I'm interested in conversations about and I want to talk about
Know exactly what you want?
Show search

Notification

Error

Pension pot

User
Posted 09 May 2019 at 12:56

Why are pensions such a minefield? You work all your life then have to jump through hoops to understand your pension, or is that just me. Kev is at the non curable stage now but thankfully this horrible thing is being managed at the moment and he continues to work full time. We have set our hearts on having a caravan on the coast, somewhere to escape. How does everyone feel about accessing pension pots? If the money's there why not use it? 25% of it anyway. Any advice would be greatly received 

User
Posted 09 May 2019 at 14:11

Originally Posted by: Online Community Member

You really MUST go and get good independent financial advice before doing anything.

One impact of withdrawing anything from your pension is that the amount you can continue putting in to your pension tax efficiently afterwards is severely reduced (if I understand it correctly, which I might not), and that could have implications if he's still working and contributing to the pension fund. If you will eventually pass on an estate which is subject to inheritance tax, you might want to look at using other savings before you touch your pension funds too.

I'll say it again...
You really MUST go and get good independent financial advice before doing anything.

Agree re the advice!  You can withdraw 25% and still contribute the full amount provided you don't start drawing down on the remaining 75%!!  I know because I have done exactly this...  

 

User
Posted 09 May 2019 at 14:02

You really MUST go and get good independent financial advice before doing anything.

One impact of withdrawing anything from your pension is that the amount you can continue putting in to your pension tax efficiently afterwards is severely reduced (if I understand it correctly, which I might not), and that could have implications if he's still working and contributing to the pension fund. If you will eventually pass on an estate which is subject to inheritance tax, you might want to look at using other savings before you touch your pension funds too.

I'll say it again...
You really MUST go and get good independent financial advice before doing anything.

User
Posted 09 May 2019 at 14:08
Ok being brutal you need to estimate how long you will need funds from the pension to live as you would wish.

If your OH has a terminal diagnosis (<12 months)you also have other options including I believe being able to take the whole pot out tax free.

If it's a life limiting rather than terminal diagnosis and you have a defined benefit pension it may be worth converting that so any residue can be passed on via a will. If it's defined benefit there may be a dependant pension too so you have to be honest and add up which gives the most benefit to your circumstance.

User
Posted 10 May 2019 at 07:46

Originally Posted by: Online Community Member

One impact of withdrawing anything from your pension is that the amount you can continue putting in to your pension tax efficiently afterwards is severely reduced

That's not entirely true. I'm retiring myself in August, so I'm fresh out of meetings with financial advisors and a retirement course paid for by my employer to explore all this kind of thing.

Everyone has an allowance called the "Lifetime Tax Allowance" (LTA), which is the maximum amount you're allowed to draw as a pension under the very favourable tax laws that govern pensions.  For the 2019-2020 tax year the LTA is £1,055,000, so as long as your lifetime pension withdrawals are under that limit, withdrawing money from your pension pot will have no adverse effects, other than reducing the size of your pot and the amount of tax free money or income you can subsequently take from it.

You can take up to 25% of the value of your pension pot tax free, regardless of whether it's as a lump sum or a regular pension payment. The remaining 75% is taxed as normal. 

I certainly agree that the OP should speak to an independent financial advisor before making any decisions. I don't know if it's the same with all pensions providers, but my pension fund managers insisted that I get independent financial advice before withdrawing any funds.

Best wishes,

Chris

 

Edited by member 10 May 2019 at 09:26  | Reason: Not specified

User
Posted 11 May 2019 at 07:43
Denstar, you need to speak to a financial adviser who can cope with talking about death. With an incurable diagnosis, the conversations a FA needs to have with your OH are very different to normal. The first FA we had couldn’t cope with the short life thing and kept glossing over it, telling us the most important considerations were about maximising our income in 20 or 30 years.

Our new FA sought advice from an actuary and has instead advised us on the best financial considerations for the next 15 years. It isn’t just deciding whether to take out the 25% ... they will also need to work out with you how important things like a widow’s pension might be, and how much income you would need have a comfortable retirement.

In our case, based on the advice of the magic money man, John has taken the 25% from two pension pots, has left 75% of one where it is for now, is drawing a pension of about £400 per month from the 75% of other one, and has put all of his little pots from previous employers into one new pension pot. They worked out that the crossover point (where the option we have taken becomes less than we would have got by waiting) is 17 years from now - it was up to J and I to decide whether we were happy with that risk. To be honest, having the 25% tax free plus a small monthly income has been brilliant and if he is still around in 17 years’ time we might lose out financially but will have won the cancer game convincingly :-)

"Life can only be understood backwards; but it must be lived forwards." Soren Kierkegaard

Show Most Thanked Posts
User
Posted 09 May 2019 at 14:02

You really MUST go and get good independent financial advice before doing anything.

