Pension Cash In April 2015

[Philx]

I apologise if there is a sub forum on this issue but I couldnt find it.

I have two pensions an excellent Company one with a considerable pot available which I dont intend to touch

and another one from a company I worked for over 20 years ago. It is run by Standard Life. I have about 14k in there and when I spoke to them they said on April 6th I could apply to have it transfered to my bank account. So far so good.

My yearly pre-tax income is about 20k but I keep reading conflicting information about how much tax I would have to pay on my cash in. Is there anywhere I can find a calculator ( I have looked) or can give me some advice. Thanks.

[honeybee13]

Hello there.

 

My understanding is that the 25% tax-free cash limit still stands and that the balance of the £14k would be taxable if you transfer it all. I'll try to have a look later if you haven't found the answer.

 

I'm a bit surprised that Standard Life can't help you more.

 

HB

[honeybee13]

This might get you started, from Pension wise, which is the government.

 

https://www.pensionwise.gov.uk/tax

 

HB

[Philx]

Thanks. They way I read it that my salary before tax is 19k so if I only draw out 10k that will keep me in the under £31,865 20% tax bracket. Its a minefield though , you can see a few people steaming in and cashing in thier Pensions and actually making a lot of money for the government.

[Philx]

Looking at it further its seems that a pensions drawdown could be an option. I no expert but it appears you invest it but can withdraw money as you wish. As long as the sum you are taking out each time isn't over 25% you would not be subjected to the 40% tax rate

[honeybee13]

Thanks. They way I read it that my salary before tax is 19k so if I only draw out 10k that will keep me in the under £31,865 20% tax bracket. Its a minefield though , you can see a few people steaming in and cashing in thier Pensions and actually making a lot of money for the government.

 

I can also see people charging in and the government profiting. I haven't learned enough about the new rules to comment on your tax assumption yet, but you could also consider ringing HMRC for further advice.

 

HB

[honeybee13]

Looking at it further its seems that a pensions drawdown could be an option. I no expert but it appears you invest it but can withdraw money as you wish. As long as the sum you are taking out each time isn't over 25% you would not be subjected to the 40% tax rate

 

There are a lot of options for pensions drawdown companies. You would need to speak to them to see if you find one you feel is suitable for you. The good ones will talk you through your options on a no obligation basis.

 

HB

[Philx]

I can also see people charging in and the government profiting. I haven't learned enough about the new rules to comment on your tax assumption yet, but you could also consider ringing HMRC for further advice.

 

HB

Spent an hour and a half on hold with the HRMC before losing the will to live and putting the phone down. Standard Life were less than helpful too referring me to thier website. I guess it's only going to get worse as the hysteria builds.......

[Mike_hawk]

The cynic in me believes its an exercise in raising tax revenue a few years ahead of time although there's no doubting the changes will be helpful to a percentage of pot holders. It's the first tranche of those that buy in [or out in the case of draw down] who will undoubtedly be caught out by and subject to the rogues in the trade.

[goodatresearch]

I don't know about drawdown, but if you withdraw the lot everything above 25% is added to your income for that year and taxed dependent on your whole income for that year. There is an option to withdraw 25% every tax year and therefore pay no tax. However I read an article that some pension companies are going to impose huge charges if you take this option.

[Mike_hawk]

However I read an article that some pension companies are going to impose huge charges if you take this option.

 

That would be transferring out to a draw down option rather than, or in combination with, the [industry norm] 25% + annuity.......as I said, plenty of opportunity to be caught out and little if any regulation in place

 

I'm 48 this year so have 7 years of learning to go, I'm not overly concerned about what will or won't befall me in 2022 [assuming my better half can put up with me retiring] as I'm fairly certain the unscrupulous within the trade will have been found wanting by then. I'm more concerned with those that end up screwed out of their life savings in the short term...... and I have no doubt it will happen to many

[Philx]

Made a couple of phone calls this morning. One to Standard Life who were more helpful this time (although they did try and convince me their Drawdown policy would be the best option) and the HMRC . It seems combining my yearly wages and the 14k I would cash in would keep me in the 20% tax threshold. He did comment on the lack of concise information out there and reckoned a lot of customers were not taking the tax implications into account.

It also appears there are a lot of "PPI" style companies springing up who are going to fleece a lot of customers. Particularly when you think my 14k is peanuts compared to what some customers are thing of cashing in on.

[citizenB]

The cynic in me believes its an exercise in raising tax revenue a few years ahead of time although there's no doubting the changes will be helpful to a percentage of pot holders. It's the first tranche of those that buy in [or out in the case of draw down] who will undoubtedly be caught out by and subject to the rogues in the trade.

 

My thinking exactly, I suspect they are also hoping that some people will go on a spending spree which will help kick start the economy.

[Old Cogger]

What will happen when the pension pots have been spent and they retire, ??

[citizenB]

http://www.theguardian.com/money/2015/apr/24/annuity-rates-all-time-low-pension-freedoms-introduced

 

Interesting also that Annuity rates hit an all time low ?

 

Average annual income on offer from a standard annuity for a 65-year-old with a £10,000 pension pot plunges by 5.9% since start of year

 

 

Savers’ hopes of securing a comfortable retirement have been dealt a blow as standard annuity rates have collapsed to all-time lows just weeks after new pension freedoms have come into force, according to a financial website.

 

The average annual income on offer from a standard annuity for a 65-year-old with a £10,000 pension pot has plunged by 5.9% since the start of the year and for someone with a £50,000 pension pot it has fallen even more sharply, by 6.4%, research from Moneyfacts has found.

 

[Old Cogger]

Been low for the last 2 decades, as interest on pensions stopped in early 1990s, lucky for some of us there was a small safeguard GPM

[citizenB]

What will happen when the pension pots have been spent and they retire, ??

 

[honeybee13]

They become a burden on the State?

 

HB