tax free without impacting your ability to pay into the other one. It will 'fix' a large %age of LTA used.

Albermarle

The issues are only that you will have to find a home for the 25% , which will be over £200K .
If you want to stay invested it will have to mainly go into a General Investment account , where you are potentially liable for CGT and dividend tax   .
Also that 25% becomes potentially liable for inheritance tax , if and when that becomes applicable . In the pension it is not included in IHT calculation.

Polareyes

Do I have to rake the 25% when I Crystallize- can I not take that at a later date when I start drawing down?

MallyGirl

I believe you have to take it at crystallisation or it won't be tax free

cfw1994

Polareyes said:

Do I have to rake the 25% when I Crystallize- can I not take that at a later date when I start drawing down?

The act of crystallising is you taking payment! 
See https://www.pensionbee.com/pensions-explained/pension-basics/pension-glossary for some definitions.
You have built up very decent pots: was that without taking tany advice?  Maybe have a free chat with Pensionwise if you have no advisor - https://www.pensionwise.gov.uk/en?gclsrc=aw.ds

Note, they will NOT give advice, but would help explain options and terminology.

Albermarle

can I not take that at a later date when I start drawing down?

No it will be paid to your nominated bank account .

Polareyes

Ok thanks for your replies. I do have a financial advisor but like to understand as much as possible myself before talking to them. 

Seems the gov have it pretty well stitched up. 

EdSwippet

Polareyes said:

my question is can I Crystallize the 850k pension when I hit 55 and then leave it whilst still paying into my other pension to try and minimise effects of LTA? 

In case it's not clear from the responses so far ... to the extent that crystallising pension money mitigates your LTA issues, there may be no reason to stop at £850k when you have enough pension savings overall to crystallise the full £1,073k. Doing this might involve a partial transfer out of your employer pension and into something more flexible, but worth considering.

Also, since nobody else has mentioned it, make sure you are clear on what triggers the MPAA's £4k/year limit on future annual pension contributions. Taking only the tax-free lump sum does not trigger it, but taking even just £1 of taxable income from your SIPP or another DC pension would.

Finally, in your shoes I'd consider early retirement. (In fact, I did; went four years earlier than planned thanks to LTA issues. No regrets at all.)

cfw1994

^^^^
This!!
Ed knows what he's talking about: helped clarify some mechanics of the LTA to me with working examples (in a thread I never bookmarked 🙄) a few years back......& indeed that plus more made me investigate stepping away from work early.

Now 6 months in, another with no regrets here!

Polareyes

Thanks everyone for your help.
to address a few comments
1) I can’t move out of my current employer pension pre 60 without penalty so that is not an option.
2) a few people have told me to retire. I’m not sure I’m ready to play golf, go fishing and enjoy myself everyday yet. Plus I just got an extension so owe £100k on that. Also there is a decent chance of redundancy in next couple of years which would pay me a hefty amount so I’m planning on that being my trigger. 

3) my wife and I will both get max state pension but my wife’s only other pension is about £2.5k pa so my pension has to support us both and pesky kids still at home.