# Cashing some of my pension



## mistycat (Jan 28, 2014)

Hey Guys,
First of all treat me as a thicko, so no fancy long words :nerd::nerd:
OK how does this work, i have read that you can draw 25% of my pension,
if your 55 or over as i am one of the young ones on here :grin2: i qualify,
thats the easy bit,
when i was younger 50 i managed to draw on a 25% on a pension then not knowing that after that i was getting a pension :surprise: :surprise:
which the tax man loves me for,
so what happens this time? if i draw 25% cash does the rest stay as a pension as i will still be paying in to it? as i am still a wage slave,
any help would be appreciated
Misty


----------



## Penquin (Oct 15, 2007)

Before you do ANYTHING use the Government helpline to ensure that what you want to do is right - there have been very many reports of people being scammed or suddenly incurring ridiculous charges for doing such a thing (one [person recently was charged £11,000 for cashing in an £18,000 pension - so he ONLY got £7,000 until Watchdog intervened......

https://www.pensionwise.gov.uk/pension-pot-options

Tread VERY carefully as many people have lost massive amounts through taking the wrong advice....

Dave


----------



## 747 (Oct 2, 2009)

I agree with Dave, you have to be very careful.

ps, wanna buy some Magic Beans? :wink2:


----------



## ThePrisoner (Jan 13, 2009)

Being one of the people you need to be wary of i can only echo penquin in contacting pensionwise as your first port of call.

However it's not compulsory to take your 25% and I would question why take it out if you are still paying in. ( although there is some merit in recycling it)

If you are set on taking it then it is a veritable minefield and you need to find the right option for you. As much as you have to be wary of advisers, you also need to be careful of online advice aswell. There is plenty of info relating to this online without any form of committment

Unless you are not desperate for the money and you believe it is in the right investment then leave it where it is. As we all know you can only spend money once.

I would concentrate more on sustaining lifestyle in retirement, unless you also have this sorted. In which case fill your boots


----------



## patp (Apr 30, 2007)

In the dark ages, when pensions were in their infancy, I was given the option to draw out my Local Government pension before they made the rule that it was not allowed until retirement. I chose to take out all that I had paid in and buy a washing machine and freezer. At the time I was delighted to be able to access this pot of money and get the things my heart desired.


I can't tell you how much I regret that decision now. 


I am assuming that you are drawing out your pension to spend it on something so I am going to tell you what that meant for us.


We are retired and on a very small pension from the various jobs I have had through my life. The State Pension is my main income. Life is so limited by this lack of finances. You look forward to your retirement when you think you can do lots of things and go to lots of places.
The reality is that you just about cover your living costs. Items in the home wear out and need replacing. The house needs maintenance. The vehicles need maintenance. It all seems easy when you are working and have a decent income. Not so when income drops.


In your fifties you think that you will just want to laze around in your retirement like a long holiday. Let me tell you that soon wears off. As we live longer and stay fitter we want to be able to take up new hobbies etc. I can't even afford to go to evening classes because they are so expensive!


If you are going to invest in something that will give you a better income then that is an entirely different matter. Do think long and hard about your options. If I had my time over again I would have paid as much as could have afforded into my pension pot.


----------



## mistycat (Jan 28, 2014)

Thanks guys,
The thinking behind this is,
I was thinking of getting 10k to put to a new van,
Without going into our savings
I am still paying in at the time being as I am still working,
In my late fifty's and can't see me working much longer,
We are toying with the idea of going long term or full timing for a couple of years,
No point waiting till we old codgers to tour  
We are even thinking of off loading the house at some time,
We are fairly healthy at the moment although I need a new knee but can still cope with it as it is,
So that's our sort of plan
Adventure before dementia type thing,


----------



## mistycat (Jan 28, 2014)

Opps
Thanks Misty


----------



## Mrplodd (Mar 4, 2008)

Patp has raised a lot of VERY valid points and their post should be read carefully several times to absorb it all.

