Time From Requesting Part of Tax Free Pension Money to Receiving?

philtrick123

Hi,

I have a two pension pots (previous employer & current job) with Standard Life.

I've been logging in checking the pot size, because I'm in the early stages of potentially reducing working hours or even leaving the company I work for (via a redundancy scheme).

The total amount in the pension changes on a daily basis according to market conditions.

If I request part of my tax free money from the pension (I'm over 55) at what point is that amount deducted and when do I receive it.

I thought it would be like share trading and you could get an instant quote that last for 15 seconds, and then the trade is done.

I'm slightly concerned if I request a withdrawal and the pension tanks in the days it take to process it. i.e. the start of USA/Iran war dropped my pension pot by £30k.

Thanks

AlanP_2

It won't be anything like share trading timescales, think weeks not seconds from start to end of process.

There are likely to be forms to fill in, potential calls with Pensionwise (independent "guidance" not "advice" to explain terminology, generalised pension options etc), potential calls with relevant SL teams etc.

The general recommendation is if you definitely want an amount as cash in the next 3-5 years swap from equity / volatile investments to cash or cash like investments to safeguard against a value drop that would have a severe impact.

Too late for you to plan 3-5 years ahead possibly but better late than never, move some to "safer" investments if you will definitely need access in forseeable near term

SVaz

That money should already be sitting there in cash if you are planning to take it anytime in the next couple of years, or at the very least in a short term money market fund. Leaving it invested is foolish, yes it *might* grow a bit more or it could also tank 20%. The other investments would also drop but if you’re not taking the entire 25% in one go then it’s not such an issue.
I’ve got £50k waiting in a money market fund earning around 4%, to take in my early retirement and yes, another £5k would have been nice ( if I’d left it invested) but I’d rather have the certainty that it won’t drop at the moment I start to draw it.

Nick9967

I don't know how Standard Life works but for Scottish Widows, as a guide, if I contact them before midday on day 1 then they take the market values form the following day, so pretty quick, (after midday moves to 48 hours) to add if you do this on a Monday should all be done by Friday end of day ( change investments will then show) for payments I received within 10 days of completing the paperwork they send (or do it over the phone with them).

Key part is that it takes the market value from a certain point, still a bit of a risk but I can live with 24 hours.

With my current work one (also SW) I can change investments online but still have to call to get cash out.

Would be worth calling them and finding out what timing agreements they have in place for changing investment and withdrawal, my first TF withdrawal was slightly more painful, docs to sign and calls to go through etc but there after was very quick.

I checked last week so I was precise as I'm close to buying a fixed term annuity with another provider and wanted to pick my point in time to safe guard my investments from fluctuating too much, and therefore know exactly what pot I have to buy the annuity and what tax free I'll receive as part of that purchase.

After writing all of that not sure how it helps you ;) SL may be different.

LHW99

You won't be able to be sure exactly what amount your 25% will amount to, as you are not going to have your whole pot as cash, so the equity part will change in value (hopefully not by too much unless you are very unlucky.

Make sure you have a bit more than your 25% in cash ready. The withdrawal timescale will depend on several things, as above, including the company you are dealing with. When my OH requested the 25% TFLS from II, it took 6 days beginning to end (requested on 15th, paid on 21st). That said, I think the main D2C SIPP providers can be quicker acting than some others as there was no actual need to have a Pensionwise appointment unless you wanted one. Other pension cos may insist on it.

Albermarle

I thought it would be like share trading and you could get an instant quote that last for 15 seconds, and then the trade is done

Your money in a SL pension will be in funds, which are not market traded. They are revalued once a day.

I know if you want to change funds with SL, it takes four working days. So I would imagine that would be the minimum time to get your cash, could be longer.

A number of posters have suggested you cash in investments your self prior to requesting the tax free cash. However this is usually not possible with a traditional pension provider like SL, as there is no cash fund. Another suggestion was to move the money to a 'cash like' fund which would be possible. The question would be is that when requesting the tax free cash, could you request it all comes from this fund? Or would SL automatically take a bit from each fund you have?

As someone said as this is a first withdrawal you may well have to speak to SL about it anyway. All pension providers have to go through a process to make sure you understand what you are doing, and that the more you withdraw the less you will have later ( obvious I know, but they have to cover themselves).

I would plan on a couple of weeks.

philtrick123

Thanks for all the comments and help. I should have said I'm not planning to take the whole tax free pot, just enough to clear my mortgage off- probably 12%. There's so much contradictory advice about paying a mortgage off or not. But for me it's £980 a month out of my Net Pay. Clearing that means I could drop to a 3 day work week for a couple of years and be no worse off, actually slightly better off.

It's a tricky balance between saving and actually enjoying life!

dunstonh

I thought it would be like share trading and you could get an instant quote that last for 15 seconds, and then the trade is done.

If you hold shares or any other tradable assets in the pension, then they will work that way.

I'm slightly concerned if I request a withdrawal and the pension tanks in the days it take to process it. i.e. the start of USA/Iran war dropped my pension pot by £30k.

If that is a concern and you know you're going to be making a withdrawal in the near future, then you should be in cash anyway. Unless you have the risk profile to leave it until later.

If your current pension doesn't give you that functionality, then just move it to one that does.

However, the actual withdrawal itself will depend on a number of factors. For example, if you're not using an advisor, you will have to go through the question-and-answers process, and some providers have been known to take two months to get the payment out, while others can do it within 24 hours.

There's so much contradictory advice about paying a mortgage off or not. 

It's probably best not to mix up advice with opinion. The general rule of thumb, though, is not to use your tax-free cash to pay the mortgage off if you are still working. However, if you are retiring and need to clear it because you're going to be retired, then it's fine to use it. The other occasion where it may be fine to use it is if the interest rate is particularly high. I mean, you'd be daft to pay off the mortgage if your interest rate is 2 or 3 percent, but if it was 8 or 9 percent, then it can make sense. Providing that you use the money saved on the monthly mortgage payments to put back into the pension to compensate for the fact that you've robbed your retirement years to pay for something that you should be paying with your working money.

philtrick123

https://forums.moneysavingexpert.com/discussion/comment/82014514#Comment_82014514

All very valid points. This is why I'm planning for later this year. I should say I've told the Mrs she needs to work until at least 70 to in order to fund my lifestyle. :-)

The returns on my pension have been amazing over the last 2 years, apart from a blip with the recent war. So I would have been crazy to take money out when the return is a lot higher than my mortgage interest rate- but the high return rate train has to end at some point, but when??? :-)

af1963

Paying off the mortgage is as much a psychological as a financial choice. Even if financially it might be more lucrative to keep the mortgage and invest the money, the certainty of having a paid off mortgage can be a big plus, and can make it easier to consider giving up a regular income..

Albermarle

https://forums.moneysavingexpert.com/discussion/comment/82014713#Comment_82014713

but the high return rate train has to end at some point, but when??? :-)

If any of us knew that, we would be sitting on a Superyacht in the Bahamas !