Private pension advice

[Moggyd]

Is anyone please able to give me some advice on what I can do with my private pension?

I have a work pension and a small private pension. I have some large unavoidable expenditure coming up and I would like to take out £5000 from my private pension. This is less than 25% of the total amount so does this mean I can withdraw the money without incurring tax? I am over 55. I'm trying to read up about it but it's confusing. Any info would be gratefully received! Many thanks.

If it is a Defined Contribution pension - probably is from how you describe it - You can crystallise £20,000 of the pension, taking out £5k as tax free and £15k goes in to Flexi Access Drawdown.

Check with your pension provider regarding fees for entering drawdown, some will charge an annual fee.

If you have alternative sources of money then I would look at those alternatives as markets are down on what they were so you are locking in a loss by taking money out.

If you are still contributing to your pension and you take some out it limits the amounts you can put in each year afterwards, it's to stop people keep taking it out and put more in with a tax advantage so I would check the limits before doing this. If you and your workplace only contributes a small amount each year it should be ok.

I think the yearly allowance drops from £40k to £4k but check this, apart from this all should be ok

@RedRiverShore2 what they said - it means then that the amount you can then put into a pension and get tax relief reduces DRASTICALLY

so it has considerable implementation

I’d recommend you book a Pensionwise appt, it’s free and impartial.

www.moneyhelper.org.uk/en/pensions-and-retirement/pension-wise/book-a-free-pension-wise-appointment

Ie this will likely have an impact on your work pension as well

This is incorrect in the OP’s case, withdrawing tax free cash does not reduce the amount you can pay in, but taking any taxable income/lump sum withdrawals does

Under the right circumstances re earnings, you can put £40k in, take £10k out tax free every year

Thanks everyone. @Keepingupappearance How will this impact my workplace pension if the one I want to take money out of is a separate private pension? I have made contact with my pensions advisor and he isn't keen on me doing this. He is asking if I have any other means or take a bank loan, remortgage etc. I can't remortgage as I've already tried that. Anyway I have a small mortgage and don't want to increase it. I don't want a bank loan. To be honest I'm feeling pretty upset because I can't see a way out of my situation. I just don't have the money to pay out for all I have coming up over the next 8 months and I'm panicking. This is so crap.

Is it really a massive disaster if I take out money from my very small pension of £36000?

Well - as I understand it - your workplace pension is j clouded in all the tax benefit caps

ie so it’s not like it’s completely separate just because it’s a work pension and not a private pension if you see what I mean

obviously I don’t know in your particular case - but if your pension advisor isn’t keen i would take note of it

is there a specific reason you don’t want to remortgage?

interest rates are still pretty low

I think as long as you check that taking the tax free lump sum is not going to affect any tax or future contributions it will be fine, a lot of people break into their private pension when they get to about 60 so they can semi retire and go part time so it isn't really any different to that

@Keepingupappearance yes I do see what you mean now. I have no plans currently to contribute to my private pension but can see that I need to check the implications on my work pension before going ahead. I tried to remortgage but was turned down. I suppose I could try again. The whole point was to keep my bills low so this would defeat that object. I think I need to look at getting a second job.

Thanks @RedRiverShore2. That's what I was thinking but will get it checked out properly.

Sounds stressful but at least ultimately you know that the money is there if you need it if desperate

good luck

Just make sure they do let you access your benefits in a flexible way as some work schemes you have to start drawing your benefits (monthly payments) at the same time xxx