Withdrawals from consolidated dormant Pensions

HoppertyHop

My husband and I both have old dormant pensions that we do not contribute to but are still increasing due to investing. We were thinking of withdrawing a lump sum from our from this pot to pay off our mortgage; as we both still are working and both are in the 20% tax bracket and contributing into work place pensions. If we do this are we able to make payments back into the pot after we have taken the lump sum out to then bulk it back up?

MTB1986

If you take any taxable cash, then you would be limited to paying £10,000 a year into defined contribution pensions thereafter, including your contributions, employer contributions, and tax relief.

Marcon

https://forums.moneysavingexpert.com/discussion/6669298/withdrawals-from-consolidated-dormant-pensions

Depends on the type/T&Cs of the pensions in question and whether they will accept further contributions. You'd need to check directly with the 'old' schemes - although you refer to them as 'consolidated', so the place to check is whichever consolidator you used.

Presumably you are old enough to access pension funds? Sounds obvious, but easy to overlook!

You also need to be aware of pension recycling, depending on the amounts involved. https://adviser.royallondon.com/technical-central/pensions/contributions-and-tax-relief/recycling-of-tax-free-cash/

dunstonh

Firstly, just for reference, pensions can't go dormant. That only applies to bank accounts and building society accounts.

Just because you're not paying into a pension currently doesn't make it dormant.

Drawing a pension whilst it is still working is normally not a good idea. Effectively, you're paying for something that you should be paying for during your working life, which means you're robbing your retirement years. Depending on your overall financial planning, you could be leaving yourself very short in retirement just to have the money now. If that is the case, your older self will not thank you for that.

Also, if you access any of the 75% part of the pension (assuming these are defined contribution schemes you're talking about) then you are going to be subject to a reduced annual allowance. And if you access the 25% part, then you are going to be subject to the recycling rules.

Albermarle

Just to be accurate and to avoid any confusion with pensions that really are dormant, these are still active schemes. The fact you do not currently pay into them does not affect their status at all.

If you only take the 25% tax free, then this will not affect your ability to contribute to pensions in future. However as already said taking taxable income could cause an issue.

Money purchase annual allowance (MPAA) | MoneyHelper

Yorkie1

What is your motivation for paying off your mortgage now, rather than letting it continue as planned?