Cashing in pensions

Liz65

My husband has a workplace pension with the company he works for.
He also has an old pension with a company he previously worked for years ago and we  were wondering if he cashed the older pension in, would it affect any state pension he might get? 

Brie

No - cashing in an older pension should NOT affect the SP.  (has he checked his forecast btw?)

But how old is the pension and should he cash it in?  And can he cash it in??  If he's 55 or over he's likely able to put it into payment or maybe he can transfer into his new company pension.  If it's a defined benefit scheme (DB) there's no cashing unless he's got a limited time to live (6 months?) and it can't be transferred except at great cost with limited likeliness of success.  

Is there a particular reason for wanting the ££?  Usually it either for debts or for something special (pay for a wedding or a deposit for a child's first house).  These answers will open up other ideas on what is best going forward.  

Liz65

Brie said:

No - cashing in an older pension should NOT affect the SP.  (has he checked his forecast btw?)

But how old is the pension and should he cash it in?  And can he cash it in??  If he's 55 or over he's likely able to put it into payment or maybe he can transfer into his new company pension.  If it's a defined benefit scheme (DB) there's no cashing unless he's got a limited time to live (6 months?) and it can't be transferred except at great cost with limited likeliness of success.  

Is there a particular reason for wanting the ££?  Usually it either for debts or for something special (pay for a wedding or a deposit for a child's first house).  These answers will open up other ideas on what is best going forward.  

Hi thanks for quick reply.  He would like to be able to do some home improvements and if possible purchase a newer secondhand car

Marcon

Liz65 said:

Brie said:

No - cashing in an older pension should NOT affect the SP.  (has he checked his forecast btw?)

But how old is the pension and should he cash it in?  And can he cash it in??  If he's 55 or over he's likely able to put it into payment or maybe he can transfer into his new company pension.  If it's a defined benefit scheme (DB) there's no cashing unless he's got a limited time to live (6 months?) the requirement is 'life expectancy of no more than 12 months' AND the scheme rules must allow this and it can't be transferred except at great cost with limited likeliness of success.  Yet again let me correct you: a DB pension can always be transferred to a stakeholder pension, which must accept a transfer from any UK registered pension scheme.  Advice will still be needed if the transfer value is £30K or more, otherwise the DB scheme can't transfer the funds. 

Is there a particular reason for wanting the ££?  Usually it either for debts or for something special (pay for a wedding or a deposit for a child's first house).  These answers will open up other ideas on what is best going forward.  

Hi thanks for quick reply.  He would like to be able to do some home improvements and if possible purchase a newer secondhand car

Pensions are supposed to be there to fund your living costs in old age, not as a handy windfall, however tempting that seductive pot of cash must look... If the home improvements/newer car will reduce your ongoing living costs it might be worth considering, but otherwise maybe not?

Remember too that he will pay tax at his marginal rate - normally only 25% of the pot is tax free- and if he takes the whole lot in one go, he could well be pushed into higher rate tax if he's currently a basic rate taxpayer. 

xylophone

He also has an old pension with a company he previously worked for years ago 

If you could  answer questions below, we could make more informed comments.

You mention a company so presumably not an unfunded Public Service pension?

How old is your husband?

 Is it a Defined Benefit Pension?

If it is a DB pension, what is its value?

If it is a Defined Contribution pension, are there any safeguarded benefits like a Guaranteed Annuity Rate?

If it is a DC pension he would be wise to have an interview with Pension Wise before approaching his pension provider concerning taking benefits.

https://www.moneyhelper.org.uk/en/pensions-and-retirement/pension-wise/book-a-free-pension-wise-appointment

Is he aware that if he takes anything above the tax free Pension Commencement Lump Sum from a DC pension, (if it cannot be 

taken under small pot rules) the Money Purchase Annual Allowance will apply to contributions to any other DC pension he has?

Has he (have you) checked your State Pension Forecasts?

https://www.gov.uk/check-state-pension

Liz65

hi, he worked for a company called JC Deaux years ago and is 63 this year.

The value is around £26000

Marcon

Liz65 said:

hi, he worked for a company called JC Deaux years ago and is 63 this year.

The value is around £26000

Was he in the defined benefit or the defined contribution scheme? Easy way to check is to look at how the value is expressed - if it includes the words Cash Equivalent Transfer Value (CETV) it's DB. Or ask the administrators: https://engage-members.broadstone.co.uk/ClientPage?Client=JCD

If it was the DB scheme, he won't be able to take the funds without transferring to some sort of personal pension. He can transfer without the need for financial advice (because the transfer is under £30K).

To answer your original question: it won't have any impact on his state pension.

xylophone

To answer your original question: it won't have any impact on his state pension.

And has he obtained his state pension forecast? Have you?

https://www.gov.uk/check-state-pension

If it was the DB scheme, he won't be able to take the funds without transferring to some sort of personal pension. He can transfer without the need for financial advice (because the transfer is under £30K).

But  bear in mind that some pension providers can be sticky about accepting a transfer from a DB Scheme  without advice, even when there is no obligation to obtain it.