If it was me I would draw on my savings and most definitely leave my pension alone as that will increase at a better rate than your savings will. Also remember that your pension will keep paying out until you pass away so you really want to maximise it. If you draw out 10k now that's 10K's worth of pension reduction (plus the loss of any increase it should accrue whilst sat in your pension pot for a few more years) you will have to deal with for the rest of your life!!!

As others have said that pension will be your source of income once you cease being a wage slave, do everything you possibly can to get as much pension as you possible can. Retirement ain't cheap!!! Don't lose sight of the fact that if you are at home (rather than at work) then your heating costs are going to rise a fair bit as well.

If you are thinking of doing an extended trip look into the possibility of renting your house out whilst you are away. That rental could finance the entire trip!!!

Good luck but as many others have said GET PROFESSIONAL FINACIAL ADVICE from as many sources as you can BEFORE making any decision.

Andy


----------



## deefordog (Dec 31, 2013)

Being in a similar position, there's one thing I can't get my head round..............

As I've just turned 55 and sort of "retired" and not working, I could get a part time job and earn up to £10600 without paying tax. I'm aware that if you take 25% of your pension pot it's claimed to be tax free but if I draw say £15k of my pension, will I end up paying tax on the difference between £10600 and £15k? 

Bottom line is would I pay tax @ 20% on the £4400? The .gov website doesn't make this crystal clear - am I missing the obvious?


----------



## listerdiesel (Aug 3, 2012)

Two situations for us (we are both over retirement age)

I deferred my pension for a few years, then took a lump sum and deferred a second time. I then took another lump sum and started drawing down my basic pension. I am still working so my pension uses up all of my tax allowances, so Rita takes our pay on her PAYE account as she still has allowances that she can set against income tax. 

Rita deferred her pension and now has a decent pot in there, but if she takes it as a lump sum, she will pay 40% tax on the amount over the 20% income tax limit, so we've decided to leave it there and wait until the monthly figures make sense for us to take. She cannot take a portion of the lump sum either, nor could I, it's all or nothing once you are past retirement age.

Taking pension out before you retire or reach pensionable age is fraught with issues, so contact the Pension Service and ask them.

I get £892 a month paid into our bank account, Rita's pot will pay a fair bit more as she has been deferring since she was 60, now she's 67. It's really working out what to do for the future. Rita's lump sum is probably about £90k now, maybe a bit more. 

I haven't spoken to the Pensions Dept since last year to get up to date figures.

We have a couple of small private pensions that were savaged by Mr Brown, worth about £500 a month.

Peter


----------



## nicholsong (May 26, 2009)

Misty

I was for several years in Financial Services, as a Compliance Officer, but I also took the financial adviser's exams.

From the info you have given and the questions you are asking, I would suggest that you need to start learning what you can and cannot do to provide for your eventual(not so distant) retirement. It will help you decide what you should do now.

I endorse the advice to seek a professional financial adviser - more about this below. However, I suggest that you yourself start to learn a lot more about how the pension system works now, as it is changing a lot. This will help you better understand advice you will be given and the language and terms used. There is reference above to the Government website and there is a lot more on the internet, especially some of the briefing papers put out by accountancy and legal firms on the recent changes - theirs is independent advice as they are not selling any pension products.

When you have gained some more knowledge you will still need a professional adviser. I suggest you look for one who is a Financial Planner with a specialist qualification in pensions. If you Google Financial Planning Qualifications you will find more info there, but note the CII qualifications are changeing at the end of the year. When you pick one check with the Financial Conduct Authority that they are Registered with them.

You also need to acquait yourself with the different arrangements financial advisers have for which schemes they can advise on, and how they are remunerated, because this informs you about how 'independant' or 'potentially biased' is their advice. Some work for only one company and are therefore not 'independent'. A second category work for organisations which are selling agents for a limited variety of products from various companies(called multipe-tied agents), and are pemitted to call themselves 'independent' as they are not tied to one company. Those two categories are usually rewarded by taking commission from the premium/investment that the client makes.

