Lump sum at 55 from pension

[eggsandwich]

Hi all would like to know if anyone can help me?

I’ve got two pensions with two different companies with 11 years at one company and 9 years at the other company.

Now I will be 55 in January and would like to take a lump sum from both pensions, can I do this and take the maximum of 25% from both pensions or am I reading it wrong and it’s only 25% of all combined pensions you have.

I’m a bit confused and have looked online but am none the wiser, I’m hoping for lump sum of 25% each pension pot.

What sort of pensions are they, private pensions set up by you, or were they set up via employers?

If the latter, will they allow access at 55 (I know this is govt minimum age, but most company schemes will have their own minimum age). I am 55 this week, so I could access my private pension pots, but not my company ones, at least not without actually retiring and taking my monthly pension 10yrs early!!

I think you can get lump sum from both, but hopefully someone else with confirm. 25% of each and 25% of the combined pot will be the same figure anyway!

I think you can have the lump sum from both pensions. I'm almost sure in fact but you'd need to check it out.

You'll have to also check if you take 25% lump sum do you have to draw the pension..which you may be liable to pay higher tax.
Also take the pension in March check mse to explain this.

www.gov.uk/government/news/pension-changes-2015 - this might be useful.
Free pensions advice/appointments: www.pensionwise.gov.uk/en/appointments - pensions can be taxed as income so if you are working think about that. The other thing I discovered was that you can't pay in to a pension and draw down at the same time, I am assuming in the same financial year.
Also, have a Google around but it seems that HMRC routinely tax drawdown at 50% and then expect you to claim the tax back... There seems to be a loophole whereby you drawdown a small amount first. It all seems a minefield so make sure you get some good advice.

Yes if the scheme allowsvyou to take it at 55 , but there will be a percentage penalty for taking it early,( the pension provider will advise you how much) but will have to take the pension as well. The 25% isnt taxable but the pension will be unless you ill be getting less than the minimum total taxable income from all sources

Many thanks to you all for answering, they are both company pensions and on one of the pensions I also did avc’s so am also wondering if the lump sum also applies to that as well ?

It applies to the pot so AVCs are part of that.
Slightly off topic, 20 years of contributions isn't massively long so make sure that you'll be able to retire on whatever is left after the lump sum.

Are you planning to take your pensions now, and looking to take the tax free lump sum? In which case i think you are all good?

Another thing to check, though, are whether the company pensions are defined benefits or defined contribution. In the first case, you will be able to be told how the lump sum will impact your pension. In the defined contribution case, they will provide an estimate but there will be no certainty.

I understand that once you take out of your pension fund, you can no-longer contribute. As a PP has mentioned, twenty years contributions may be on the low side, to keep you for the rest of your life. If only we knew, how long our lifespan will be. Sigh.

finallyhere if I take a lump sum does that automatically trigger me taking my pension early or can I just take the lump sum and not take my pension early? They are sending me details so hopefully I’ll find out more information.

I won’t be reliant on the income from my pension which I know won’t be huge as I’ll have income from other sources which should see me through retirement but I’d like to put the lump sum towards my Dd’s University fees should she decide to go so she won’t be saddled with a load of debt at the end.

Thanks everyone there’s a lot to think about.

Just wait for the paperwork to see what the rules of your particular schemes are re taking the pot early vs having to actually retire when you take it.

Id be surprised if ypu could just take lump wothout the pension. I have recently asked about mine. Mix of private and public pensions all required you to take both at same time .

Egg sandwich before funding your daughters uni make sure you read mse advice on student loans or whether to pay yourself

The 25% limit is generally on a tax free lump sum which needs to be taken at the same time the rest of your pension starts (its called a pension commencement lump sum).
Alternatively if your pensions are defined contribution, you can (subject to your providers rules) take part of your DC benefits in the form of a lump sum and 25% of that payment will be tax free.
What you can’t do is take a 25% tax free lump without drawing any other benefits.

If your pensions are defined contribution there will not be any penalty for taking them early - that sort of reduction for early payment is generally a feature of DB schemes.
Assuming that your schemes are DC you should contact your trustees or other provider and find out what flexibilities they offer. Just because something is permitted in tax law doesn’t mean a scheme will offer it (this is often the case for drawdown). If your scheme is DB you can look to transfer to another registered pensions scheme which is DC and which offers the flexibility to take your benefits as a lump sum.

I'd really think seriously about your decision to remove money from your pension in order to help your daughter. She can get a part-time job while she studies.
Have a look on Moneysavingexpert which explains student loans. It's not a particularly scary form of debt.
I would much rather my mum had a decent pension, and I had a bit of debt when starting my career.
I'm drumming it into my children to think about their pensions early - if you're able to help her out with small regular payments to put into a pension rather than a big lump sum to avoid uni debt, it will help her more in the long run, I think.

As you have other investments that you're planning to fund your retirement, have you considered using some of those to help your daughter through uni? That way, you wouldn't be taking your pension out till later (so it would be more money then).

And personally, I think there is a lot to be said for paying uni fees and intend to do that myself. If the child is likely to have a good professional career, then the repayments are likely to be substantial. For example, on a 70k salary, the monthly payment would be £370 per month. If they have no loan, they would be able to contribute some £620 to pension instead. Not to mention the 6.1% interest rate... I think it's quite a burden unless someone is likely to be in a very low paid job after uni.