Multiple pensions

[Candellara]

I've limited pension knowledge and in light of not wanting to pester my IFA, i have some basic pension questions, i'm sure that the PH collective can answer :-)

As i'm approaching 55 next year, i find myself with multiple pensions with differing providers. Namely,

Prudential
AEGON
Scottish Eq
NEST
Vanguard (SIPP)

As and when i hit 55, i assume that i can take 25% from each of these schemes (tax free - even if still earning?) and then can crystallise the balances until such a time i start withdrawing?

Once crystallised, will the individual funds continue to grow even if i'm not making contributions?

Am i better off merging all these into one provider?

[lauda]

Hard to say for certain without knowing more details but as I understand it, assuming these are all defined contribution pots, you should be able to draw 25% tax free from each and leave the remaining balances until such time as you wish to do something else with them. They'll continue to be invested in whichever funds they're currently in, unless you make any changes, and any gains will continue to be tax free.

[craig1912]

Agree with this /\

I’d also consider (if you can) putting them all with one provider to simplify administration if nothing else.

[Quattromaster]

Can you take the 25% out tax free, then if not needed, put it straight back in, and claim the tax on it.

[2 sMoKiN bArReLs]

Candellara said:

not wanting to pester my IFA,

Isn't that exactly what you pay them for? Get stuck in

[Mr Pointy]

Quattromaster said:

Can you take the 25% out tax free, then if not needed, put it straight back in, and claim the tax on it.

Look up pension recycling.

[Candellara]

lauda said:

Hard to say for certain without knowing more details but as I understand it, assuming these are all defined contribution pots, you should be able to draw 25% tax free from each and leave the remaining balances until such time as you wish to do something else with them. They'll continue to be invested in whichever funds they're currently in, unless you make any changes, and any gains will continue to be tax free.

Thanks

My Prudential pension was derived from a Pru salesman talking me into contracting out my SERPs IIRC in the late 90's. I then completely lost track and forgot that i had a Pru pension after a couple of job & house moves etc until they traced me about 10 years ago.

I haven't paid into the Pru pension since the late 90's but what effect is this likely to have had on my state pension?I've been paying my normal amount of NI contributions for as long as i remember.

Edited by Candellara on Wednesday 23 August 15:45

[WayOutWest]

Be warned, if you take any income over the 25% tax free lump sums from any of those pots you will trigger the Money Purchase Annual Allowance which will then restrict you into only being able to contribute a maximum of £10,000 per year (including employer contributions) into any pension.
Worth mentioning as you infer you are going to continue working for a bit.

Personally if they are all bog standard DC schemes I would probably merge them into one provider who offers the best combination regarding investment choices, low fees and (eventual) free drawdown unless there is something special about any of them.

[Candellara]

WayOutWest said:

Be warned, if you take any income over the 25% tax free lump sums from any of those pots you will trigger the Money Purchase Annual Allowance which will then restrict you into only being able to contribute a maximum of £10,000 per year (including employer contributions) into any pension.
Worth mentioning as you infer you are going to continue working for a bit.

Personally if they are all bog standard DC schemes I would probably merge them into one provider who offers the best combination regarding investment choices, low fees and (eventual) free drawdown unless there is something special about any of them.

Thanks for that info. So i can draw 25% down and continuing contributing up to £40k PA to them before i finally stop work? Reason that i as is that i plan to pay off a couple of mortgage balances with the 25% next year and will then continue to work until maybe 60

[craig1912]

Quattromaster said:

Can you take the 25% out tax free, then if not needed, put it straight back in, and claim the tax on it.

No

[WayOutWest]

Candellara said:

WayOutWest said:

Be warned, if you take any income over the 25% tax free lump sums from any of those pots you will trigger the Money Purchase Annual Allowance which will then restrict you into only being able to contribute a maximum of £10,000 per year (including employer contributions) into any pension.
Worth mentioning as you infer you are going to continue working for a bit.

Personally if they are all bog standard DC schemes I would probably merge them into one provider who offers the best combination regarding investment choices, low fees and (eventual) free drawdown unless there is something special about any of them.

Thanks for that info. So i can draw 25% down and continuing contributing up to £40k PA to them before i finally stop work? Reason that i as is that i plan to pay off a couple of mortgage balances with the 25% next year and will then continue to work until maybe 60

Yes. I don't think that is a bad plan given where mortgage rates are now. It is not a bad risk free return.
And the amount you can contribute (including employers contribution and tax relief) has now increased from £40k to £60k pa. And the MPAA allowance was only £4k pa previously, has recently increased to £10k pa as Hunt has tried to get some retired people back to work.