There are other 'independent' advisers who will gave advice on all schemes/products available in the market. These fall into two sub-categories, according to whether they take the remuneration for their services by commision, as those described above, or by the Client paying a fee, just as one would to a Lawyer or Accountant. Some will only do one or the other, and some will offer the Clent the choice of payment. 

If one chooses to pay a fee there is no incentive for an adviser to be biased to one product or another because of a higher commission. The adviser owes a duty to you and only you, and as such should be totally 'independent'. If paying by fee the adviser might still be entitled to be paid a commission by the product provider, but the Client can direct that the Adviser shall offset that against the fee being charged - in fact the Law Society dictate that Solicitors giving financial advice must always hold any commission as Client's money unless the Clent directs otherwise. I personally would recommend going for that arrangement of a fee and offsetting commission just described.

Misty, I hope I have not made this too complicated, but it is unavoidable as this subject is, which is why you, or anyone else, need to spend some time understanding it. I suggest you keep this post and refer to it from time to time when you are doing some research and the two together may give you a clearer idea of what I have written.

It is not possible to give specific advice on your pension withdrawal question without knowing a lot more about where the pension and savings are invested, and all your other financial circumstances, which is the first thing a financial adviser would need to know.

I would make one point; you said you did not wish to touch your savings - your pension pot IS part of your savings.

I hope this is some help.

Geoff.


----------



## ThePrisoner (Jan 13, 2009)

All good points. It's worth noting however that commission cannot be paid any more since the rdr. So you will have no choice but to agree a fee. As with everything in life the cheapest will not necessarily be the best. The qualification you are looking for is af3 or g60 equivalent.

your plans look great, however any adviser worth his salt will ask you to demonstrate how you expect to fund this not just now but for the rest of your life. So do a budget clearly outlining your incomings and outgoings before you contact an adviser.

One thing noone has touched on is that the remaining pension will be an investment so you will also need to decide how you want to invest it. Pretty much like an isa a except cash is even less attractive.

last but not least as a few people have said, your pension should be your last port of call as it can be passed on to beneficiaries outside of probate, tax free on death


----------



## nicholsong (May 26, 2009)

Misty

ThePrisoner is right on the commission point - apologies for being out-of-date.

Although it was in my head, I omitted to include the point about having a budget prepared, both one for while you are still working and making pension contributions and have expenses connected to work, and one for retirement, when the expenses will be different - but so will the income:wink2:

Geoff


----------



## mistycat (Jan 28, 2014)

Wow my head is cooked,
Thanks guys,
I will need to read it a few times to get it to sink in,
I was told today its better to use an isa that is only getting 1.6% than cash the pension,??
But think I might get away without it now
Dam who wants to get old, with money,
My kids aren't happy   
Misty


----------



## nicholsong (May 26, 2009)

mistycat said:


> Wow my head is cooked,
> Thanks guys,
> I will need to read it a few times to get it to sink in,
> I was told today its better to use an isa that is only getting 1.6% than cash the pension,??
> ...


Misty

Just take it one step at a time - none of us were born with the information chip installed - we had to acquire the info. You have learnt to use a MH so you can learn this financial stuff as well.

You said "But think I might get away without it now" - I am assuming you mean you can afford the replacement without touching the pension - or the savings?

Even if that is true, I think that from what you have said in general, you need to get more information on your financial situation for the future. For example 1.6% is derisory, unless it is an instant access account, for which we should all have some funds (for a roof leak for example).

You said "Who wants to get old with money?" - I suppose you meant 'worrying about money', but who wants to get old worrying about NOT having money?

If you are still working as you say, you are probably capable of getting your head around the basics of pensions and then getting professional advice.

I think that if you put the effort in now, you could improve your long-term income in retirement by 20-40%.

Do I sound as though I am nagging? Yes, I hope so - because I have seen people who have not helped themselves enough and somebody else has helped themselves to their money.

