Cashing in 2 small pensions - please help !

DeeMM

Hello Forumites 

I've searched as many forum posts as I can and will be honest I'm more confused than ever now.  Pensions just make me stressed - they really do. 

Anyway, I'm 65 and due to retire next April but left my part time job recently as I just couldn't stand any more!  So I won't have any regular income until next April when I will claim a Civil Service Pension which I could have had from 60 but will take from 6.4.2025 instead and I will also receive full new state pension [once I've paid over the money for missing years working overseas and which HMRC have agreed I can pay voluntary Class 2 NIC for]. Those 2 pensions will be fine for my income in retirement. Currently I'm OK too luckily - as I have money to live off and further savings if I need them. 

I have 2 other small pensions though worth 6.5K and 10.5K.  One from my most recent job of a few years and one from early 90's before I went overseas. I'm thinking to just cash those in and use the proceeds to pay the Class 2 NICs and use the rest as the salary I won't be getting now that I've finished work.  Does that make sense to cash them in?  I don't understand  all the other options available really and even though all the advice is 'speak to a financial adviser' in reality I don't think they're interested in giving advice on pension pots so small.  I just need confirmation really that my idea of cashing them in would be the best thing to do.  I think it is ........ based on all the other factors.  I'd get some of the tax back too as I only worked 6 months of the tax year so have 6 months of unused tax allowance.  Can sort that out later anyway.
 
Hope the above makes sense, isn't too long and that someone can please give their thoughts on it all. 

Thanks very much 

Dazed_and_C0nfused

So I won't have any regular income until next April when I will claim a Civil Service Pension which I could have had from 60 but will take from 6.4.2025 instead

Why didn't you take that at 60?

What do you think happens to the money for the ~6 years you haven't taken it?

Are the two small pensions definitely defined contribution pensions and not defined benefit pensions?

MallyGirl

DeeMM said:

I'd get some of the tax back too as I only worked 6 months of the tax year so have 6 months of unused tax allowance.  Can sort that out later anyway.
 
Hope the above makes sense, isn't too long and that someone can please give their thoughts on it all. 

Thanks very much 

There is no concept of '6 months of unused tax allowance'.
25% of your pensions would be tax free but the other 75% would be added to your salary for this year and taxed accordingly. You would likely be hit with emergency tax to start with but would get that adjusted at year end.
Whether this cashing in is a good idea will depend on what tax rate you are paying now and what you will pay in retirement.

Marcon

DeeMM said:

Hello Forumites 

I've searched as many forum posts as I can and will be honest I'm more confused than ever now.  Pensions just make me stressed - they really do. 

Anyway, I'm 65 and due to retire next April but left my part time job recently as I just couldn't stand any more!  So I won't have any regular income until next April when I will claim a Civil Service Pension which I could have had from 60 but will take from 6.4.2025 instead and I will also receive full new state pension [once I've paid over the money for missing years working overseas and which HMRC have agreed I can pay voluntary Class 2 NIC for]. Those 2 pensions will be fine for my income in retirement. Currently I'm OK too luckily - as I have money to live off and further savings if I need them. 

I have 2 other small pensions though worth 6.5K and 10.5K.  One from my most recent job of a few years and one from early 90's before I went overseas. I'm thinking to just cash those in and use the proceeds to pay the Class 2 NICs and use the rest as the salary I won't be getting now that I've finished work.  Does that make sense to cash them in?  I don't understand  all the other options available really and even though all the advice is 'speak to a financial adviser' in reality I don't think they're interested in giving advice on pension pots so small.  I just need confirmation really that my idea of cashing them in would be the best thing to do.  I think it is ........ based on all the other factors.  I'd get some of the tax back too as I only worked 6 months of the tax year so have 6 months of unused tax allowance.  Can sort that out later anyway.
 
Hope the above makes sense, isn't too long and that someone can please give their thoughts on it all. 

Thanks very much 

You say you'll take your Civil Service pension from 6.4.2025. Exactly which scheme were you in, and why have you delayed taking it?

DeeMM

Dazed_and_C0nfused said:

So I won't have any regular income until next April when I will claim a Civil Service Pension which I could have had from 60 but will take from 6.4.2025 instead

Why didn't you take that at 60?

What do you think happens to the money for the ~6 years you haven't taken it?

Are the two small pensions definitely defined contribution pensions and not defined benefit pensions?

I didn't take it at 60 because I was working and didn't need it.

Sorry but I'm not sure what you mean by the 'what do you think happens etc' part of your reply?... When I enquired with the CSP people they told me that when I do claim it the back years will be paid to me too. It's not much so that sounded OK to me.  I guess it will be taxed at source but it's not enough to take me into the higher rate tax bracket.  

