25% Or keep it there?

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jeff_chandler
jeff_chandler Posts: 287 Forumite
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edited 19 June 2018 at 2:11PM in Pensions, annuities & retirement planning
I'm a 63 year old bloke. Is there any web sites that offers information regarding taking 25% of a pension policy. I'm a tad concerned in using a financial advisor that could cost me a fortune. I did take the free one which pension wise offer of a face to face consultation but, the info given then was over my head and I would rather have it in writing rather than be explained to.
I have 5 policies, 4 of which are with one banking group and 1 with another. One of the policies has £47000 in it and I'm thinking of taking the 25% but, I'm unsure what implications there are.


Kind regards Jeff

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  • AlanP_2
    AlanP_2 Posts: 3,253 Forumite
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    Are you still working and contributing to a pension?

    Are these Defined Benefit or Defined Contribution schemes or a mixture?

    Why do you want to take the 25%? What are you going to do with it?


    There are pros and cons and there are restrictions that come in to consideration if you take it and want to carry on making pension contributions so some context will help you get relevant responses?.
  • dunstonh
    dunstonh Posts: 116,384 Forumite
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    Is there any web sites that offers information regarding taking 25% of a pension policy.

    What information could they offer that would benefit you?
    I'm a tad concerned in using a financial advisor that could cost me a fortune.

    Or it could save you money.
    I did take the free one which pension wise offer of a face to face consultation but, the info given then was over my head and I would rather have it in writing rather than be explained to.

    And pensionwise is generic and not advice. They wont tell you all commerical options (just generic) and they wont give personalised advice.
    I have 5 policies, 4 of which are with one banking group and 1 with another.

    So, its likely that using an IFA wont cost you a fortune but will save you money. I can give you an example as I have just completed a case this morning that had three Scottish Widows pensions (ex Lloyds TSB) and the recommended alternative was a third of the annual cost of the SW plans. Our advice fee would be recovered in a little over 3 years. So, from year three onwards, it would be saving money. Also, none of the SW plans supported any of the pension freedom options.
    I'm thinking of taking the 25% but, I'm unsure what implications there are.
    Why do you want to take the 25%?
    Is this the most tax efficient way to access your pensions?
    do your existing providers support income drawdown?
    Is UFPLS (phased, ad-hoc or total) a better alternative?
    Could small pots rules apply to any of the pensions?
    I am an Independent Financial Adviser (IFA). The comments I make are just my opinion and are for discussion purposes only. They are not financial advice and you should not treat them as such. If you feel an area discussed may be relevant to you, then please seek advice from an Independent Financial Adviser local to you.
  • jeff_chandler
    jeff_chandler Posts: 287 Forumite
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    edited 19 June 2018 at 2:58PM
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    I do have full contributions.

    I did have a works pension until the company folded in 1990. My pension from there was very good but, it was froze. TSB bank got it working again and recently was compensated 30,000 in mis-sold pension.
    Since then I have paid £20 per week in a private pension which I still contribute.

    The money would be used to finance house improvements including a walk in shower which is needed.
    I have 4 policies with Scotish widows and 1 with another company.

    Kind regards Jeff

    I now claim ESA as I have undergone a total knee replacement and on the waiting list for my other one to be done.
  • Dox
    Dox Posts: 3,116 Forumite
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    jeff_chandler wrote: »

    I now claim ESA as I have undergone a total knee replacement and on the waiting list for my other one to be done.

    Jeff - you can take 25% tax free from each pension (assumed they are all 'defined contribution', aka 'money purchase' - final salary schemes work differently), and at different times. More info: https://www.pensionsadvisoryservice.org.uk/about-pensions/retirement-choices/the-right-choice-for-me/cash-lump-sum

    If any of your 'pots' are very small, you may be able to take the lot as cash, albeit 75% would be taxable at your marginal rate (i.e. the highest rate of income tax you pay in the tax year in which you cash in the pot): https://www.pensionsadvisoryservice.org.uk/about-pensions/retirement-choices/the-right-choice-for-me/taking-a-small-pension-as-a-cash-lump-sum
  • jamesd
    jamesd Posts: 26,103 Forumite
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    edited 19 June 2018 at 6:03PM
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    Dox wrote: »
    If any of your 'pots' are very small, you may be able to take the lot as cash, albeit 75% would be taxable at your marginal rate (i.e. the highest rate of income tax you pay in the tax year in which you cash in the pot): https://www.pensionsadvisoryservice.org.uk/about-pensions/retirement-choices/the-right-choice-for-me/taking-a-small-pension-as-a-cash-lump-sum
    The size is irrelevant for pensions with a personal pot and no extra guarantees. That page now matters for defined benefit pensions only and doesn't seem to have been updated since the last batch of pension freedoms arrived in 2016..

