Redundancy - Less that a year of employment - Pension withdrawal

acebanditcat

I have been told that I and the rest of my co-workers are being made redundant.
I have been with the company 9 months tomorrow.
They have given me two months notice and I am aware I don't get any redundancy as I've been here under two years.

But my query is my pension.  I have been in it since the first contribution in August. So that's 8 months and it has a value of £1,318.00 at the moment. So when I leave this could be around 
£1490.00. I am 57.

I have debt of around £2,000 so I would like to withdraw this pension and pay towards this 
as I have other larger pensions which I wont be drawing for another 10 years.

I've just spoken to the pension company, who said they can only tell me 25% is tax free and the remaining 75% is taxed so didn't tell me an amount of if they will charge me to with draw it

Its with True Potential and he said its a personal pension but was provided by my company

Would anyone know what sort of amount the the bank, as it were, i could/should get

Thanks in advance for any advice

hyubh

acebanditcat said:

my query is my pension.  I have been in it since the first contribution in August. So that's 8 months and it has a value of £1,318.00 at the moment. So when I leave this could be around 
£1490.00. I am 57.

I have debt of around £2,000 so I would like to withdraw this pension and pay towards this 
as I have other larger pensions which I wont be drawing for another 10 years.

I've just spoken to the pension company, who said they can only tell me 25% is tax free and the remaining 75% is taxed so didn't tell me an amount of if they will charge me to with draw it

It would be taxed at your marginal rate. Taking a pension 'flexibly' like this would mean any subsequent pension contributions (employee or employer) would be subject to the 'money purchase annual allowance' (MPAA) of £10K pa however, so it needs to be properly considered. If your other pensions are DC not DB too, it would likely be a better option to consider what 25% of what would clear your debts, and leave the rest invested.

PS - this question would have been better posted on the Pensions board, maybe a mod could move it...?

EnPointe

hyubh said:

acebanditcat said:

my query is my pension.  I have been in it since the first contribution in August. So that's 8 months and it has a value of £1,318.00 at the moment. So when I leave this could be around 
£1490.00. I am 57.

I have debt of around £2,000 so I would like to withdraw this pension and pay towards this 
as I have other larger pensions which I wont be drawing for another 10 years.

I've just spoken to the pension company, who said they can only tell me 25% is tax free and the remaining 75% is taxed so didn't tell me an amount of if they will charge me to with draw it

It would be taxed at your marginal rate. Taking a pension 'flexibly' like this would mean any subsequent pension contributions (employee or employer) would be subject to the 'money purchase annual allowance' (MPAA) of £10K pa however, so it needs to be properly considered. If your other pensions are DC not DB too, it would likely be a better option to consider what 25% of what would clear your debts, and leave the rest invested.

PS - this question would have been better posted on the Pensions board, maybe a mod could move it...?

I agree 

and if one or more of the other  pensions are DC  the OP should seek advice aobut whether it;s financially worthweile  transferring this small pension fundto  one of the larger DC ones 

silvercar

EnPointe said:

hyubh said:

acebanditcat said:

my query is my pension.  I have been in it since the first contribution in August. So that's 8 months and it has a value of £1,318.00 at the moment. So when I leave this could be around 
£1490.00. I am 57.

I have debt of around £2,000 so I would like to withdraw this pension and pay towards this 
as I have other larger pensions which I wont be drawing for another 10 years.

I've just spoken to the pension company, who said they can only tell me 25% is tax free and the remaining 75% is taxed so didn't tell me an amount of if they will charge me to with draw it

It would be taxed at your marginal rate. Taking a pension 'flexibly' like this would mean any subsequent pension contributions (employee or employer) would be subject to the 'money purchase annual allowance' (MPAA) of £10K pa however, so it needs to be properly considered. If your other pensions are DC not DB too, it would likely be a better option to consider what 25% of what would clear your debts, and leave the rest invested.

PS - this question would have been better posted on the Pensions board, maybe a mod could move it...?

I agree 

and if one or more of the other  pensions are DC  the OP should seek advice aobut whether it;s financially worthweile  transferring this small pension fundto  one of the larger DC ones 

That advice would possibly be more expensive than the small pension pot!

silvercar

I'll move this thread to the pensions board.

