Pension lump sum

RONC_3

I have just began the initial stages with one of the web site companys that offer a service to unlock your pension as I would like to take advantage of the tax free lump sum. Please advise if this is the correct course of action, do they charge the earth for this service as in there second letter,they state that there hourly rate is from £250, or can I go direct to my pension company and ask them myself for a tax free lump sum.

How long will it take to receive my lump sum

dunstonh

Please advise if this is the correct course of action,

Pension unlocking is a high risk transaction and many companies operating in that area over the last few years have been fined heavily.

There is no way for us to give you advice as we know nothing about your pension, your circumstances or anything else. If you want a quick generalisation though then it is generally considered bad to unlock a final salary pension scheme unless you are really really desperate. You are basically cutting your retirement income down significantly.

can I go direct to my pension company and ask them myself for a tax free lump sum.

If its a final salary occupational pension then they usually have to transfer you out of the occupational pension. If you are worrying about an hourly rate of £250, then you should really worry about the amount you will lose on the transfer value.

I suggest if you are serious with doing this that you get an independent IFA to review your situation and the pension details regarding the unlocking. Whilst some of these pension unlocking companies use IFA in their title, that is often more to do with marketing than the true meaning of the term IFA.

I would be on extreme guard with a transaction like this if I was you. It could be right for you but there are significant risks and companies operating exclusively in this area have an awful track record (hence why I said get an independent IFA to review what they are doing)

How long will it take to receive my lump sum

3-6 months assuming average. Sometimes longer. Rarely quickly

My response has been based on the assumption that it is a final salary scheme. Money purchase schemes dont require unlocking.

EdInvestor

It depends on what kind of pension you have - with some kinds it is a routine matter you can DIY and it will cost you very little.

With others it is more difficult and probably not a good idea (depending on your age and other matters).

In the past there were some schemes that were illegal which meant you lost your entire pension to scamsters.

Let us know more info about the pension.

RONC_3

The pension that I am referring to is a PERSONAL PENSION PLAN which I have had since the early 90s which is split into 3 catagories 2 at protected rights and 1 non protected rights. By having this type of pension will it be easier and quicker to release the tax free cash lump sum

EdInvestor

RONC wrote: »

The pension that I am referring to is a PERSONAL PENSION PLAN which I have had since the early 90s which is split into 3 catagories 2 at protected rights and 1 non protected rights. By having this type of pension will it be easier and quicker to release the tax free cash lump sum

In order to extract the 25% tax free cash from the pensions you need to transfer them into income drawdown, usually done by moving them to a SIPP, especially if the toal value is under 100k..

The SIPP provider will pay out the 25% TFC and then you can invest the rest taking no income, until you need regular cash.You cannot at this point move protected rights pensions to SIPPs, but this should be possible from October. Income drawdown is possible with PR funds at insurance companies, but min fund is usually 100k.

Before moving this money you should check if the pensions have any valuable guarantees attached, and whether they are penalties to transfer.

How much is the fund value
Where are the pensions now?

Have a look at this SIPP provider for a guide on DIY costs.

https://www.h-l.co.uk

dunstonh

A personal pension doesnt need to be unlocked. You dont need to pay a specialist firm to do this. In fact, unlocking isnt a term that goes with personal pensions. A local IFA can sort this out for you much cheaper.

In order to extract the 25% tax free cash from the pensions you need to transfer them into income drawdown, usually done by moving them to a SIPP, especially if the toal value is under 100k..

The SIPP provider will pay out the 25% TFC and then you can invest the rest taking no income, until you need regular cash.You cannot at this point move protected rights pensions to SIPPs, but this should be possible from October. Income drawdown is possible with PR funds at insurance companies, but min fund is usually 100k.

Ignore all that. There are personal pensions that will take protected rights and allow drawdown. You dont have to wait.

EdInvestor

dunstonh wrote: »

There are personal pensions that will take protected rights and allow drawdown. .

Not normally for funds under 100k.Any that do accept smaller funds charge very high rates.You would likely be better to get your cash in 2 chunks, moving the non PR money now and the rest later to take advanatge of low costs long term.

As dunstonh says this is a routine procedure, no need for expensive specialists, or even IFAs, you can do it yourself.Have a look at the online forms for transfer and income drawdown at this SIPP provider, it's quite easy:

https://www.sippdeal.co.uk

dunstonh

Not normally for funds under 100k.Any that do accept smaller funds charge very high rates.

Apart from those that dont. The choice is more limited but there are multiple providers that can do this cost efficiently.

RONC_3

Values
NPR - 49K
PR - 11.8K
PR - 9.9K

These values are from 2007 statements

SUN LIFE FINANCIAL OF CANADA

They state that the earliest you can take pension benifits is from age 50, I am 50, including Protected Rights

Can I process the release of the tax free cash lump sum myself or do I have to go through an IFA or will I continue to go with the company from the web

dunstonh

Can I process the release of the tax free cash lump sum myself or do I have to go through an IFA or will I continue to go with the company from the web

You dont need the pension unlocking company as you are not unlocking your pension. Knock them on the head.

Your choice is either to do it yourself and transfer the pension to another provider that will allow protected rights and non protected rights income drawdown. There are not too many of those and the best one requires you to use an IFA as they do not transact direct with the public.

If you dont want to use an IFA, you can wait October and do it yourself with one of the online sipp providers.

EdInvestor

RONC wrote: »

Values
NPR - 49K
PR - 11.8K
PR - 9.9K

Can I process the release of the tax free cash lump sum myself

Sure you can.:)

As you are under 100k, you will be best to go with a low cost online SIPP provider such as

https://www.sippdeal.co.uk
https://www.h-l.co.uk
https://www.alliancetrust.co.uk

You need to deal with the non PR money first as the PR money can't be moved until October.Are these 3 separate pension plans?If so that's helpful.

Proceed as follows:

Write to the provider and ask for the current and transfer values of the NPR pension.Also ask if there are any guarantees attached to the pension and any penalties for transferring out now.[If there are guarantees or penalties you might deceide to leave the money where it is, as they could be valuable.It's best to check.]

Check the costs and facilities of the SIPP providers above and decide on how you plan to invest your fund ( unit tusts, gilts, cash, direct share portfolio, whatever) and choose one. Fill in their application to open an account (usually on the website). Usually they will include a form to be sent to the exisiting provider authorising the transfer.

When the money is moved over to the SIPP, tell the new company you want it put into income drawdown, and the 25% tax free cash paid out.The latter will go to your bank account and the former will end up in the cash account of the SIPP.

Then its up to you to invest it, and to tell the SIPP provider if you want to take any income out (you can take nil) every year.That's it basically.