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Taking final salary pension early

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Henrik07!
Henrik07! Posts: 4 Newbie
in Auto-enrolment
I have decided to take my previous company final salary pension early. (50). Basically because I need the money!! I will receive £25000, tax free lump sum.. I will also get £3600 a year.
My question (s) is, the £3600 extra income I don't need. This will take my earnings into the 40% tax bracket.. What is best to avoid this. Another pension?
My other question is if I have to take it as earnings will this be added on to my state pension when I am 67 or does my state pension reduce.
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  • Paul_Herring
    Paul_Herring Posts: 7,481 Forumite
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    What is best to avoid this?

    Don't take the pension to begin with.

    Why are you deciding to take the pension early, since it seems you don't seem to require the money?
    Conjugating the verb 'to be":
    -o I am humble -o You are attention seeking -o She is Nadine Dorries
  • Henrik07!
    Henrik07! Posts: 4 Newbie
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    Because I need the lump sum to pay off debt.
  • Henrik07!
    Henrik07! Posts: 4 Newbie
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    Because I need to pay off debt. Free up some money.
    I also am paying into another pension.
  • ossie
    ossie Posts: 354 Forumite
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    I thought the earliest you could take pension was 55! A final salary pension is like a golden egg nowaday! You should not take it earlier than retirement date as usually a penalty of about 4% for each year taken early!
  • Dazed_and_confused
    Dazed_and_confused Posts: 6,458 Forumite
    Uniform Washer
    edited 5 August 2018 at 8:55PM
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    If you make contributions to a personal pension/SIPP then you will receive basic rate tax relief through the pension company i.e. pay in £4000 and £1000 tax relief is added so your pension fund is £5,000.

    You can then advise HMRC of the pension contribution and this increases the amount of basic rate tax you can pay. This in turn reduces the amount of higher rate tax you have to pay.

    If you complete Self Assessment tax returns then you can include the pension contribution (and £3600 pension you are being paid) on the return and it is taken into account in your Self Assessment calculation.

    I agree with the other posters though that taking this pension is quite an unusual choice. Losing such a huge proportion (for ever?) for taking it early (10 years?) and then paying 40% tax on is an unusual position to want to be in.
  • Henrik07!
    Henrik07! Posts: 4 Newbie
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    I will receive £25000tax free.. If I left it until retiral age in 17 years I would receive £42000. In those 17 years I could have paid off debt had holidays and lived my life, while my kids are still young.. I'm an old man at 67.i won't need it. I will have my state pension, my company defined benefits pension. And hopefully the other 75% of my deferred pension that I had invested wisely yo stop the 40%tax.
  • LHW99
    LHW99 Posts: 4,215 Forumite
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    Have you considered whether the spouse protection in the FS would be useful?
    If the FS income would puch you into HR tax, just maybe it would be worth considering if cutting your current pension payments for a few years would help you clear the debts. The unreduced FS would cover the lower return from your "wisely invested" other funds - which could reduce by 50% if there was a bad downturn.
    And please don't suggest you'll be an old man at 67 - unless your health is really bad!. Most people these days are expecting another 10-15 years of good health / having holidays, and maybe a total of 20+ years altogether. Kids will benefit more from your time day to day, than from expensive periodic holidays IMO
  • xylophone
    xylophone Posts: 44,412 Forumite
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    I thought the earliest you could take pension was 55

    See

    https://www.scottishwidows.co.uk/extranet/literature/doc/FP0465
  • xylophone
    xylophone Posts: 44,412 Forumite
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    OP, have you obtained a new state pension statement?

    https://www.gov.uk/check-state-pension
    My other question is if I have to take it as earnings will this be added on to my state pension when I am 67 or does my state pension reduce.

    I don't understand this at all. Are you getting confused because the pension you propose taking has a reduction applied to it at state pension age as a few schemes still do?

    If you take the deferred pension as proposed, then presumably you would receive a gross payment of £300 a month.

    This is taxable as income.

    HMRC will provide the pension payer with a tax code.

    It appears that you are currently a member of another DB pension.

    Is an AVC Scheme offered?
  • atush
    atush Posts: 18,726 Forumite
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    We do have a debt free forum to help you get yoru finances in shape to pay off the debt. Far better than robbing your future self.

    but if you are too lazy for that, and go head- stick the extra 3600 per year into the pension you have currently, or into a PP or Sipp.
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