    For others, the UFPLS type of lump sum can be used. For any schemes which don't offer that, they can be transferred.

    The small pot rule is now useful mainly for those who want to withdraw some pension money while continuing to make pension contributions of more than 4000 a year.
  • dunstonh
    dunstonh Posts: 116,384 Forumite
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    Jeff - you can take 25% tax free from each pension (assumed they are all 'defined contribution', aka 'money purchase' - final salary schemes work differently), and at different times. More info: https://www.pensionsadvisoryservice.org.uk/about-pensions/retirement-choices/the-right-choice-for-me/cash-lump-sum

    Although it will involve transferring the pensions as the old LTSB plans do not support drawdown. So, the 25% only cannot be taken from them
    I am an Independent Financial Adviser (IFA). The comments I make are just my opinion and are for discussion purposes only. They are not financial advice and you should not treat them as such. If you feel an area discussed may be relevant to you, then please seek advice from an Independent Financial Adviser local to you.
  • jamesd
    jamesd Posts: 26,103 Forumite
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    jeff_chandler wrote: »
    I'm a 63 year old bloke. Is there any web sites that offers information regarding taking 25% of a pension policy. I'm a tad concerned in using a financial advisor that could cost me a fortune. ... I have 5 policies, 4 of which are with one banking group and 1 with another. One of the policies has £47000 in it and I'm thinking of taking the 25% but, I'm unsure what implications there are.
    I suggest that you sign up with Hargreaves Lansdown and get them to consolidate them for you. They offer all of the modern withdrawing options at charges that are sensible for what you want at the sort of pot size you gave.

    You're allowed to take a 25% tax free lump sum from any portion of your pot so if you needed 1000 you could take 25% of 4000. The remaining 75% would go into a flexi-access drawdown account that you can withdraw any part of whenever you like as taxable income.

    Alternatively, you can take a UFPLS lump sum from any portion. This is 25% tax free, 75% taxable.

    If you take taxable money in either of those ways you're only allowed to pay 4000 a year gross into pensions. There's a small pot rule that can be used to work around this while taking taxable money but that doesn't seem to matter for your situation.
  • jeff_chandler
    jeff_chandler Posts: 287 Forumite
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    Some brilliant advice given by yourselves. Thank you.

    Kind regards Jeff.
  • North4
    North4 Posts: 17 Forumite
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    Is it good advice to consolidate all your pensions in one place?

    Having them in 2 or 3 places may give some more flexibility, but possibly at a slightly increased cost and a bit more work?

    Then there's the Beaufort Securities situation. An extreme case, I know, but pensions are for the long term and a 'safe' option today may turn out to be not quite so safe in 10 or 20 years time, depending on what happens to the pension provider.
  • dunstonh
    dunstonh Posts: 116,384 Forumite
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    Is it good advice to consolidate all your pensions in one place?
    If it is the right thing to do then yes. If it is the wrong thing to do then no.
    Having them in 2 or 3 places may give some more flexibility, but possibly at a slightly increased cost and a bit more work?
    Could be increased cost or lower cost. Could reduce flexibility or increase it.

    All depends on the facts appropriate to the situation. e.g if you have three plans, one with a high GAR, another with transitional relief and the other with a guaranteed minimum maturity value, then all three are worth keeping. However, if all three are old LTSB SW plans with no safeguarded benefits then moving them into a single modern option would likely be better.
    I am an Independent Financial Adviser (IFA). The comments I make are just my opinion and are for discussion purposes only. They are not financial advice and you should not treat them as such. If you feel an area discussed may be relevant to you, then please seek advice from an Independent Financial Adviser local to you.
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