Just found an old pension - what to do?

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g0mgx
g0mgx Posts: 14 Forumite
in Pensions, annuities & retirement planning
Hi All

I'm looking for a little guidance as I have no clue on what I can or can't do.

I have found a pension from when I was self employed many years ago. It has had NIL contributions paid in for over 20 years, but still has a value of around £23K or about £600 per year once I retire. Its currently managed by Zurich.

I'm 49 now and have an excellent final salary scheme with my current employer which will more than provide for my needs when I retire at 55.

Can I "cash in" this pension I've found and use the money now or is it stuck until I am 55?

There seem to be loads of internet ads for "turn your pension into cash" but am scared of scams.

Thanks!

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  • jaybeetoo
    jaybeetoo Posts: 1,337 Forumite
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    You can’t touch it until you are 55.

    https://www.moneyadviceservice.org.uk/en/articles/pension-release-or-pension-unlocking
  • lisyloo
    lisyloo Posts: 29,615 Forumite
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    No you cannot cash in your pension until 55 (unless your terminally and even then there are strict criteria).

    Do not believe any of those ads, they are all scams and you could end up with a massive penalty from HMRC.

    You could look at transferring it into a SIPP.
    If are thinking of transferring then ask for a transfer value (I have one with penalties at 28% before age 65).

    You could also just leave it there until you retire.
    You could check what the annual charges are, what it’s invested in and also any benefits to the plan (such as guaranteed return).

    Do not believe the scams. The 55, death or terminally ill are the ONLY scenarios for cashing in.
  • wallpaperman
    wallpaperman Posts: 86 Forumite
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    lisyloo wrote: »
    No you cannot cash in your pension until 55 (unless your terminally and even then there are strict criteria).

    The 55, death or terminally ill are the ONLY scenarios for cashing in.



    That's not strictly correct.


    You could be under 55 and ill and unable to work again, but not likely to die in the next 12 months. Most pension companies should offer 'non-serious' ill health, subject to medical evidence being accepted by their underwriters.


    The payment wouldn't be fully tax-free of course, which would be the case for serious ill health, but they would get the same options for an annuity, UFPLS, small pot (if it had been under £10K).
  • wjr4
    wjr4 Posts: 1,131 Forumite
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    wallpaperman wrote: »
    That's not strictly correct.

    You could be under 55 and ill and unable to work again, but not likely to die in the next 12 months. Most pension companies should offer 'non-serious' ill health, subject to medical evidence being accepted by their underwriters.

    The payment wouldn't be fully tax-free of course, which would be the case for serious ill health, but they would get the same options for an annuity, UFPLS, small pot (if it had been under £10K).
    It is correct, you are not.
    I am an Independent Financial Adviser (IFA). Any posts on here are for information and discussion purposes only and should not be seen as financial advice.
  • lisyloo
    lisyloo Posts: 29,615 Forumite
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    wallpaperman wrote: »
    That's not strictly correct.


    You could be under 55 and ill and unable to work again, but not likely to die in the next 12 months. Most pension companies should offer 'non-serious' ill health, subject to medical evidence being accepted by their underwriters.


    The payment wouldn't be fully tax-free of course, which would be the case for serious ill health, but they would get the same options for an annuity, UFPLS, small pot (if it had been under £10K).

    Can you clarify are you taking about DB pensions rather than personal pensions (whether group or individual).
  • wallpaperman
    wallpaperman Posts: 86 Forumite
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    wjr4 wrote: »
    It is correct, you are not.



    Interesting reply, which part am I wrong about?

    I work in pensions and deal with cases all the time where a policyholder is under 55, wishes to take the benefits on the grounds of ill health (not serious/under 12 months to live).

    If the medical form that we ask them to complete in conjunction with their GP is accepted by our underwriters, then they are entitled to the same options as anybody else. Obviously exceptions for GMP etc.
  • wallpaperman
    wallpaperman Posts: 86 Forumite
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    lisyloo wrote: »
    Can you clarify are you taking about DB pensions rather than personal pensions (whether group or individual).


    I am not talking about DB pensions.

    The OP made a comment that they found a pension from when they were self employed, so it clearly won't be a DB pension, will likely be a contracted-out personal pension.
  • xylophone
    xylophone Posts: 44,422 Forumite
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    The OP appears to have a personal pension which is a DC scheme.

    There is no indication that his scheme had a protected pension age so that the age when (short of ill health) he can take benefits is age 55.

    With regard to ill health and a DC scheme

    https://www.aegon.co.uk/support/faq/pension-technical/ill-health-faq.html

    Where a member is, and will continue to be, medically incapable of carrying on with their current occupation, because of injury, sickness, disease, or disability, then they may be able to take their pension benefits earlier than the normal minimum pension age of 55.

    https://www.pensionsadvisoryservice.org.uk/about-pensions/retirement-choices/ill-health-retirement

    Ill health retirement
    If you cannot work any longer due to sickness, you may be able to take your pension benefits early, even before the age of 55. This is generally known as taking an ill-health pension.

    Your scheme will have its own definition of what ill-health (sickness) means, but usually you will be considered for an ill-health pension if you're unable to carry out your normal job because you're physically or mentally ill.

    If you're in serious ill-health (you have less than a year to live), you may be able to take the whole of your pension pot as a lump sum. A serious ill-health lump sum paid before you reach the age of 75 will be paid tax-free provided you have available lifetime allowance. If you’re over the age of 75, the lump sum will be taxed at your marginal rate of income tax.
  • Albermarle
    Albermarle Posts: 22,158 Forumite
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    Can I "cash in" this pension I've found and use the money now or is it stuck until I am 55?
    You maybe need to give some thought as to what would happen if you 'cashed it in' at age 55.
    25% would be tax free but the rest would be taxable ( as will your DB pension )at your normal rate . Maybe taking it will push you into the 40% tax band for that year.?
    Then what would you do with it ? You say you do not really need it .
    If you left it where it was it would probably keep growing ( depending on charges , which funds etc ) and you could take it later.
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