Which pension lump sum?

Whiterose23

I need to access a sum of money from one of my pensions to help facilitate a house move/purchase.
I have two Defined Benefit pensions and one Defined Contribution pension with Aviva that I’m currently still paying into at work.
The amount I need (around £25-£30k) I could take from one of my Defined Benefit pensions by accessing the TFLS and triggering a monthly payment which would be quite low. However, I’m aware of how valuable this pension is so I’m considering leaving it alone and taking the money from my Defined Contribution pension. However this would mean taking more than just the TFLS by around £10k, which would result in a tax bill.
I’m 59 so still have a way to go before retirement, but have no other source of cash other than accessing one of my pensions. Would using the DC pension be the most sensible move so I can leave the DB pensions alone? I do not want to increase my mortgage, which will be ported. Thanks

El_Torro

One thing to consider is that if you access some taxable cash from your DC pension you will be limited by how much you can pay into a pension in future. This may or may not be a problem for you. Look up MPAA

Have you considered getting a loan for the £10k? Or the full amount? 

I know what I'm about to say doesn't help your situation very much but it's situations like this that highlight the importance of an adequate emergency fund in cash.

QrizB

What are your plans for retirement?

How does your retirement income look at your intended retirement age, with and without taking tax-free cash early like this?

Cobbler_tone

Depends on the size of the DB’s and how much you want to continue paying into the DC.
Could be an option to take one of the DB’s PCLS’, borrow the rest and use the monthly DB to pay it back. You might have the affordability to get the loan without touching anything.
Some number crunching required and impossible to say without the detail.

Whiterose23

Im paid up for a full government pension and my DB pensions are as follows (quotes for accessing them now):

DB1 - TFLS £30k / £350 a month

DB2 - TFLS £10k / £100 a month

DC - £60k total (TFLS of £15k)

i don’t want to get a loan as the interest I would pay would be more than any tax I would think? I want to avoid further borrowing if I can and intend to work to retirement.

MarlowMallard

As others said, check out MPAA - if you take anything above the £15k tax-free from DC, it triggers MPAA and then you can only pay £10k pa into all pensions for the rest of your working life.  May or may not be a problem for you. 
Also, a lot depends on what the penalty is for taking either of the DBs early - not worth saving £2k in tax if you then lose £50 pcm for life... need to compare all the options. 
Also, your quotes look odd... normally the max TFLS on commencing a DB is 6.66 times the annual pension, and yours look more than that. 
Finally, if you work to state pension age you're going to pay £9k of tax on the DC eventually ... £15k tax-free and £45k at basic-rate.  The only way to avoid that is to stop earning before state pension and take up to £16.7k per year, 25% tax-free and the other 12.5k is personal allowance.    

ali_bear

Are you sure you can afford this house move/purchase? Your pensions are not enormous, TBH, and they are meant to pay for your retirement

Whiterose23

ali_bear said:

Are you sure you can afford this house move/purchase? Your pensions are not enormous, TBH, and they are meant to pay for your retirement

Yes, I’m working full time and although my pensions aren’t huge as are most on this forum, it is what it is. I need to move and I’m not going to buy a house that is any more valuable than the one I currently live in, but I need extra for legal fees/moving etc etc. My mortgage isn’t huge and I expect to pay it off in the next few years.

Whiterose23

MarlowMallard said:

As others said, check out MPAA - if you take anything above the £15k tax-free from DC, it triggers MPAA and then you can only pay £10k pa into all pensions for the rest of your working life.  May or may not be a problem for you. 
Also, a lot depends on what the penalty is for taking either of the DBs early - not worth saving £2k in tax if you then lose £50 pcm for life... need to compare all the options. 
Also, your quotes look odd... normally the max TFLS on commencing a DB is 6.66 times the annual pension, and yours look more than that. 
Finally, if you work to state pension age you're going to pay £9k of tax on the DC eventually ... £15k tax-free and £45k at basic-rate.  The only way to avoid that is to stop earning before state pension and take up to £16.7k per year, 25% tax-free and the other 12.5k is personal allowance.    

I don’t think the MPAA would affect me.

Whiterose23

QrizB said:

What are your plans for retirement?

How does your retirement income look at your intended retirement age, with and without taking tax-free cash early like this?

If I didn’t touch the pensions then I would end up with around £53k tax free lump sum from the two DB pensions at age 65, and a monthly income of around £600 from the DB pensions and whatever I choose to draw down from the DC pension, which would have grown to around £70k give or take. 

If I take the lump sums from both DB pensions now (5.5 years early), this would equate to £35k tax free cash plus around £450 a month for life (which I could re-invest?), but I’m trying to work out the best way to get the cash I need without losing too much from my pensions if I can.

I expect to have my mortgage paid off in the next few years also.

The move is a personal one and although I would be downsizing, the mortgage would remain the same (ported) due to the area I’m moving to, but I need the extra to cover fees/moving and other bits and pieces.

I work full time on a wage of £38k and intend to work till 65 if I can.

LHW99

If you put DB1 into payment, it covers the amount you want with the PCLS, and you could use the monthly payment to increase your current payments to the DC pension?

BTW - you have checked your SP position, not just assumed you need 35 years?