Cashing in pensions while working

colcolg

Albermarle said:

OP,
Just on the basis that you are lacking in knowledge about pensions it could be worth just clarifying what this is.

( i will still have another, main pension pot which i wont touch until im 65).

Hi this is another public sector pension which i currently cobtribute into via my job..different from the other one I wanted to cash in.  I also have a smallish amount 17k in a personal pension with standard life which I pay into each month..I have nearly always have fixed term contracts hence the several pensions etc

colcolg

NannaH said:

I read ‘ cashing it in’ as wanting the lot? 

So what OP actually means is accessing the pension. 

£5400 a year, if that’s the ‘now’ rate, would be a bit more if left until retirement age, or even age 60. 

£54k ( minus over £10k tax) over the 10 years,  against potentially an extra 35% for the whole retirement.  I suppose it depends on whether an  extra £50k ( in todays money)  over say 25 years is worth the wait, plus the gamble of living long enough to break even, which would be when? 

I imagine an extra £4320 a year after tax immediately is very tempting though and if you are servicing debts with a highish interest rate, that £14k tfls would come in handy.

If it were me, I’d think that taking it now was probably worth losing an extra £2k a year later on but then my family don’t seem to live past their late 70’s.  At 57, I see myself as having no more than 25 years, realistically. 

You have to weigh up your own pros and cons. 

Yes thats right...accessing the full lump sum and monthly amount from my old public sector pension plus the full amount in a lump sum from my aegon one too

QrizB

colcolg said:

Yes thats right...accessing the full lump sum and monthly amount from my old public sector pension plus the full amount in a lump sum from my aegon one too

In which case, most likely:

•  from the PS pension, the £14k will be tax-free while the £450 pm will be taxable.
• from the £7k DC pension, £1750 will be tax-free and the remaining £5250 will be taxable.

The taxable amounts will be added to your income (as though they were a second/third job) and taxed at your marginal rate. If you're earning enough from your main job that you currently pay tax, but less than about £40k pa, they will be taxed at 20% (you might pay more or less than this to begin with, but it should all come out in the wash).

colcolg said:

Hi this is another public sector pension which i currently cobtribute into via my job ...  I also have a smallish amount 17k in a personal pension with standard life which I pay into each month.

To avoid any difficulties with your other pensions, you might want to ask to take the £7k pension under the "small pot" rules.

https://blog.moneyfarm.com/en/pensions/small-pension-pots/ (this is not a recommendation for MoneyFarm as a firm, just a link to their blog post).

NlghtOwl

Recommend you get some ‘fee only’ advice (so they’re not trying to sell you products) even if this costs 1-2k. You could end up paying more in tax if you access the wrong pension at the wrong time. Good luck