One impact of withdrawing anything from your pension is that the amount you can continue putting in to your pension tax efficiently afterwards is severely reduced (if I understand it correctly, which I might not), and that could have implications if he's still working and contributing to the pension fund. If you will eventually pass on an estate which is subject to inheritance tax, you might want to look at using other savings before you touch your pension funds too.

I'll say it again...
You really MUST go and get good independent financial advice before doing anything.

User
Posted 09 May 2019 at 14:08
Ok being brutal you need to estimate how long you will need funds from the pension to live as you would wish.

If your OH has a terminal diagnosis (<12 months)you also have other options including I believe being able to take the whole pot out tax free.

If it's a life limiting rather than terminal diagnosis and you have a defined benefit pension it may be worth converting that so any residue can be passed on via a will. If it's defined benefit there may be a dependant pension too so you have to be honest and add up which gives the most benefit to your circumstance.

User
Posted 09 May 2019 at 14:11

Originally Posted by: Online Community Member

You really MUST go and get good independent financial advice before doing anything.

One impact of withdrawing anything from your pension is that the amount you can continue putting in to your pension tax efficiently afterwards is severely reduced (if I understand it correctly, which I might not), and that could have implications if he's still working and contributing to the pension fund. If you will eventually pass on an estate which is subject to inheritance tax, you might want to look at using other savings before you touch your pension funds too.

I'll say it again...
You really MUST go and get good independent financial advice before doing anything.

Agree re the advice!  You can withdraw 25% and still contribute the full amount provided you don't start drawing down on the remaining 75%!!  I know because I have done exactly this...  

 

User
Posted 10 May 2019 at 07:46

Originally Posted by: Online Community Member

One impact of withdrawing anything from your pension is that the amount you can continue putting in to your pension tax efficiently afterwards is severely reduced

That's not entirely true. I'm retiring myself in August, so I'm fresh out of meetings with financial advisors and a retirement course paid for by my employer to explore all this kind of thing.

Everyone has an allowance called the "Lifetime Tax Allowance" (LTA), which is the maximum amount you're allowed to draw as a pension under the very favourable tax laws that govern pensions.  For the 2019-2020 tax year the LTA is £1,055,000, so as long as your lifetime pension withdrawals are under that limit, withdrawing money from your pension pot will have no adverse effects, other than reducing the size of your pot and the amount of tax free money or income you can subsequently take from it.

You can take up to 25% of the value of your pension pot tax free, regardless of whether it's as a lump sum or a regular pension payment. The remaining 75% is taxed as normal. 

I certainly agree that the OP should speak to an independent financial advisor before making any decisions. I don't know if it's the same with all pensions providers, but my pension fund managers insisted that I get independent financial advice before withdrawing any funds.

Best wishes,

Chris

 

Edited by member 10 May 2019 at 09:26  | Reason: Not specified

User
Posted 11 May 2019 at 07:43
Denstar, you need to speak to a financial adviser who can cope with talking about death. With an incurable diagnosis, the conversations a FA needs to have with your OH are very different to normal. The first FA we had couldn’t cope with the short life thing and kept glossing over it, telling us the most important considerations were about maximising our income in 20 or 30 years.

Our new FA sought advice from an actuary and has instead advised us on the best financial considerations for the next 15 years. It isn’t just deciding whether to take out the 25% ... they will also need to work out with you how important things like a widow’s pension might be, and how much income you would need have a comfortable retirement.

In our case, based on the advice of the magic money man, John has taken the 25% from two pension pots, has left 75% of one where it is for now, is drawing a pension of about £400 per month from the 75% of other one, and has put all of his little pots from previous employers into one new pension pot. They worked out that the crossover point (where the option we have taken becomes less than we would have got by waiting) is 17 years from now - it was up to J and I to decide whether we were happy with that risk. To be honest, having the 25% tax free plus a small monthly income has been brilliant and if he is still around in 17 years’ time we might lose out financially but will have won the cancer game convincingly :-)

"Life can only be understood backwards; but it must be lived forwards." Soren Kierkegaard

 
Forum Jump  
©2021 Prostate Cancer UK