Marcon

hyubh said:

acebanditcat said:

my query is my pension.  I have been in it since the first contribution in August. So that's 8 months and it has a value of £1,318.00 at the moment. So when I leave this could be around 
£1490.00. I am 57.

I have debt of around £2,000 so I would like to withdraw this pension and pay towards this 
as I have other larger pensions which I wont be drawing for another 10 years.

I've just spoken to the pension company, who said they can only tell me 25% is tax free and the remaining 75% is taxed so didn't tell me an amount of if they will charge me to with draw it

It would be taxed at your marginal rate. Taking a pension 'flexibly' like this would mean any subsequent pension contributions (employee or employer) would be subject to the 'money purchase annual allowance' (MPAA) of £10K pa however, so it needs to be properly considered. If your other pensions are DC not DB too, it would likely be a better option to consider what 25% of what would clear your debts, and leave the rest invested.

PS - this question would have been better posted on the Pensions board, maybe a mod could move it...?

If the 'pot' is under £10K and the whole amount is taken in one go, specifically citing that it is being taken under the 'small pots' regime (OP, you need to check your provider offers that facility - most modern contracts do), then the MPAA isn't triggered. Nor, for the record, does the tax free 25% count towards the Lump Sum  Allowance - the maximum overall amount you can take tax free from all pension schemes; it's currently £268,275.

acebanditcat said:

I've just spoken to the pension company, who said they can only tell me 25% is tax free and the remaining 75% is taxed so didn't tell me an amount of if they will charge me to with draw it

The final amount won't be known until you actually come to withdraw it. Whatever you withdraw over and above the tax free 25% will be paid after deduction of tax, and is potentially taxable at your marginal rate. I say 'potentially' because it depends what other income you have during the tax year. If you've been made redundant and your taxable income in the tax year doesn't exceed your personal allowance, you can reclaim the tax the provider will have deducted.

Did you ask them if there was a charge?

Albermarle

If the 'pot' is under £10K and the whole amount is taken in one go, specifically citing that it is being taken under the 'small pots' regime (OP, you need to check your provider offers that facility - most modern contracts do), then the MPAA isn't triggered. Nor, for the record, does the tax free 25% count towards the Lump Sum  Allowance - the maximum overall amount you can take tax free from all pension schemes; it's currently £268,275.

Another advantage of withdrawing it as a 'small pot' , is that the taxable 75% is always taxed at 20% .
So at least you know how much you will get .

Whereas if it is just a 'normal ' withdrawal, the amount of tax taken can be a bit unpredictable.

ali_bear

What are your prospects for getting more paid work? I would suggest that you don't make this withdrawal for at least a couple of months, and not at all if you get into another job. Unless you really need the money of course. 

LHW99

£1,318.00

Is that the value you have been told your will get if you withdraw, or is it what's "in the pot" on your pension website? I ask because if you don't transfer to another pension (but choose to get back your contributions), I believe the employer's contributions are lost, which would reduce the amount you would get.

Albermarle

LHW99 said:

£1,318.00

Is that the value you have been told your will get if you withdraw, or is it what's "in the pot" on your pension website? I ask because if you don't transfer to another pension (but choose to get back your contributions), I believe the employer's contributions are lost, which would reduce the amount you would get.

I think that only affects some DB/public sector pensions. If it is a normal DC workplace pension, that whole pot would be yours including employer contributions. AFAIK

Marcon

LHW99 said:

£1,318.00

Is that the value you have been told your will get if you withdraw, or is it what's "in the pot" on your pension website? I ask because if you don't transfer to another pension (but choose to get back your contributions), I believe the employer's contributions are lost, which would reduce the amount you would get.

OP confirmed in the opening thread that it's a personal pension, so immediate vesting (ie what's in the pot is OP's) unless OP had opted out within a month of being enrolled. That's the only time a refund of contributions would be allowed where a personal pension is concerned - OP would get theirs back and the employer would get their contribution returned to them.

But OP didn't opt out, and is over 55, so they can scoop the pot if they wish!