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  • FIRST POST
    • Henrik07!
    • By Henrik07! 5th Aug 18, 5:40 PM
    • 4Posts
    • 0Thanks
    Henrik07!
    Taking final salary pension early
    • #1
    • 5th Aug 18, 5:40 PM
    Taking final salary pension early 5th Aug 18 at 5:40 PM
    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.
Page 1
    • Paul_Herring
    • By Paul_Herring 5th Aug 18, 6:08 PM
    • 6,509 Posts
    • 3,209 Thanks
    Paul_Herring
    • #2
    • 5th Aug 18, 6:08 PM
    • #2
    • 5th Aug 18, 6:08 PM
    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!
    • By Henrik07! 5th Aug 18, 8:36 PM
    • 4 Posts
    • 0 Thanks
    Henrik07!
    • #3
    • 5th Aug 18, 8:36 PM
    • #3
    • 5th Aug 18, 8:36 PM
    Because I need the lump sum to pay off debt.
    • Henrik07!
    • By Henrik07! 5th Aug 18, 8:46 PM
    • 4 Posts
    • 0 Thanks
    Henrik07!
    • #4
    • 5th Aug 18, 8:46 PM
    • #4
    • 5th Aug 18, 8:46 PM
    Because I need to pay off debt. Free up some money.
    I also am paying into another pension.
    • ossie
    • By ossie 5th Aug 18, 8:52 PM
    • 332 Posts
    • 310 Thanks
    ossie
    • #5
    • 5th Aug 18, 8:52 PM
    • #5
    • 5th Aug 18, 8:52 PM
    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
    • By Dazed and confused 5th Aug 18, 8:52 PM
    • 3,304 Posts
    • 1,667 Thanks
    Dazed and confused
    • #6
    • 5th Aug 18, 8:52 PM
    • #6
    • 5th Aug 18, 8:52 PM
    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.
    Last edited by Dazed and confused; 05-08-2018 at 8:55 PM.
    • Henrik07!
    • By Henrik07! 5th Aug 18, 9:04 PM
    • 4 Posts
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    Henrik07!
    • #7
    • 5th Aug 18, 9:04 PM
    • #7
    • 5th Aug 18, 9:04 PM
    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
    • By LHW99 6th Aug 18, 10:19 AM
    • 1,582 Posts
    • 1,453 Thanks
    LHW99
    • #8
    • 6th Aug 18, 10:19 AM
    • #8
    • 6th Aug 18, 10:19 AM
    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
    • By xylophone 6th Aug 18, 10:55 PM
    • 27,677 Posts
    • 16,633 Thanks
    xylophone
    • #9
    • 6th Aug 18, 10:55 PM
    • #9
    • 6th Aug 18, 10:55 PM
    I thought the earliest you could take pension was 55
    See

    https://www.scottishwidows.co.uk/extranet/literature/doc/FP0465
    • xylophone
    • By xylophone 6th Aug 18, 11:13 PM
    • 27,677 Posts
    • 16,633 Thanks
    xylophone
    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
    • By atush 7th Aug 18, 11:55 AM
    • 17,318 Posts
    • 10,868 Thanks
    atush
    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.
    • Peelerfart
    • By Peelerfart 30th Aug 18, 11:09 PM
    • 1,985 Posts
    • 1,714 Thanks
    Peelerfart
    "I'm an old man at 67" interesting perspective, and one which I don't agree with personally.

    I'm younger btw.
    Space available for rent
    • louby40
    • By louby40 13th Oct 18, 2:23 PM
    • 1,387 Posts
    • 3,775 Thanks
    louby40
    67 isn't old!

    My parents are in their mid 70's and travelling all over the world. They've just sold their narrow boat which they lived on for 50% of the year. Both still very young at heart, fit and well.
    • dunstonh
    • By dunstonh 15th Oct 18, 9:30 AM
    • 96,087 Posts
    • 63,897 Thanks
    dunstonh
    .. I'm an old man at 67.i won't need it
    Have we timewarped back to 1970?

    People aged 67 are the equivalent of those aged 47 in the 1970s in terms of health and fitness and life expectancy.

    Also, it is unlikely the DB pension has a scheme age of 67. Especially if it has a protected early scheme age of 50.

    What is the cost of taking it at 50? I suspect it comes at great cost.

    Its a shame this thread wasnt in the pension section where it belonged as it would have had greater discussion.
    I am an Independent Financial Adviser (IFA). Comments are for discussion purposes only. They are not financial advice. 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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