Regarding the two small pensions I had no idea what type they were or what  those 2 types of pensions actually are but I have now read up on them and have also phoned both Prudential and Aegon who have confirmed that yes, they are both defined contribution pensions. 
 
As you can probably tell I really have no idea about pensions and the more I read and the more I talk to the providers the more confused I become.  It truly is a minefield to me. 

FIREDreamer

DeeMM said:

Dazed_and_C0nfused said:

So I won't have any regular income until next April when I will claim a Civil Service Pension which I could have had from 60 but will take from 6.4.2025 instead

Why didn't you take that at 60?

What do you think happens to the money for the ~6 years you haven't taken it?

Are the two small pensions definitely defined contribution pensions and not defined benefit pensions?

I didn't take it at 60 because I was working and didn't need it.

Sorry but I'm not sure what you mean by the 'what do you think happens etc' part of your reply?... When I enquired with the CSP people they told me that when I do claim it the back years will be paid to me too. It's not much so that sounded OK to me.  I guess it will be taxed at source but it's not enough to take me into the higher rate tax bracket.  

Regarding the two small pensions I had no idea what type they were or what  those 2 types of pensions actually are but I have now read up on them and have also phoned both Prudential and Aegon who have confirmed that yes, they are both defined contribution pensions. 
 
As you can probably tell I really have no idea about pensions and the more I read and the more I talk to the providers the more confused I become.  It truly is a minefield to me. 

I think (based on other comments here) that you have lost the past payments and there is no late retirement factor applied for starting the pension late either.

DeeMM

MallyGirl said:

DeeMM said:

I'd get some of the tax back too as I only worked 6 months of the tax year so have 6 months of unused tax allowance.  Can sort that out later anyway.
 
Hope the above makes sense, isn't too long and that someone can please give their thoughts on it all. 

Thanks very much 

There is no concept of '6 months of unused tax allowance'.
25% of your pensions would be tax free but the other 75% would be added to your salary for this year and taxed accordingly. You would likely be hit with emergency tax to start with but would get that adjusted at year end.
Whether this cashing in is a good idea will depend on what tax rate you are paying now and what you will pay in retirement.

Thanks but I was working on the premise that under PAYE on a monthly salary you get 1/12 of the 12570 as a tax free amount each month and are taxed on  any amount paid to you over that.
Having only worked Apr to Sep this year I've only used 6/12 of the 12570 so far, so the remaining 6/12 is available for me to receive as tax free income. That's what I meant when I said 'unused tax allowance'   

I realise that I'll probably be hit with a full charge for tax on the amount of any small pension taken over the 25% tax free but that unused 6 months of tax free allowance will eventually go towards a refund of some of the tax taken - either at the end of the year or if I claim it earlier via the HMRC P53 option online. 

I'm a basic rate taxpayer and that will continue into retirement. 

DeeMM

Marcon said:

DeeMM said:

Hello Forumites 

I've searched as many forum posts as I can and will be honest I'm more confused than ever now.  Pensions just make me stressed - they really do. 

Anyway, I'm 65 and due to retire next April but left my part time job recently as I just couldn't stand any more!  So I won't have any regular income until next April when I will claim a Civil Service Pension which I could have had from 60 but will take from 6.4.2025 instead and I will also receive full new state pension [once I've paid over the money for missing years working overseas and which HMRC have agreed I can pay voluntary Class 2 NIC for]. Those 2 pensions will be fine for my income in retirement. Currently I'm OK too luckily - as I have money to live off and further savings if I need them. 

I have 2 other small pensions though worth 6.5K and 10.5K.  One from my most recent job of a few years and one from early 90's before I went overseas. I'm thinking to just cash those in and use the proceeds to pay the Class 2 NICs and use the rest as the salary I won't be getting now that I've finished work.  Does that make sense to cash them in?  I don't understand  all the other options available really and even though all the advice is 'speak to a financial adviser' in reality I don't think they're interested in giving advice on pension pots so small.  I just need confirmation really that my idea of cashing them in would be the best thing to do.  I think it is ........ based on all the other factors.  I'd get some of the tax back too as I only worked 6 months of the tax year so have 6 months of unused tax allowance.  Can sort that out later anyway.
 
Hope the above makes sense, isn't too long and that someone can please give their thoughts on it all. 

Thanks very much 

You say you'll take your Civil Service pension from 6.4.2025. Exactly which scheme were you in, and why have you delayed taking it?

Marcon said:

DeeMM said:

Hello Forumites 

I've searched as many forum posts as I can and will be honest I'm more confused than ever now.  Pensions just make me stressed - they really do. 