Geoff


----------



## mistycat (Jan 28, 2014)

Thanks Geoff,
yep we can manage now without touching both, or should i say by march we will,
the isa is a instant cash one in case of emergencys
Thanks Misty


----------



## ThePrisoner (Jan 13, 2009)

Deefor dog you can take 25% tax free. In your example the remaining 4400 will be taxable. However you will only pay tax if you have 10k + earned income from elsewhere. Hope that makes sense. So if you have sort of retired and have no income it will be tax free. You could do the same again next year and every year thereafter until it has gone


----------



## mistycat (Jan 28, 2014)

ThePrisoner said:


> Deefor dog you can take 25% tax free. In your example the remaining 4400 will be taxable. However you will only pay tax if you have 10k + earned income from elsewhere. Hope that makes sense. So if you have sort of retired and have no income it will be tax free. You could do the same again next year and every year thereafter until it has gone


Sounds like a plan hey Doggie


----------



## ThePrisoner (Jan 13, 2009)

Sorry for that post. Tried to change it when i realised I had misread the post i was replying to, but it didn't, t work. Should have said.

Any pension withdrawals taken over and above tax free cash will be taxed as earned income at your marginal rate. If you have no taxable income you can use a combination of tfc and withdrawals via a flexible drawdown plan to get more money out and reduce tax bill. This can be repeated annually until the money runs out if you want. First you have establish that this method is suitable for you. Here is where a budget helps

if done effectively it can be very financially rewarding. It gets more difficult once state pension kicks in as most of your threshold is used up. However we do have an increase to £12500 in 2020 to look forward to. There are some excellent responses in particular from patp which should be compulsory reading for every working adult. I realise how mind numbing that all sounds A crystal ball would come in handy because predicting longevity is another issue


----------



## deefordog (Dec 31, 2013)

mistycat said:


> Sounds like a plan hey Doggie


Most certainly :wink2:
I was 55 on the 1st August and had already contacted my four pension providers to get approximate values. My intention was to dip into just one of the pension plans and take £10600 and, having done a bit of homework, leave the others alone. Further investigation and bearing in mind we both had no income at the time, showed that our savings were also quite healthy. Judging by how my pension values have crept up over the past 2-3 years, they seem to offer a better return long term than our savings accounts so have decided to leave ALL the pension plans alone until such a time that the 25% is required - a rainy day lol.

This has been a very interesting and eye opening thread and the advice has been invaluable - thanks all.


----------



## mistycat (Jan 28, 2014)

Damm these clever people know how to pee us off hey,,,
But suppose best I take note in my old age,
Don't want to have too much fun before I get old  
So go by what the guys are saying I am better off using my low rate isa,s than grabbing a hand full of my pension ??
It seems to be sinking in,
The kids ain't going to get it though
Misty


----------



## 747 (Oct 2, 2009)

deefordog said:


> Most certainly :wink2:
> I was 55 on the 1st August and had already contacted my four pension providers to get approximate values. My intention was to dip into just one of the pension plans and take £10600 and, having done a bit of homework, leave the others alone. Further investigation and bearing in mind we both had no income at the time, showed that our savings were also quite healthy. Judging by how my pension values have crept up over the past 2-3 years, they seem to offer a better return long term than our savings accounts so have decided to leave ALL the pension plans alone until such a time that the 25% is required - a rainy day lol.
> 
> This has been a very interesting and eye opening thread and the advice has been invaluable - thanks all.


I still have those magic beans if you are interested in a good investment. 0


----------



## deefordog (Dec 31, 2013)

747 said:


> I still have those magic beans if you are interested in a good investment. 0


Ah, but would they be tax free lol?

Or are you offering Viagra? :nerd:


----------



## ThePrisoner (Jan 13, 2009)

You seem like you have it sorted. However anyone with multiple pensions who are less confident in finance may want to consider
each pension is effectively an investment, your money will be invested in a fund/funds let's call it the magic bean fund

the fund will have a set of charges applied to it each month regardless of performance

each pension provider will decide whether or not to offer a flexible drawdown facility. I.e take out ad hoc lump sums

one of these pensions is likely to stand out as better than the others.

