Changing pensions

[Simpo Two]

I have a very inflexible pension which runs for another 8 years. I can't take a cash lump sum or any income from it. If I do nothing I will have to pay in another £21K when in fact I have enough provision for old age, and would rather get as much out as possible to enjoy or re-invest elsewhere. I believe pensions are an increasingly poor method of saving and hear there will be a Government pension review in November which will no doubt make them even more restrictive as the Govt struggles to make ends meet.

I have been recommended James Hay and 7IM but understand the former is not a pension provider merely an administrator. It seems I have to run the thing myself online, when in fact all I want to do is get rid of the damn thing.

Essentially what I want to so is stop paying into my pension (because that money is coming from other investments so I'm robbing Peter to pay Paul) and get my paws on the stash.

Edited by Simpo Two on Wednesday 4th September 11:50

[Smartboy]

If you are in an occupational pension scheme (one operated by your employer) then surely you have the option to cease making future contributions?

Depending on the rules and set-up of the Scheme, if you make a 0% contribution each month, the employer may still continue contributing into the Scheme for you. Free money if you are in a Defined Contribution Scheme.

If you are in a Defined Benefit Scheme (lucky you!), then ceasing future contributions may cease your accrual of future benefits (ie: so if you cease contributing now, you won't add any furhter periods of qualifing service to accrue more benefits).

I guess the first thing would be for you to talk to your pension provider and ask what your options are if you want to cease future contributions and ask how that would impact your future benefits from the Scheme.

[Simpo Two]

Employer indeed!

Nope, nobody is giving me any money in this equation. I'm self-employed/semi-retired and it's a personal pension; sorry for not adding that. I live mostly on investment dividends and they provide not only my 'income' but also have to fund the pension.

If I simply stop paying premiums the fund is penalised and of course I would get less pension payout as well. But the main point is that there is £120K in that fund and I will probably have to live to 100 to get it all back, let alone any extra. So I want it out and into something more flexible where I can release as much as possible before any new rules kick in.

[Smartboy]

Ah right... Personal Pension arragements are not my area of 'expertise' I'm afraid. Sorry!

[Simpo Two]

Thanks for trying

[Zigster]

Isn't there an option now to take all your pension as cash on retirement if you have a guaranteed income of at least £20k pa? Stops you having to buy an annuity at retirement (which a lot of people believe, often wrongly, are poor value for money). Would investigating that option change your view on whether it is worth continuing with the policy?

[Simpo Two]

Zigster said:

Isn't there an option now to take all your pension as cash on retirement if you have a guaranteed income of at least £20k pa? Stops you having to buy an annuity at retirement (which a lot of people believe, often wrongly, are poor value for money). Would investigating that option change your view on whether it is worth continuing with the policy?

It certainly would. It sounds too good to be true but I'll ask. Many thanks.

[Zigster]

It's called flexible drawdown.

Hargreaves Lansdown on it:
http://www.hl.co.uk/pensions/income-drawdown/what-...

And HMRC on it:
http://www.hmrc.gov.uk/manuals/rpsmmanual/rpsm0910...

[westberks]

Simpo Two said:

It certainly would. It sounds too good to be true but I'll ask. Many thanks.

the problem is that the 20k needs to be from g'teed sources (such as pensions). if it comes from investments then it's not qualifying as the revenue take the view that you could take all of that money and spend it on coke & hookers (and possibly waste some too!)

you could bite the bullet and transfer the fund into a regular drawdown contract, take the 25% tax free cash and then use the maximum GAD rules to get the money out as quickly as possible. there may be a penalty on the existing scheme but you can decide if that's worth it or not.

if you don't particularly need the income, then don't commit to an annuity at the moment as the rates are poor and i'm guessing you aren't that old either. drawdown gives you a bit more flexibility; there are also enough schemes that don't require too much involvement from you if you can't be arsed.

PM me if you like a chat.

[Simpo Two]

YHM