Anyway, I'm 65 and due to retire next April but left my part time job recently as I just couldn't stand any more!  So I won't have any regular income until next April when I will claim a Civil Service Pension which I could have had from 60 but will take from 6.4.2025 instead and I will also receive full new state pension [once I've paid over the money for missing years working overseas and which HMRC have agreed I can pay voluntary Class 2 NIC for]. Those 2 pensions will be fine for my income in retirement. Currently I'm OK too luckily - as I have money to live off and further savings if I need them. 

I have 2 other small pensions though worth 6.5K and 10.5K.  One from my most recent job of a few years and one from early 90's before I went overseas. I'm thinking to just cash those in and use the proceeds to pay the Class 2 NICs and use the rest as the salary I won't be getting now that I've finished work.  Does that make sense to cash them in?  I don't understand  all the other options available really and even though all the advice is 'speak to a financial adviser' in reality I don't think they're interested in giving advice on pension pots so small.  I just need confirmation really that my idea of cashing them in would be the best thing to do.  I think it is ........ based on all the other factors.  I'd get some of the tax back too as I only worked 6 months of the tax year so have 6 months of unused tax allowance.  Can sort that out later anyway.
 
Hope the above makes sense, isn't too long and that someone can please give their thoughts on it all. 

Thanks very much 

You say you'll take your Civil Service pension from 6.4.2025. Exactly which scheme were you in, and why have you delayed taking it?

Marcon said:

DeeMM said:

Hello Forumites 

I've searched as many forum posts as I can and will be honest I'm more confused than ever now.  Pensions just make me stressed - they really do. 

Anyway, I'm 65 and due to retire next April but left my part time job recently as I just couldn't stand any more!  So I won't have any regular income until next April when I will claim a Civil Service Pension which I could have had from 60 but will take from 6.4.2025 instead and I will also receive full new state pension [once I've paid over the money for missing years working overseas and which HMRC have agreed I can pay voluntary Class 2 NIC for]. Those 2 pensions will be fine for my income in retirement. Currently I'm OK too luckily - as I have money to live off and further savings if I need them. 

I have 2 other small pensions though worth 6.5K and 10.5K.  One from my most recent job of a few years and one from early 90's before I went overseas. I'm thinking to just cash those in and use the proceeds to pay the Class 2 NICs and use the rest as the salary I won't be getting now that I've finished work.  Does that make sense to cash them in?  I don't understand  all the other options available really and even though all the advice is 'speak to a financial adviser' in reality I don't think they're interested in giving advice on pension pots so small.  I just need confirmation really that my idea of cashing them in would be the best thing to do.  I think it is ........ based on all the other factors.  I'd get some of the tax back too as I only worked 6 months of the tax year so have 6 months of unused tax allowance.  Can sort that out later anyway.
 
Hope the above makes sense, isn't too long and that someone can please give their thoughts on it all. 

Thanks very much 

You say you'll take your Civil Service pension from 6.4.2025. Exactly which scheme were you in, and why have you delayed taking it?

I was in the Civil Service Classic [non contributory] final salary scheme - it was years and years ago that I worked in the civ so it's a really old type pension. 
I've delayed taking  it because I was working and didn't need it.  I thought I'd just let it go and have the arrears paid to me when I do finally take it.  Possibly the wrong thing to do I really don't know.  It just illustrates my ignorance about pensions. They really stress me out and I find them a minefield.  Not the money part per se - lol -  just the decision making and understanding all the different options. 

MallyGirl

That isn't how income tax works. If you only worked for 1 month and earned £12570 that would be all your personal allowance used

Marcon

DeeMM said:

Marcon said:

DeeMM said:

Hello Forumites 

I've searched as many forum posts as I can and will be honest I'm more confused than ever now.  Pensions just make me stressed - they really do. 

Anyway, I'm 65 and due to retire next April but left my part time job recently as I just couldn't stand any more!  So I won't have any regular income until next April when I will claim a Civil Service Pension which I could have had from 60 but will take from 6.4.2025 instead and I will also receive full new state pension [once I've paid over the money for missing years working overseas and which HMRC have agreed I can pay voluntary Class 2 NIC for]. Those 2 pensions will be fine for my income in retirement. Currently I'm OK too luckily - as I have money to live off and further savings if I need them. 

I have 2 other small pensions though worth 6.5K and 10.5K.  One from my most recent job of a few years and one from early 90's before I went overseas. I'm thinking to just cash those in and use the proceeds to pay the Class 2 NICs and use the rest as the salary I won't be getting now that I've finished work.  Does that make sense to cash them in?  I don't understand  all the other options available really and even though all the advice is 'speak to a financial adviser' in reality I don't think they're interested in giving advice on pension pots so small.  I just need confirmation really that my idea of cashing them in would be the best thing to do.  I think it is ........ based on all the other factors.  I'd get some of the tax back too as I only worked 6 months of the tax year so have 6 months of unused tax allowance.  Can sort that out later anyway.
 
