Cashing in a pension?
Discussion
I'm 57, currently drawing 2 previous "final salary" pensions, and working part time in a supermarket.
Both pensions are indexed. On one of them, the indexing is running, but the increased amount isn't actually paid to me until I reach state pension age.
Current pension income is about £7.5k pa, which will increase to about £12k pa at 66 (plus inflation/indexing). I'll also get the basic state pension on top of this. Should be plenty for me to live on, more than I'm currently earning.
I've been contributing to my current employer's pension scheme for 5 years, paying in 6%, plus employer's contribution of 5%. Because it's a low paid, part time, job, that equals about £750 a year. I'm guessing that the potential income from this pension will be pretty low, so I'll consider cashing it in.
My questions:
Can I cash in my current pension while I'm still working for the employer?
Can I cash it in, and continue paying in?
Can I cash it in, then rejoin the scheme?
Both pensions are indexed. On one of them, the indexing is running, but the increased amount isn't actually paid to me until I reach state pension age.
Current pension income is about £7.5k pa, which will increase to about £12k pa at 66 (plus inflation/indexing). I'll also get the basic state pension on top of this. Should be plenty for me to live on, more than I'm currently earning.
I've been contributing to my current employer's pension scheme for 5 years, paying in 6%, plus employer's contribution of 5%. Because it's a low paid, part time, job, that equals about £750 a year. I'm guessing that the potential income from this pension will be pretty low, so I'll consider cashing it in.
My questions:
Can I cash in my current pension while I'm still working for the employer?
Can I cash it in, and continue paying in?
Can I cash it in, then rejoin the scheme?
clockworks said:
My questions:
Can I cash in my current pension while I'm still working for the employer?
Can I cash it in, and continue paying in?
Can I cash it in, then rejoin the scheme?
It's a complex area.Can I cash in my current pension while I'm still working for the employer?
Can I cash it in, and continue paying in?
Can I cash it in, then rejoin the scheme?
- AFAIK if you have multiple pensions, you will be able to cash one and keep others. AFAIK you can be a pensioner of an employer and a (non-pensioned) current employee of the same employer at the same time. Typically where a retired person goes back part time. I have no idea whether it's possible to take your current employer's pension without "retiring" from employment first. In other words, breaking any continuity of service.
- Why would you want to do that? Anyway, there are HMRC rules to prevent people "recycling" pensions - in other words taking tax-free cash and using to buy a new pension, claiming income tax relief on the new contributions! The rules are complex and you would have to check carefully on your particular facts.
- How does your Q3 differ from Q2? If you are talking about an employer's scheme I very much doubt you would be able to do it.
Thanks for your reply. I guessed that it would be a bit complicated.
The reason I'm thinking of doing it (if it's possible) is to get a lump sum, rather than a very small pension. As I said, the other pensions that I've got will be enough for my needs. No point in cashing them in, as they are DB, while this new one is DC.
There's also the possibility that I'll want to carry on working after I reach state pension age. It's not a "good job", but I do enjoy the company. Having retired once, aged 52, I quickly got bored, and took ths job.
I tried to get paid for advice when I was considering retirement five years ago. I contacted a couple of local financial advisors, and never heard back. Not sure if this because I wasn't rich enough to make it worth their while, or because the financial advisors in Cornwall don't need the work?
The reason I'm thinking of doing it (if it's possible) is to get a lump sum, rather than a very small pension. As I said, the other pensions that I've got will be enough for my needs. No point in cashing them in, as they are DB, while this new one is DC.
There's also the possibility that I'll want to carry on working after I reach state pension age. It's not a "good job", but I do enjoy the company. Having retired once, aged 52, I quickly got bored, and took ths job.
I tried to get paid for advice when I was considering retirement five years ago. I contacted a couple of local financial advisors, and never heard back. Not sure if this because I wasn't rich enough to make it worth their while, or because the financial advisors in Cornwall don't need the work?
Fundamentally, legislation permits all those things but the pension arrangement and your employer may not. Neither are legally obliged to facilitate what the law permits.
So you will have to ask them.
Your annual contribution allowance will be reduced from £40,000 to £10,000 if you surrender a pension, although this isn't an issue for you by the looks of it.
So you will have to ask them.
Your annual contribution allowance will be reduced from £40,000 to £10,000 if you surrender a pension, although this isn't an issue for you by the looks of it.
Clockwork,
Lots of advisers are up their own ars*s, and not just in Cornwall. This (possibly) is not of much use to you but it might be to someone else. Some questions, before encashing a significant portion of a pension fund.
Will you lose any guarantees attached to the pension?
Do you have a partner or dependents who might benefit from a joint life annuity (where you are not already purchasing one)?
If you are seeking to buy a level annuity, do you understand that inflation will erode the real value of the income you receive from your annuity?
Have you shopped around different providers before choosing to sell or buy a substitute product?
Are you expecting the money you take from the pension to help provide an income in retirement?
Do you understand the tax implications of taking money from your pension savings?
Have you considered how the charges you may face when investing your pension savings elsewhere compare with those on your pension savings?
Are you aware that taking money from your pension may impact on any means-tested benefits you receive?
Are you aware that creditors may have a call on any money taken from your pension savings?
Are you aware that investment scams exist, and that you should be careful where they invest money taken from your pension savings?
Are there aspects of your health or lifestyle that would make them potentially eligible for a better value annuity – for example, an enhanced annuity?
Are you going to run out of money?
Have you underestimated how long you'll live?
Lots of advisers are up their own ars*s, and not just in Cornwall. This (possibly) is not of much use to you but it might be to someone else. Some questions, before encashing a significant portion of a pension fund.
Will you lose any guarantees attached to the pension?
Do you have a partner or dependents who might benefit from a joint life annuity (where you are not already purchasing one)?
If you are seeking to buy a level annuity, do you understand that inflation will erode the real value of the income you receive from your annuity?
Have you shopped around different providers before choosing to sell or buy a substitute product?
Are you expecting the money you take from the pension to help provide an income in retirement?
Do you understand the tax implications of taking money from your pension savings?
Have you considered how the charges you may face when investing your pension savings elsewhere compare with those on your pension savings?
Are you aware that taking money from your pension may impact on any means-tested benefits you receive?
Are you aware that creditors may have a call on any money taken from your pension savings?
Are you aware that investment scams exist, and that you should be careful where they invest money taken from your pension savings?
Are there aspects of your health or lifestyle that would make them potentially eligible for a better value annuity – for example, an enhanced annuity?
Are you going to run out of money?
Have you underestimated how long you'll live?
Pension Wise is now taking bookings and doing interviews - give them a call?
https://www.pensionwise.gov.uk
https://www.pensionwise.gov.uk
Timely. This fact-sheet from DWP published just now refers to the rules surrounding state benefits and pension freedom.
https://www.gov.uk/government/uploads/system/uploa...
In essence, if someone spends their pension the government can treat them as if they still have it when when calculating entitlement to benefits, effectively reducing reliance on the state in the event of poor decision making.
https://www.gov.uk/government/uploads/system/uploa...
In essence, if someone spends their pension the government can treat them as if they still have it when when calculating entitlement to benefits, effectively reducing reliance on the state in the event of poor decision making.
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