Work pension advice

kevker23

Hi all

have had a quick scout through the section, but can't find the answer i am looking for.

I have a work pension, which is pretty good as my employer matches my contribution up to 6% of my wages. I'm at a stage where I can cash in my pension early.

Now I will get professional advice before i do anything, but was wondering one question which might mean it's not even worth getting the advice.

If I was to cash in my pension, by taking a 25% lump sum and then leaving the rest in an annuity to avoid tax, what happens to my continuing contributions through my work. WIll a new pension be opened or will it cause me issues?

Many thanks in advance.

QrizB

It depends on the scheme.

Some schemes will let you transfer out (in whole or part) without having to leave the scheme, others are fussier.

The scheme boolket should tell you, or you can contact the administrators to ask. If your employer is big enough to have an HR department, they might know too.

Marcon

kevker23 said:

If I was to cash in my pension, by taking a 25% lump sum and then leaving the rest in an annuity to avoid tax, what happens to my continuing contributions through my work. WIll a new pension be opened or will it cause me issues?

Many thanks in advance.

Are you aged at least 55 - it isn't usually possible to access your pension before then (unless you need to retire on grounds of ill health, or have a 'protected pension age')?

Not sure what you mean by 'leaving the rest in an annuity to avoid tax'. You can take 25% as tax free cash and the rest can remain invested (no more tax free cash in respect of the remaining 75%, however much it 'grows') if your pension provider offers that facility, but you'll be taxed at your marginal rate when you access any part of that 75%. You could use it to buy an annuity, but again, it's potentially subject to tax.

If you do take cash from the 75% (rather than buying an immediate annuity payable for life), you'll be permanently limited to contributions of no more than £10K a year, including any employer contributions and any tax relief on your personal contributions. You could pay more but won't get tax relief - unless you're in a defined benefit scheme, and it's clear from your post that you are in a defined contribution scheme.

Accessing the tax free cash might mean that you are treated as opting out of the scheme. You can ask your employer to re-enrol you, but they don't have to do so for 12 months, so you'd miss out on 'free cash' from the employer.

Dazed_and_C0nfused

kevker23 said:

Hi all

have had a quick scout through the section, but can't find the answer i am looking for.

I have a work pension, which is pretty good as my employer matches my contribution up to 6% of my wages. I'm at a stage where I can cash in my pension early.

Now I will get professional advice before i do anything, but was wondering one question which might mean it's not even worth getting the advice.

If I was to cash in my pension, by taking a 25% lump sum and then leaving the rest in an annuity to avoid tax, what happens to my continuing contributions through my work. WIll a new pension be opened or will it cause me issues?

Many thanks in advance.

That won't work sorry.  Any income taken via an annuity will be taxable and forms part of your taxable income just like any other taxable pension income or taxable earnings would.

Keeping it in the pension and not buying an annuity would avoid tax.

NoMore

just because you can access your pension doesn’t mean you should. There can be good reasons for doing so but if the only reason is because you are above the age to access it, that’s not a good reason. 

kevker23

Thanks all for your comments, it's much appreciated.

To answer some of the questions, yes I'm over 55, but wouldn't be accessing it until next year anyway, at the earliest.

There are good reasons for accessing it, but I would need to explore options with a financial/pension advisor. I'm really just exploring at the moment, it it is one of my options.

As you probably guess, I've only taken a quick look at my options with the pension, I must have read wrong that putting the remaining 75% into an annuity would avoid tax (hence why I need the financial advisor)

The renrollment period for our benfits at work is in january, so I'm now thinking if its the only option, to access shortly before than re-enrol in january to get the benefit of my emploer paying.

The amount paying into my pension is less than 10k, so that won't be a limiting factor.

Once again, thankyou for the clarifications, and please keep them coming if you can think of anything else

Albermarle

Not sure of the size of the pension, but financial advisors are usually only interested in larger sums, and will have some significant charges.

There is a free Govt service for people over 50 (Pensionwise) , wanting to look at future withdrawal possibilities. It is only basic guidance but probably worth it.

Help with taking your pension | MoneyHelper

Also your pension providers website should be informative.

MEM62

kevker23 said:

There are good reasons for accessing it, but I would need to explore options with a financial/pension advisor. 

Which might seem like good reasons now but will probably not look so good to your future-self facing retirement and looking back.  Your pension is for your retirement.