Taking pension pot at 55

pookie_rabbit

Hi all - I feel I have seen numerous messages on the forum asking the same question but I still don't quite understand the implications. 
In a nutshell - I turn 55 next month and have been in a company pension since 1993. Before that I had a private pension for around 3 or 4 years. I have been ignoring the letters from this company most of my life but the pot in this is now around 15K. 
Due to wanting to consolidate some debt I was thinking of taking this pot and I understand the 25%/tax implications piece. I think. The bit I still don't get is the implications on my work pension (which I don't expect to be leaving anytime soon) with the line “you’ll be subject to tax charges if you pay more than £10,000 in total into any defined contribution pensions in a tax year” if you take a lump sum. My work pension statement says "in a defined BENEFIT arrangement like the scheme" - so does that means the above line is not applicable as relates to a defined CONTRIBUTION scheme only? Many thanks (-:

Dazed_and_C0nfused

If you take a penny in taxable income from a DC pension then you will be forever limited to total contributions (including pension tax relief and employer contributions) of £10k per year going into a DC pension.

It won't limit what you contribute to a DB pension.

Is your ongoing pension definitely a DB one?

Marcon

Dazed_and_C0nfused said:

If you take a penny in taxable income from a DC pension then you will be forever limited to total contributions (including pension tax relief and employer contributions) of £10k per year going into a DC pension.

It won't limit what you contribute to a DB pension.

Is your ongoing pension definitely a DB one?

Look for the words 'final salary' or 'CARE' (Career Average Revalued Earnings) in the scheme documentation - they might be used rather than 'defined benefit'.

Veteransaver

Is it possible to split the £15k in two and transfer to 2 different sipps plans and then use the small pots rule to avoid triggering the MPAA?

pookie_rabbit

Thanks for the replies on this thus far.
I had it confirmed my work pension is a Defined Benefit Scheme.. so I BELIEVE the MPAA is no longer relevant?

Albermarle

pookie_rabbit said:

Thanks for the replies on this thus far.
I had it confirmed my work pension is a Defined Benefit Scheme.. so I BELIEVE the MPAA is no longer relevant?

Correct , so you can take the £15K from the old pension without triggering the MPAA on your current employment pension.
A caveat is that if the pension is pretty old, it maybe quite restrictive on how you can take the money. Probably best to read some of the info and give them a call. 

MallyGirl

pookie_rabbit said:

Thanks for the replies on this thus far.
I had it confirmed my work pension is a Defined Benefit Scheme.. so I BELIEVE the MPAA is no longer relevant?

MPAA does not apply to DB schemes - are you definitely going to be in a DB scheme for the rest of your working life?

PootleF

It’s correct that the £10k MPAA limit that kicks in when you draw income from a DC scheme only relates to paying into DC schemes, not to defined benefit schemes. So on the face of it this wouldn’t impact you. 

My other question would be how certain you are that you’ll work at your current employer until retirement, and how sure you are that they will keep the DB scheme open? It would be a shame to have to move job and be very limited on future pension savings. 

Albermarle

PootleF said:

It’s correct that the £10k MPAA limit that kicks in when you draw income from a DC scheme only relates to paying into DC schemes, not to defined benefit schemes. So on the face of it this wouldn’t impact you. 

My other question would be how certain you are that you’ll work at your current employer until retirement, and how sure you are that they will keep the DB scheme open? It would be a shame to have to move job and be very limited on future pension savings. 

OP, the comment above in bold is a good one.

If you work in the public sector then your DB pension is essentially safe. However the fact that you had to confirm with your employer it is a DB scheme, is making people think you are in the private sector.

Not sure if you aware but if you work in the private sector, active DB pensions are rather rare nowadays. Most employers who had them have stopped them as they are too expensive, hence the comment.