Tax Free Lump sum

Peppa20091

I have. Private pension from when I contracted out of SERPs. I am 55 and have a civil service pension. I work full time and will continue to work for 7 years. I earn over £40K. I have checked my state pension and have paid enough NI to receive full state pension.
I would like to take 25% tax free lump sum from private pension (I do not contribute to this and is valued at £32k).
I am worried this will impact my civil service pension, I live in Scotland and did take advice from Pension wise. I can’t afford a financial advisor. I have read about MPPA and it’s worrying me. Any advice would be greatly appreciated.

Dazed_and_C0nfused

Why do you think MPAA may be an issue if you are only taking the TFLS?

Cobbler_tone

It's a fair concern and if you don't know you don't know. Exactly the type of question this forum is useful for.

You are fine to take the tax free cash (from a defined contribution pension) without any negative impact on your current arrangements. Just make sure you don't touch the rest of it. That is where MPAA is triggered.

For info, MPAA doesn't apply to accessing defined benefit pensions.

What you are describing is exactly what someone I know is doing to purchase their company car ahead of having other money accessible ahead of retirement.

hugheskevi

I am 55 and have a civil service pension. I work full time and will continue to work for 7 years.

If you have any Civil Service pension with a Normal Pension age of 60, you should give careful thought as to what you will do at age 60 regarding work and taking the Civil Service pension. If you do nothing, there is a high risk that you will forfeit 2 years of pension.

I earn over £40K…I live in Scotland

So you are pushing close to 42% income tax, and maybe there already. You should consider whether putting all taxable income in excess of £43,662 into a pension would be financially optimal.

I am worried this will impact my civil service pension

Whatever you do will not affect your Civil Service pension.

I have read about MPPA and it’s worrying me.

MPPA does not affect Civil Service pension (assuming you are in the alpha scheme, and not Partnership).

Albermarle

https://forums.moneysavingexpert.com/discussion/6661172/tax-free-lump-sum

If the pension is quite old, there could well be restrictions on how you withdraw money.

For example I have a SERPS related pot with Standard Life, which was started over 35 years ago. I can still add to it, monitor it via the website, and change investments if I want. However if I ever want to withdraw from it, I will need to transfer to a newer Standard Life pension, or a new provider altogether ( which is probably what I will do at some point).

plumb1_2

I had an old contracted out pension with standard life, worth £34k. And it had a GAR attached to it. And had to take an annuity from them as it wasn’t worth trying to get a better rate on a smallish sum from elsewhere. As it also allowed me to get close to 30% tax free from it. And most probably that wouldn’t have been available when transferred to a different company.
And advisor fees about £5k not worth it. But I believe that it could be transferred to a Stakeholder pension?

To the Op check with your pension company, the policy doesn’t have any safeguarding benefits like a GAR( guaranteed annuity rate).

Marcon

I had an old contracted out pension with standard life, worth £34k. And it had a GAR attached to it. And had to take an annuity from them as it wasn’t worth trying to get a better rate on a smallish sum from elsewhere. As it also allowed me to get close to 30% tax free from it. And most probably that wouldn’t have been available when transferred to a different company. 

And advisor fees about £5k not worth it. But I believe that it could be transferred to a Stakeholder pension?

A stakeholder pension has to accept a transfer from any UK registered pension scheme - BUT if a pension has 'safeguarded benefits' (and a GAR counts as a safeguarded benefit), you'd still need to receive regulated advice before the ceding (paying) scheme would release the funds to another pension provider, be it a stakeholder or other type of pension.

dunstonh

And advisor fees about £5k not worth it. But I believe that it could be transferred to a Stakeholder pension?

It would have still required advice and suffered the £5k bill.

plumb1_2

https://forums.moneysavingexpert.com/discussion/comment/81936661#Comment_81936661

yes I was aware that it needed regulated advice, and the most probably percentage wise the answer would have been a No from the advisor. And the cost wasn’t worth it on a small pot. If it was under £30k then I think it would have been a different outcome.

And later I found out I already had a SL stakeholder pension in place when I was trying to sort out the contracted out pension.

Marcon

https://forums.moneysavingexpert.com/discussion/comment/81937264#Comment_81937264

In terms of a transfer being able to proceed, the requirement is for the member to have 'received' regulated advice, not necessarily to have followed it. The adviser must sign the appropriate form (known as a S.48 Certificate) if full - as opposed to 'abridged' - advice has been given, and that's the key piece of paper.

The ceding scheme can then normally proceed unless amber or red flags have been raised during the process.

The more common stumbling block is often that the receiving scheme won't take a transfer unless the adviser supports transferring. That's where stakeholder pensions come into their own; they can't refuse the transfer.

plumb1_2

https://forums.moneysavingexpert.com/discussion/comment/81937285#Comment_81937285

Yes but to get that regulated advice would be £5k plus, no mater what the outcome would be positive or negative And having a GAR would have been a red flag.