Hope the above makes sense, isn't too long and that someone can please give their thoughts on it all. 

Thanks very much 

You say you'll take your Civil Service pension from 6.4.2025. Exactly which scheme were you in, and why have you delayed taking it?

Marcon said:

DeeMM said:

Hello Forumites 

I've searched as many forum posts as I can and will be honest I'm more confused than ever now.  Pensions just make me stressed - they really do. 

Anyway, I'm 65 and due to retire next April but left my part time job recently as I just couldn't stand any more!  So I won't have any regular income until next April when I will claim a Civil Service Pension which I could have had from 60 but will take from 6.4.2025 instead and I will also receive full new state pension [once I've paid over the money for missing years working overseas and which HMRC have agreed I can pay voluntary Class 2 NIC for]. Those 2 pensions will be fine for my income in retirement. Currently I'm OK too luckily - as I have money to live off and further savings if I need them. 

I have 2 other small pensions though worth 6.5K and 10.5K.  One from my most recent job of a few years and one from early 90's before I went overseas. I'm thinking to just cash those in and use the proceeds to pay the Class 2 NICs and use the rest as the salary I won't be getting now that I've finished work.  Does that make sense to cash them in?  I don't understand  all the other options available really and even though all the advice is 'speak to a financial adviser' in reality I don't think they're interested in giving advice on pension pots so small.  I just need confirmation really that my idea of cashing them in would be the best thing to do.  I think it is ........ based on all the other factors.  I'd get some of the tax back too as I only worked 6 months of the tax year so have 6 months of unused tax allowance.  Can sort that out later anyway.
 
Hope the above makes sense, isn't too long and that someone can please give their thoughts on it all. 

Thanks very much 

You say you'll take your Civil Service pension from 6.4.2025. Exactly which scheme were you in, and why have you delayed taking it?

Marcon said:

DeeMM said:

Hello Forumites 

I've searched as many forum posts as I can and will be honest I'm more confused than ever now.  Pensions just make me stressed - they really do. 

Anyway, I'm 65 and due to retire next April but left my part time job recently as I just couldn't stand any more!  So I won't have any regular income until next April when I will claim a Civil Service Pension which I could have had from 60 but will take from 6.4.2025 instead and I will also receive full new state pension [once I've paid over the money for missing years working overseas and which HMRC have agreed I can pay voluntary Class 2 NIC for]. Those 2 pensions will be fine for my income in retirement. Currently I'm OK too luckily - as I have money to live off and further savings if I need them. 

I have 2 other small pensions though worth 6.5K and 10.5K.  One from my most recent job of a few years and one from early 90's before I went overseas. I'm thinking to just cash those in and use the proceeds to pay the Class 2 NICs and use the rest as the salary I won't be getting now that I've finished work.  Does that make sense to cash them in?  I don't understand  all the other options available really and even though all the advice is 'speak to a financial adviser' in reality I don't think they're interested in giving advice on pension pots so small.  I just need confirmation really that my idea of cashing them in would be the best thing to do.  I think it is ........ based on all the other factors.  I'd get some of the tax back too as I only worked 6 months of the tax year so have 6 months of unused tax allowance.  Can sort that out later anyway.
 
Hope the above makes sense, isn't too long and that someone can please give their thoughts on it all. 

Thanks very much 

You say you'll take your Civil Service pension from 6.4.2025. Exactly which scheme were you in, and why have you delayed taking it?

I was in the Civil Service Classic [non contributory] final salary scheme - it was years and years ago that I worked in the civ so it's a really old type pension. 
I've delayed taking  it because I was working and didn't need it.  I thought I'd just let it go and have the arrears paid to me when I do finally take it.  Possibly the wrong thing to do I really don't know.  It just illustrates my ignorance about pensions. They really stress me out and I find them a minefield.  Not the money part per se - lol -  just the decision making and understanding all the different options. 

Thank you. The reason for asking is that Classic has no 'late retirement' factor - in other words, if you don't take it at 60, you don't get any 'extra' for the delay in starting to draw it. It will be backdated to 60 when you do start to take it, and uplifted for inflation, but not with any increase because you've delayed taking it.

On the tax side, you can either have the whole lot taxed at the time you receive it, or you can choose to ask HMRC to tax it as if you had started to draw it at the time you became entitled to the pension (ie age 60, and taxed on a year by year basis for the amount you could have drawn in that year). You might want to have a think about how that will impact your tax position now.

Dazed_and_C0nfused

MallyGirl said:

That isn't how income tax works. If you only worked for 1 month and earned £12570 that would be all your personal allowance used

That isn't how it works in reality though as the employer would only have allowed 1/12th of the tax code code allowances when calculating the tax due for month 1.