You can combine them all into one large pension potentially completely free of charge depending on how they were originally set up 

once combined you can decide which is the best magic bean or combination of bean funds out there and put all your money in it and change it on a regular basis

you can add further monies to the plan if you want.

It's a little known fact that anyone up to age 75 can put 2880 each year into a pension

due to tax relief this automatically grossed up to 3600

you don, t have to be enstein to work out the advantages to non tax payers of this 

contact the underused and over funded pensionwise to talk you through this and see if it is your interests


----------



## mistycat (Jan 28, 2014)

Hi ThePrisoner,
Thanks for the info,
gonna have to give them a ring or maybe we should meet up some time (with a motorhome facts discount :grin2::grin2: )
The way i see it is, if i keep putting it in a pension thats for when im old and grumpy,:surprise::surprise:
i want to have it now and have some fun before i get old and grumpy :laugh::laugh:
at the moment i am still working, and they bump my pot double of what i pay in, to a ceiling don't know off hand what that is,
i am seriously thinking of packing in and travelling for a while, i'm 56 so after a few years of travelling i will be back, but don't fancy working then, maybe a part time job to keep me out of her way,
will i have to wait till im 66 i think it is now to get me dosh?(dam thats only ten years away)
thanks for the info
Misty


----------



## ThePrisoner (Jan 13, 2009)

mistycat said:


> Hi ThePrisoner,
> Thanks for the info,
> gonna have to give them a ring or maybe we should meet up some time (with a motorhome facts discount :grin2::grin2: )
> The way i see it is, if i keep putting it in a pension thats for when im old and grumpy,:surprise::surprise:
> ...


Ah the milion dollar question. When to pack a good job in. All you need to know is how long you expect to live/stay healthy, what inflation will be, what your investment will grow at and how long your money will last. So no pressure.

There are software programmes that can try to give a good guess though. One thing you haven, t said is whether your works pension is final salary or personal pension type. That is important, as you may not be allowed to access it early.

An option worth considering could be part time which gives you the best of both worlds, however if you have a dream sometimes you just have to go for it. There seems plenty on here who have with no regrets. I have sent you a little pm


----------



## Mrplodd (Mar 4, 2008)

Final thoughts from me...........

DONT RUSH THIS DECISION !!! 

Andy


----------



## mistycat (Jan 28, 2014)

Mrplodd said:


> Final thoughts from me...........
> 
> DONT RUSH THIS DECISION !!!
> 
> Andy


I won't, she won't let me 
Suppose someone has to keep me in check
Misty


----------



## patp (Apr 30, 2007)

You will be even more "grumpy" in your old age if you have a more limited income to make life a little more comfortable.


----------



## raynipper (Aug 4, 2008)

Beware of even regulated Financial Advisors.!!!!!!! This was mine.

http://www.thisismoney.co.uk/money/saving/article-1512514/Free-to-defraud.html

Ray.


----------



## rayrecrok (Nov 21, 2008)

Sandra and I planned our retirement as best we could when we were in our twenty's , result we have never been as well off now we are retired, even when we were working, those days we never had much savings, now we save, my state pension goes straight into our savings for a rainy day!.... Young folk carp on about keeping us pensioners and how much it is costing them, how many have set into practise a retirement plan and forsake some of life's pleasures during their working years to live comfortable in their old age, not many I would suspect, they want everything on a plate but we come from an era when folk had nowt, but there again we didn't have the temptations of modern life.

You spend a lifetime acquiring your pension pot, treasure it!.


ray.


----------



## Jamsieboy (Jan 14, 2011)

Sound advice from many.
I agree with Ray.
But
Work is great as long as you enjoy it and it doesn't cause you actual bodily or mental harm.
Retirement is great as long as you have sufficient income to enjoy it.
So work as hard as you can until your body or head tells you it's time to quit - irrespective of age.
Pay as much as you can into a quality pension plan while you can.

Buy yourself a good van that meets your needs - irrespective of its age (or yours)
ENJOY yourself cos you are a long time dead!


----------