[C69]

Candellara said:

Thanks for that info. So i can draw 25% down and continuing contributing up to £40k PA to them before i finally stop work? Reason that i as is that i plan to pay off a couple of mortgage balances with the 25% next year and will then continue to work until maybe 60

I think the MPAA reduces to £10k in total - i.e. the maximum you can contribute to your DC pensions and still get tax relief.

To be honest, this sounds exactly like the sort of thing you should be pestering your IFA about!

[Michael_B]

Candellara said:

Thanks

My Prudential pension was derived from a sneaky Pru salesman talking me into contracting out my SERPs IIRC in the late 90's. I then completely lost track and forgot that i had a Pru pension after a couple of job & house moves etc until they traced me about 10 years ago.

I haven't paid into the Pru pension since the late 90's but what effect is this likely to have had on my state pension?I've been paying my normal amount of NI contributions for as long as i remember.

My Sun Alliance pension was derived in a similar way from contracted out SERPs contributions, sometime during the 90s. I then moved abroad in 1999, the last statement indicated a surrender value of £10K, and then promptly forgot about it. Some twenty years later, a few months before my 55th birthday, I remembered it, and easily traced it to Phoenix Finance where it then had a rather pleasant surrender value of £65K.

So I took it the whole lot in cash and paid the corresponding tax; I have no other UK income or assets, so after the 25% tax-free lump sum and personal allowance, I paid £7k of tax; in reality, I was initially taxed at £20k, then HMRC sent me back the £13k overpayment upon filling in a tax return the following spring.

Before doing this I had confirmed with the Swiss authorities that, as there is a DTA between Bern and London, they would consider the funds to have been fully treated for tax by the other 'state', such that no further tax was payable here. The Swiss also considered it to be pure income and not to be proceeds from a pension. Some of it I gave to our children, and the rest I deposited in my workplace pension here, which attracted an immediate tax credit of around 35% for that year . So pension recycling is indeed possible and legal, just not in the same country

We have also maintained our UK NI contributions (Class 2 at £158/year each) and according the gov.uk website we are both due a pension of £203.85/week at age 67, assuming we keep up our contributions for the next 8 years. This is apparently the maximum amount of the New State Pension.

PS. We should at age 66 also be in receipt of 75% of a Swiss State Pension (contributing 33 out of a maxium 44 years), which works out at around £250/week each.

[craig1912]

Candellara said:

Thanks

My Prudential pension was derived from a Pru salesman talking me into contracting out my SERPs IIRC in the late 90's. I then completely lost track and forgot that i had a Pru pension after a couple of job & house moves etc until they traced me about 10 years ago.

I haven't paid into the Pru pension since the late 90's but what effect is this likely to have had on my state pension?I've been paying my normal amount of NI contributions for as long as i remember.

Edited by Candellara on Wednesday 23 August 15:45

I’d ignore the post above as you are still in this country. Being contracted out of SERPs will/may have an effect on your State Pension. Get a forecast here

https://www.gov.uk/check-state-pension

(It’s isn’t always correct but will give you an idea). My guess is if you are still working and have a few years to go paying NI then it may not have any affect.

…..and if you do have an IFA and are paying him, he should be advising you on all this stuff.

Edited by craig1912 on Wednesday 23 August 16:43

[Kickstart]

Quattromaster said:

Can you take the 25% out tax free, then if not needed, put it straight back in, and claim the tax on it.

Nope but your wife can

[Candellara]

craig1912 said:

…..and if you do have an IFA and are paying him, he should be advising you on all this stuff.

Edited by craig1912 on Wednesday 23 August 16:43

Yes, he was listed as my IFA when i phoned my one of my pension providers but i removed him as i never hear from him.

With regards to merging these pensions, i guess i just select a product that offers draw down etc and transfer existing (checking if there are penalties) schemes much like an ISA?

[LordGrover]

Michael_B said:

We have also maintained our UK NI contributions (Class 2 at £158/year each) and according the gov.uk website we are both due a pension of £203.85/week at age 67, assuming we keep up our contributions for the next 8 years. This is apparently the maximum amount of the New State Pension.

I'm 61, and my state pension is forecast to be a little more than that. Not a lot more, but over the years, hopefully decades, it'll add up.

[Michael_B]

LordGrover said:

I'm 61, and my state pension is forecast to be a little more than that. Not a lot more, but over the years, hopefully decades, it'll add up.

Compared to yours, the same page on my Govt Gateway has two additional paragraphs above the "Putting off claiming" information:

---

As you are living or working overseas you may be entitled to a State Pension from the country you are living or working in.

You’ve been in a contracted-out pension scheme
Like most people, you were contracted out of part of the State Pension.

---

So I presume that you are forecast to receive a bit more as you were *not* contracted out.