Interest on pension payment and cashing in question
Discussion
Interest on pension payment and cashing in question
Mother in laws pay slip had a note on it saying that payment interest rates are to be capped at 6.5% you are currently getting 6.9%.
She asked what this means. Am I correct in saying that all future payments made into the pot will only collect interest at MAX of 6.5% (I guess it is obvious but I just wanted to check)
She is in her final year of pension payments as well.
Secondly she is due for early retirement from the council (poor health related to a knee injury)
Apparently the offer a large lump sum and a smaller montyly payment or small lump sum and bigger monthly, I advised to go for the small lump and pay off the mortgage (about £7K)
Any thoughts ?
Mother in laws pay slip had a note on it saying that payment interest rates are to be capped at 6.5% you are currently getting 6.9%.
She asked what this means. Am I correct in saying that all future payments made into the pot will only collect interest at MAX of 6.5% (I guess it is obvious but I just wanted to check)
She is in her final year of pension payments as well.
Secondly she is due for early retirement from the council (poor health related to a knee injury)
Apparently the offer a large lump sum and a smaller montyly payment or small lump sum and bigger monthly, I advised to go for the small lump and pay off the mortgage (about £7K)
Any thoughts ?
Yes you are right in that future accrual will be capped at a set interest rate.
With regards to the lump sum the way it works is:
Take a full pension with set monthly payments
Take a tax free lump sum with a reduced monthly payment
The maximum tax free lump sum is usually 25% of your mothers total pension fund. However, she can take any lump sum amount between £1 and the maximum allowable.
It is a bit of a toss up really between having larger monthly payments, or having a lump sum to reduce your debts (mortgage, credit card etc) meaning that you can manage on a smaller monthly payment. I always advise my staff to seek independant financial advice with regarsd this, but most of them do take the full lump sum.
With regards to the lump sum the way it works is:
Take a full pension with set monthly payments
Take a tax free lump sum with a reduced monthly payment
The maximum tax free lump sum is usually 25% of your mothers total pension fund. However, she can take any lump sum amount between £1 and the maximum allowable.
It is a bit of a toss up really between having larger monthly payments, or having a lump sum to reduce your debts (mortgage, credit card etc) meaning that you can manage on a smaller monthly payment. I always advise my staff to seek independant financial advice with regarsd this, but most of them do take the full lump sum.
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