Cashing in FSAVC at 55
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Have you obtained a new state pension statement?
https://www.gov.uk/check-state-pension
https://adviser.royallondon.com/technical-central/pensions/contributions-and-tax-relief/defined-benefits-and-the-mpaa/
You might consider transferring the old FSAVC to a SIPP, taking only the tax free PCLS to reduce the card debt and leaving the balance invested to draw after leaving employment when it appears your tax rate would be lower.
http://www.hl.co.uk/pensions/sipp0 -
Have you obtained a new state pension statement?
https://www.gov.uk/check-state-pension
https://adviser.royallondon.com/technical-central/pensions/contributions-and-tax-relief/defined-benefits-and-the-mpaa/
You might consider transferring the old FSAVC to a SIPP, taking only the tax free PCLS to reduce the card debt and leaving the balance invested to draw after leaving employment when it appears your tax rate would be lower.
http://www.hl.co.uk/pensions/sipp
State pension on 6 July 2030 will be £164 per week in I contribute to NI for the next 7 years.. I'll look in to your other suggestion thanks.0 -
Obviously I have not given this a great deal of thought, but I thought I could reduce my mortgage to an extent where I can retire perhaps a year or 2 earlier than I would otherwise have to. Some of it would pay some outstanding balances on credit cards.
1) you are going to lose around £8000 or more (depending on how much you earn).
2) pension returns in even your basic medium risk funds are likely returning more than the interest you are paying on the mortgage
3) if you finish work early and then access the pension in a tax year you have not been working you will get the bulk of it with very little tax taken.The last statement suggested a pension valuation of £450K so adding 26K from 'FSAVC' (if it can be done) doesn't make much difference.
For someone that is borrowing money on credit cards, your opinion of £26k not making much difference is rather strange. Also, you don't have £450k in your pension. It is not that type of pension.Have 12K on 0% interest cards which I rotate as and when. But paying £200 pm minimum payment which I was planning on overpaying mortgage if I paid these off.
Overpaying the mortgage seems counterproductive. You can pay it as normal and then if you finish work early and there is still some mortgage left, THEN you can use the pension when you are a basic rate taxpayer. In the meantime, the pension would likely have grown at a rate higher than the mortgage interest and you would get more of the money as you would pay less tax.I still like idea of cashing in now.
Even though financially it makes no sense whatsoever?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.0 -
1) you are going to lose around £8000 or more (depending on how much you earn).
2) pension returns in even your basic medium risk funds are likely returning more than the interest you are paying on the mortgage
3) if you finish work early and then access the pension in a tax year you have not been working you will get the bulk of it with very little tax taken.
For someone that is borrowing money on credit cards, your opinion of £26k not making much difference is rather strange. Also, you don't have £450k in your pension. It is not that type of pension.
Overpaying the mortgage seems counterproductive. You can pay it as normal and then if you finish work early and there is still some mortgage left, THEN you can use the pension when you are a basic rate taxpayer. In the meantime, the pension would likely have grown at a rate higher than the mortgage interest and you would get more of the money as you would pay less tax.
Even though financially it makes no sense whatsoever?
I hear you! Bear in mind this is all new to me and is a steep learning curve, That is why I'm posting here to get some great advice and I'm so very grateful to all the contributors.
So what about take the 25% tax free and transfer rest into a SIPP (as suggested above) I could just about get rid of these cards once and for all, free up the £200 per month to invest?0 -
So what about take the 25% tax free and transfer rest into a SIPP (as suggested above) I could just about get rid of these cards once and for all, free up the £200 per month to invest?
That is more justifiable. (although it would be a transfer to a PPP or SIPP that supports drawdown first and then take the 25%).
Taking only the 25% means its tax-free. You dont trigger the MPAA £4000 reduction and you still have the remaining pot to use later when you are no longer a higher rate taxpayer (so avoid that £8k tax)
If you can free up funds to put back into the pension remember that every £100 you pay into a pension is only costing you £60. It beats ISA (and as you are over 55, you can access the money easily enough should you need to do so in an emergency - although best left until you cease being a higher rate taxpayer).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.0 -
That is more justifiable. (although it would be a transfer to a PPP or SIPP that supports drawdown first and then take the 25%).
Taking only the 25% means its tax-free. You dont trigger the MPAA £4000 reduction and you still have the remaining pot to use later when you are no longer a higher rate taxpayer (so avoid that £8k tax)
If you can free up funds to put back into the pension remember that every £100 you pay into a pension is only costing you £60. It beats ISA (and as you are over 55, you can access the money easily enough should you need to do so in an emergency - although best left until you cease being a higher rate taxpayer).
Excellent thank you. Will look in to this further.0 -
So I'm committed to transferring out this dormant pension plan into a flexi-drawdown PPP and withdrawing the 25% lump sum. Looking at further options to invest in my pension fund for five years to my retirement at 60 I've been considering the terms my workplace scheme.
You may recall in April 2019 I am being moved onto a DB average earnings scheme, Civil Service Alpha, with my current final salary (Classic) being 'banked' after 33 years of contributions. If I go at 60 then I'll be contributing for 4.25 years into new scheme.
My contribution stays at 7.85% based on my current pensionable earnings of £51,174 although there will be a small increase before the scheme starts perhaps 2-3% depending on September's pay rise.
My final salary pays out when I'm 60 but Alpha runs until NPA of 67 although there is some hope that the scheme may change and it may allow us to get the benefits before. Union is taking matters through the courts but may not be resolved for some time. Regardless as things stand I can access it before and take a hit.
The Alpha accrues 2.32% of pensionable earnings each year. Then the total fund is adjusted in line with prices each year as determined by HM treasury.
So year one I'll accrue £1187 before adjustment. Year 2 I'll accrue a similar amount if wages stay same. So after 4.25 years it'll accrue around £5K. If I retire at 60 the civil service calculator projects I will get an Alpha pension of £3200 if I draw it then, so quite a hit for not waiting until NPA. There is scope of converting some into a tax free lump sum in lieu of pension.
Anyway in terms of adding to this scheme I chucked £200 per month extra into civil service calculator for 4 years and it tells me it will provide an extra £2237.55 of pension. If monthly payment comes direct from salary the tax relief is sorted automatically by employer so presumably my higher rate tax relief with be adjusted through tax code without a tax return.
My question is adding to my workplace pension likely to be more of an attractive option compared to adding to my private pension?
Sorry for long winded method but want to provide as much information as possible.0 -
uclown2002 wrote: »You may recall in April 2019 I am being moved onto a DB average earnings scheme, Civil Service Alpha, with my current final salary (Classic) being 'banked' after 33 years of contributions.
This is not quite correct - you stop adding 'reckonable service', however the 'final salary' used to calculate your Classic pension on retirement will still be with reference your pay at that point (not when you move into Alpha).If I retire at 60 the civil service calculator projects I will get an Alpha pension of £3200 if I draw it then, so quite a hit for not waiting until NPA.
However, the Alpha accrual rate is way better than Classic's in the first place, so to an extent this is horses for courses and you may well end up with a similar pension to if you were in Classic to the end.0 -
uclown2002 wrote: »Obviously I have not given this a great deal of thought
Understatement of the month.uclown2002 wrote: »I still like idea of cashing in now.
Bah, this is a tease.Free the dunston one next time too.0 -
This discussion has been closed.
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