I've Just Hit 55 & Have Pension Questions

dizco

Hi All

I've just reached the grand young age of 55 and realise I now have some options regarding my pension.

Background - I'm currently in full time employment earning around 45,000 per annum, and have been with my employer since October 2005. I pay 8% into the company pension scheme. My employer pays an additional 16% making the total contribution 25% (including an additional 1% AVC). This is managed by Aviva. At the moment I'm still trying to ascertain the current value.

I also have an older pension pot from a previous employer which is currently sitting at around £60,000.

Ideally I would like to explore options for my older pension pot of £60,000. I understand that I can access 25% of the pot tax free, and then have to decide what I want to do with the remaining 75% within 6 months. The company it is with can offer me a taxable lump sum, an annuity, a drawdown, or a mix of them. I don't want to access anymore than the 25% tax free amount at the moment, probably closer to 15% of the total.

My questions are:

- Out of the options available, what would be the best for the remaining 75 - 85%, or should I even be thinking about taking anything out at all at this age?
- How can I understand any impacts doing this could have on my existing company pension or tax situation? If any?

Any advice you can provide would be much appreciated.

ader42

Transfer the pot (or what remains after you take the lump sum you want) to something that doesn’t have silly 6 month time limits.

E.g. a SIPP

Qyburn

Or transfer it first, then take tax free from the target scheme as and when you need.

megacatt

And only take tax free cash at this point.  If you take any taxed cash from the pension then you will trigger the MPAA and be limited in your future pension contributions.

Albermarle

 I understand that I can access 25% of the pot tax free, and then have to decide what I want to do with the remaining 75% within 6 months. 

Older pensions tend to be less flexible with the wirthdrawal options than more modern ones.

As suggested already probably best to transfer it to a new pension, or maybe even into your current employer pension.

Transferring pensions is normally pretty easy and can be done on line usually. It is simpler though if you transfer before taking any tax free cash .

Normally it is advised only to take tax free cash before retirement, if you really need it. It can be a useful tool for reducing tax paid in retirement, and of course it will still be part of your retirement pot, from when you are not earning a salary anymore.

dunstonh

 I don't want to access anymore than the 25% tax free amount at the moment, probably closer to 15% of the total.

Can you afford to rob your retirement years during your working years?
Have you mapped the impact of losing the ability to take some of your retirement income fund tax free?

- Out of the options available, what would be the best for the remaining 75 - 85%, or should I even be thinking about taking anything out at all at this age?

Insufficient information to go on.

- How can I understand any impacts doing this could have on my existing company pension or tax situation? If any?

you model the impact over your lifetime.  Software is the easiest way but those good on spreadsheets may be able to code their own.

LHW99

The fact that you can acess the pension doesn't mean you have to (if you don't desperately need the money).

It would probably be worth finding out more about the Aviva pot - what funds its in, what are the charges -  and comparing it with your employers' scheme and with some other options eg Vanguard, Hargreaves Lansdown, AJBell ...... (others are available).

One option would be to leave it alone until you want to semi or fully retire.

cloud_dog

dizco said:

....
I also have an older pension pot from a previous employer which is currently sitting at around £60,000.

Ideally I would like to explore options for my older pension pot of £60,000. 

....
My questions are:

- How can I understand any impacts doing this could have on my existing company pension or tax situation? If any?

Any advice you can provide would be much appreciated.

As others have comments on, why?

What purpose will this money serve now that you cannot accommodate from your current income/budget?

What is your current pension provision?  Is your current workplace scheme a Defined Benefit type scheme?  If so, how much is it indicating you may receive at normal retirement age?

Have you checked your State Pension provision, e.g. are you on track with NI contributions for a full SP?

How much do you envisage you will need or want as an annual income in retirement?

For example to match your current £45k pa income you would likely need a pot of money around the size of £1.125m.  Obviously, we can deduct from the £45k the SP and possibly the current workplace scheme, if it is a DB type scheme; or simply add the current workplace 'pot of money' in to the prior calculation.

dizco

Thanks All. I have few expenses to pay for, but I've decided to leave things as they are now, and see if I can find funds without dipping in to my pension.

GSP

dizco said:

Thanks All. I have few expenses to pay for, but I've decided to leave things as they are now, and see if I can find funds without dipping in to my pension.

Think that’s the first we have heard about you wanting to find funds. Depending on what this, if we knew your intentions it may cast a different light and therefore responses from people?

dizco

Yes, sorry this isn't just me wanting extra cash to spend. Without going into too much detail I need to find some additional funds, and I was just trying to understand any implications of accessing all or some of the 25% tax free element of an old private pension that is still active, but I no longer contribute towards.

Before considering if it was an option, I wanted to understand how it might affect other things: i.e. my existing workplace pension, my tax bracket, or any other tax considerations.