Equity release from pension

[mug81]

Hi all,

Looking for some advice if anyone can help. I have a couple of private pensions that are currently dormant, and due to current personal circumstances I could really do with releasing some/all of the equity. I understand there's a huge (55%?) tax penalty, but the way I'm looking at it is that I would've had to pay the tax if had been straight earnings anyway, so I'm fine with that.
I've tried googling and all the usual obvious avenues, but there seem to be many warnings and/or sharks out there so I wondered if any of the experts here may be able to offer some honest advice or recommendations. If it helps, I'm 32 and the value of combined plans is not large- circa 20k GBP.

Thanks very much in advance.

[IanMorewood]

20k combined value and age 32 and looking to bust your pensions? You would be lucky to get a few hundred quid back after charges and tax, find some other way of getting some money.

[mug81]

Thanks for the reply. But assuming the tax penalty is indeed 55% as I suspect, then are the charges (in addition to those already billed to the account annually) really going to add up to 9k GBP? Seems a bit strong, no?

[PurpleMoonlight]

You are going to have to find a SIPP provider willing to do this, but the main stream providers will be unwilling to do so. That leaves you with the smaller specialist end and even then I think you will struggle. I could easily see charges of several thousand being levied if you find one.

Yes, the tax charges would total 55%.

[ellroy]

The other thing to remember is that a lot of these schemes are technically against the rules.

So the 'advisors' will happily charge you an enormous fee and then leave you to face the music.

The revenue are not noted for their humour in these matters. The 55% tax charge will be the least of your problems.

Leave it well alone and look elsewhere for your cash.

[The Leaper]

You are dangerously close to what's called pensions liberation, which is illegal. The firms touting PL charge 30%+ of the amount involved and HMRC consider it an unauthorised payment so there is a tax penalty of 55% on the gross amount, and the PL companies rarely tell you this. So, out of your £20,000 you're going to get maybe 15%, say £3000. Ask yourself: are you so desperate that you can spend £17,000 to get £3,000?

R.

[Sarnie]

The Leaper said:

You are dangerously close to what's called pensions liberation, which is illegal. The firms touting PL charge 30%+ of the amount involved and HMRC consider it an unauthorised payment so there is a tax penalty of 55% on the gross amount, and the PL companies rarely tell you this. So, out of your £20,000 you're going to get maybe 15%, say £3000. Ask yourself: are you so desperate that you can spend £17,000 to get £3,000?

R.

Ouch....

[mug81]

Thanks again for the replies.

So to surmise there is essentially no way to access this money, regardless of the fact it could quite possibly prevent a mini fiscal meltdown? (I refuse to deal with the sharks that have been mentioned). I just find it a little surprising, even if willing to accept the heavy tax penalties.

[J012E]

To summarise yes, unfortunately there is very little you can do. As previously advised stay away from any 'legit' company that can release funds, there is no such way and is highly illegal.


If you are willing to take such a hit, is there no way of borrowing this money even at a high rate of interest?

[mug81]

Thanks again for all the replies, I think it's fairly clear what the consensus is..! A little frustrating because loans are expensive (for me at the moment, haven't been back in the country long etc) and this would've just cleared it up without any repayments to worry about.

It's for the greater good this way anyway no doubt. In the meantime if anybody needs any jobs doing in the Bromley area give me a shout!

[Ruskie]

I too investigated this last year. There is no way of doing it legally.

[PurpleMoonlight]

I do wish people would stop stating that cashing in a pension is unlawful.

Providing it is done properly and the tax paid, it is not.

[Ruskie]

PurpleMoonlight said:

I do wish people would stop stating that cashing in a pension is unlawful.

Providing it is done properly and the tax paid, it is not.

I have £20k in a SIPP. Please enlighten me into how I can get it out?

[Ginge R]

Bruskie,

Read this and have a chat with your provider. But whatever you do, take strong advice about whether or not you should be using a SIPP to cradle £20,000. It will probably be costing you far too much.

http://www.hmrc.gov.uk/pensionschemes/liberation.h...

[The Leaper]

Purplemoonlight is right: it is not illegal. It should be, if only to protect the innocent being pursued by the crooked. Any organisation supporting and marketing PL where via their fees they get 30%+, HMRC gets 55%, and the member 15% net should be asked why and who gains?

There are a number of organisations, including HMRC and the Pensions Regulator, that are actively monitoring PL schemes and are encouraging legitimate pension providers from where the transfer originates to have in place procedures to pick up PL schemes and to try and ensure the member is fully informed about their vey questionable value to the member.

R.

[foliedouce]

Just out of pure interest, how did you lose all your cash?

I don't see how you can go from owning Lambos, Astons & Rolex's to scrabbling around for £9k

I am not judging (I lost literally everything I had in 1999 and it took me near on 6 years to get anywhere close to where I was) but I am curious to understand. This is an anonymous forum after all.

[mug81]

Where to begin! To put it very simply (and also I don't really want to think about it) I had a great job for a number of years, but have also always had eyes bigger that my wallet as it were- so when I lost that job the house of cards came tumbling down!

Lesson firmly learnt.

[Efbe]

mug81 said:

Where to begin! To put it very simply (and also I don't really want to think about it) I had a great job for a number of years, but have also always had eyes bigger that my wallet as it were- so when I lost that job the house of cards came tumbling down!

Lesson firmly learnt.

if its that bad, would bankruptcy be better?

[mug81]

Actually the number left is low 4 figures now so I very much hope that won't be necessary. I am a bit of a worrier these days (a by-product of being so reckless in the past I suspect!) so as long as I keep a cool head, and knuckle down all should be well.

[Efbe]

mug81 said:

Actually the number left is low 4 figures now so I very much hope that won't be necessary. I am a bit of a worrier these days (a by-product of being so reckless in the past I suspect!) so as long as I keep a cool head, and knuckle down all should be well.

thats the thing about this country.

as long as you have your marbles and a bit of common sense; there is always a way to survive, pretty much always quite well.

Problem is most of your options are probably unknown to you. SO have a look at what you have with equity in it, what is costing you, and what you can cut.

Also remember the difference between capital and ongoing costs. yes £5k may help now, but for how long? If you are spending more money per month than your income, then you need to fix this, gaining capital will only delay your problems, but this time when you get there you won't have the same things to sell!

Though I don't have a clue about your situation; mortgages can be put on hold for a few months, cars are extremely expensive to run, 90% of the time people could actually live without one, and if you simply send a letter to your creditors can be all it takes to half a credit card bill or loan.