Lump sum when on benefits

saintscouple

Looking for some advice please.

I am on income related benefits and have been for some time. 
I have 2 x private pension of not much amounts - 
Old Aviva Staff Pension Scheme £8,650
Scottish Widows Retirement Account £33,795

When i turn 55 i would like to withdraw £6,000 as this is the limit of savings i can have with benefits that doesn´t occur a penalty as such. 

Now i presume this would have to be drawn from the SW account as it would be no more than 25%?

Would this £6,000 be subject to tax?

And do i have to change my retirement age to 55 to withdraw this money, or can it stay at the state age?

I know i´m 11 months ahead of myself, but I just wanted to prepare so everything is in order when the time comes. 

Thank you 

SVaz

No tax and you would have some left in the tax free kitty too, for future use. 

£8448 tax free from SW available so to get £6000 tax free cash you would crystalise £24,000.  

SVaz

You could also transfer your smaller pension to your SW, or vice versa. 

DRS1

Old Aviva Staff Pension Scheme £8,650

Could you clarify what sort of pension this is?  Is it a defined benefits scheme?  Is £8650 an annual pension amount payable at eg age 65?  If so it is worth more than you might think.  And you may want to pin down at what age you can take the benefits as of right ie without requiring anyone's consent.

saintscouple

SVaz said:

You could also transfer your smaller pension to your SW, or vice versa. 

Thank you, I was trying to transfer the Aviva policy to SW but the paperwork was just too difficult to fathfum out, that i just gave up. 
I had transferred other policies to SW with no problems

saintscouple

DRS1 said:

Old Aviva Staff Pension Scheme £8,650

Could you clarify what sort of pension this is?  Is it a defined benefits scheme?  Is £8650 an annual pension amount payable at eg age 65?  If so it is worth more than you might think.  And you may want to pin down at what age you can take the benefits as of right ie without requiring anyone's consent.

I´m just looking now, 

Yes, it is a defined benefit scheme. 
No the £8650 is the total pension pot. 
It appears they have my retirement age as 55, SW is 63
It also has me taking the flexiable option when taking my pension, there are 2 other choices of lump sum, or regular income. 

I suspect i need to change the retirement age of this pension to state age? 

SVaz

You can’t transfer a DB without paid advice ( which would wipe out the value) because you have more than £30k in pensions.

If you take the Aviva as a lump sum and have to pay tax,  you won’t be much over the savings limit,  you could spend the extra on ‘essentials’, do you need new appliances etc. ?   

QrizB

saintscouple said:

Yes, it is a defined benefit scheme. 
No the £8650 is the total pension pot.

There is no "pot" with a Defined Benefit scheme.

Exactly what does it say next to the £8650 number? And what pension is is offering to pay, how many ££ per year?

DRS1

Defined benefit schemes don't have a pot as such.  It might be a transfer value I suppose.
55 would be young for a "normal retirement age" which would usually be 60/65/67 - 55 is typically the youngest age from which you can take early retirement but early retirement usually requires consent from the trustees or the employer.  
I raised the point because with some benefits if you can take a pension as of right from a certain age then the benefit requires you to do so (or you are treated as if you have done so).  If that age really is 55 you may want to dig a bit deeper and perhaps look at taking the benefits from the Aviva Scheme (in whatever way will least affect your benefits).
I confess I am wondering if the Aviva Scheme really is defined benefits rather than defined contribution given the way you describe those options - they are not what you'd expect from a defined benefits scheme (which is basically a lump sum at retirement plus a pension for life (with spouse's or dependants' pension after you die)).  The problem with taking all £6k from the Aviva Scheme is that a large chunk of that would be taxable - check but I imagine only 25% of the £8650 pot can be taken tax free.
Sorry I seem to be making this more complicated.  Ignore me and just do what SVaz said as it is far simpler but maybe have a read around the benefits you are on to see if there is any mention of pensions.

Marcon

SVaz said:

You can’t transfer a DB without paid advice ( which would wipe out the value) because you have more than £30k in pensions.

I think you might be muddling this up with trivial commutation? 

Where DB schemes are concerned (or DC schemes with 'safeguarded' benefits), the important point is whether the transfer value from the scheme is question is £30K+, in which case regulated advice is mandatory.

saintscouple

SVaz said:

You can’t transfer a DB without paid advice ( which would wipe out the value) because you have more than £30k in pensions.

If you take the Aviva as a lump sum and have to pay tax,  you won’t be much over the savings limit,  you could spend the extra on ‘essentials’, do you need new appliances etc. ?   

Ahhh, so take the full amount of the Aviva pension at 55, and immediately spend anything over £6k on things like appliances to keep the savings below £6,000? 

This would mean i then only have the SW pension and untouched?

Thank you