Cashing in a pension

lookstraightahead

Thank you albermarle, this seems to be in line with the brief conversation I had with the pension provider a while ago, and thank you for the info on the emergency tax. I also didn't knit about the £10k limit.

thanks all 

eskbanker

lookstraightahead said:

Brie thank you but I'm really confused. I have a local government pension that I'm paying into for retirement, and actually I do have a trivial pension too which I haven't cashed in whych is about £8000, along with a really small pension pot of £3000 from when I started work. Zurich have informed me that for this personal pension of £42000 I can't withdraw 'some' of it, but I can transfer it to another provider, or cash it in . Maybe I've misunderstood them.

I will phone them tomorrow x

On the basis that the conversation has moved on from the issue of whether or not you can take the entire £42K Zurich pot, the question would be whether or not it's sensible to do so - do your other pensions (LGPS in particular) provide an adequate income for your retirement?

lookstraightahead

eskbanker said:

lookstraightahead said:

Brie thank you but I'm really confused. I have a local government pension that I'm paying into for retirement, and actually I do have a trivial pension too which I haven't cashed in whych is about £8000, along with a really small pension pot of £3000 from when I started work. Zurich have informed me that for this personal pension of £42000 I can't withdraw 'some' of it, but I can transfer it to another provider, or cash it in . Maybe I've misunderstood them.

I will phone them tomorrow x

On the basis that the conversation has moved on from the issue of whether or not you can take the entire £42K Zurich pot, the question would be whether or not it's sensible to do so - do your other pensions (LGPS in particular) provide an adequate income for your retirement?

Yes I think so but I need to sort them out. In fact I have two lgps pensions from different councils that I need to put together, plus this £8k which is an old teachers pension that I can't do anything with except withdraw. All a bit messy. I've already paid all my national insurance contributions. The money will help with house repairs and updates which will need doing at some point. Only have a small mortgage. But im no where near 'wanting' to retire, I think at this moment all being well I want to continue ad infinitum but on a part time basis rather than all or nothing. I also get educational hols 

xylophone

The OP is currently contributing to a defined benefit pension - taking benefits from the Zurich DC plan would not trigger the MPAA in respect of these contributions.


With regard to the other DC pension valued at £8000, taking this would not trigger the MPAA so as to affect his contributions to the DB pension - it would not be necessary to take this as a "small pot" for this to be the case.


https://adviser.royallondon.com/technical-central/pensions/contributions-and-tax-relief/money-purchase-annual-allowance/

The OP 's  Zurich  DC pension has no safeguarded benefits  and he may access it without advice from age 55.



It is an old pension plan and it does not permit flexible access (see below) so that if the OP wishes to access the money through Zurich, he would be required to take it as 25% tax free PCLS with the balance taxed as income in the year of receipt.

He might prefer to arrange the transfer of this  pension to a modern arrangement if he wished to have more options as to how and when he takes this pension.

He could book an appointment with Pension Wise to discuss those options.

https://www.moneyhelper.org.uk/en/pensions-and-retirement/pension-wise?source=pw

https://www.moneyhelper.org.uk/en/pensions-and-retirement/taking-your-pension/your-options-for-using-your-defined-contribution-pension-pot

If he wishes to transfer to a modern plan, he has a wide choice of pension providers - for example, he could transfer to a SIPP.

If he does choose to access the pension now through Zurich, he would receive 25% tax free - it is probable that they would tax the balance on the emergency basis

https://techzone.abrdn.com/public/pensions/emergency-tax-and-pensions-guide

so he could well find that he had overpaid tax and would need to organise a reclaim from HMRC - see link.

lookstraightahead

Thank you

LHW99

plus this £8k which is an old teachers pension

Depending on how old, this could be a defined benefit pension (DB), not a "pot of money" (DC).

If so, it would give you a certain amount of pension (at 60, or your SPA) that is index linked. Is the £8000 a CETV, or is it the annual pension when you left?

LGPS / council pensions also tend to be DB, and you usually can't combine them as such, except within around a year of starting a new job. That wouldn't necessarily matter, as you would get pension from both schemes in due course.

lookstraightahead

LHW99 said:

plus this £8k which is an old teachers pension

Depending on how old, this could be a defined benefit pension (DB), not a "pot of money" (DC).

If so, it would give you a certain amount of pension (at 60, or your SPA) that is index linked. Is the £8000 a CETV, or is it the annual pension when you left?

LGPS / council pensions also tend to be DB, and you usually can't combine them as such, except within around a year of starting a new job. That wouldn't necessarily matter, as you would get pension from both schemes in due course.

The £42000 is a personal pension plan now with Zurich, it has (DL) after it in brackets. The £8000 one is an old teachers pension I'm not sure what CETV is, but they wrote to me with this amount as a small pots lump sum. Edit - yes I believe it's a CETV of £8k. Does that mean I need to put it in another scheme (sorry I will eventually get my head around it all).
I think I was told two years to join up the lgps pensions but I need to check that out as well.

xylophone

You had said

 I do have a trivial pension too which I haven't cashed in whych is about £8000, 

so I assumed a DC pot but you have clarified

The £8000 one is an old teachers pension

So this is a  deferred DB pension.

You are being offered this as a "small lump sum" commutation? Again taking it would not trigger the MPAA or affect your contributions to your LGPS pension.

https://www.mandg.com/pru/adviser/en-gb/insights-events/insights-library/small-pots-defined-benefit-trivial-commutations#:~:text=A small pot payment (properly,(personal pension plans etc.)

https://www.teacherspensions.co.uk/-/media/documents/member/documents/tax-section/trivial-commutation-lump-table--v1.ashx?rev=0dc2f854a056481dbfa1b75cccbccc89&hash=A954A24422088BBF070CB046F738D92D

It could have been possible to transfer this   TPS pension into LGPS within a year of joining LGPS but presumably that window has closed.

What exactly is the £3000? Is it a DC pension?

If so, you might wish to consider opening a SIPP and arranging the transfer in of both the Zurich pension and the £3000.

You could then decide on how you wished to access the SIPP.

With regard to combining your LGPS pensions, you would need to think carefully about whether this was to your advantage.

Silvertabby is a former LGPS administrator and might be able to throw some light on this. You could try a PM.

https://forums.moneysavingexpert.com/discussion/6292085/lgps-guidance-not-advice-when-can-i-walk-silvertabby-and-others-please-guide-me-thank-you

Marcon

Brie said:

lookstraightahead said:

Thank you - is there a reason why I can't take it all out ? Sorry, it's an old private pension that I don't contribute to

Mostly the reasoning is that you have a pension to support you in your old age so you are normally expected to use it to provide ongoing income.  The TFLS is allowed I think as a sweetener for not being able to take the lot.  

If it is a private pension it may well be similar to a occupational defined contribution pension scheme in which you put money to be invested in hopes that it will grow with inflation. 

The only schemes that I'm aware of that allow you to take the whole thing are referred to as "trivial" pensions.  As I recall a few years back the upper limit on these was £17k and above that you had to take it as a pension, not simply withdraw it.  The only exception to this might occur if you had a very very limited time to live - which I hope is not the case.  

@Brie

You might want to delete your post - it's very misleading and wrong in so many ways, however well meant.

michaels

If the OP does not need the money immediately then it may be that if they delay drawdown to any period between stopping working and state pension becoming payable they will be able to draw down the whole amount over 2-3 years avoiding the £6.3k tax bill that they would have if they drawdown the full amount whilst also earning 16k pa.

Another vote for transferring to a sipp to increase options.