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Pension Lump Sum.
22 Answers
I've had a letter from House of Fraser and they say they can pay out a lump sum on my pension, it also says I will pay tax at 20% on all but the first £614.64. I can leave it where it is and take the annual pension in 8 years time. I am thinking I will take the lump sum, it's not a lot.
I only paid into the fund from January 1978 until June 1978 and then I left to have my first child, I think I paid in about £70 in all. Now they say I can have £2089.78 after tax. Or I could leave it where it is and it will be moved to their new scheme and continue to grow and then in 8 years time when i retire i would get either a lump sum then or a small amount monthly.
What would be the best for me? They will pay it on 29th November and it would mean I could go for a better car now that will probably last me til i retire,
I only paid into the fund from January 1978 until June 1978 and then I left to have my first child, I think I paid in about £70 in all. Now they say I can have £2089.78 after tax. Or I could leave it where it is and it will be moved to their new scheme and continue to grow and then in 8 years time when i retire i would get either a lump sum then or a small amount monthly.
What would be the best for me? They will pay it on 29th November and it would mean I could go for a better car now that will probably last me til i retire,
Answers
I'm not sure I'd bother with an IFA for a small pension like this (as the small pot may be swallowed up by fees), but if you have various pots scattered around it may be worth using an IFA to review all your pension arrangements
07:49 Wed 11th Sep 2013
Dotty, I don't understand why you are being taxed on the lump sum they're offering. Our pension scheme lump sum is tax free - you're taxed on the pension itself if you're eligible to pay tax (i.e. if earnings are over the personal allowance) but the lump itself is as it is.
Personally, I'd leave it where it is. I cashed in one of my pensions early, taking a lump sum and smaller pension, and I wish now that I hadn't - but I needed the money at the time.
Personally, I'd leave it where it is. I cashed in one of my pensions early, taking a lump sum and smaller pension, and I wish now that I hadn't - but I needed the money at the time.
I know ZAc, but then I've just been sitting here glazing over to New Tricks latest unnecessarily complicated storyline and thinking, split 3 ways I could get my daughter the fancy samsung galaxy she wants, get the new laptop my youngest son wants and then give my eldest son the bond and deposit for a new house,
You can't take it all as a lump sum , unless you have absolutely no other company/private pensions or the total fund value of all such schemes is less than £18000 (which is very unlikely if you have been in other company pension schemes). House of Fraser will probably not be aware of other schemes you may have been in.
This should help: http:// www.pen sionsad visorys ervice. org.uk/ taking- payment s-from- your-pe nsion-p ot/what -is-the -right- choice- for-me/ taking- a-small -pensio n-as-a- cash-lu mp-sum
This should help: http://
I’m no expert, but it looks to me as though House of Fraser are treating your pension sum of around £2,500 as a ‘trivial amount’ and allowing you to take 25% tax free, and paying your standard rate tax on the remainder.
The rules on pension ‘trivial amounts’ allows the above (rather than buying an annuity), on the proviso that the pension amount is less than £18,000 (current value). However this £18,000 figure includes all personal pensions that you have – not just to a single pension.
So if you have paid into other personal pensions during your working life, and the value of all your pensions added together exceed £18,000 – House of Fraser should not be making the offer to you.
If House of Fraser pays you this amount, and it is subsequently found to have been outside the rules (see above) – then you could find that you are landed with a tax bill for the tax relief that you were given on the original payments into the plan.
If the payment is all within the rules – my advice it to take the money. It is the reason that the rules for trivial amounts were created – knowing that you would get a very bad annuity rate with such a low pension sum.
The rules on pension ‘trivial amounts’ allows the above (rather than buying an annuity), on the proviso that the pension amount is less than £18,000 (current value). However this £18,000 figure includes all personal pensions that you have – not just to a single pension.
So if you have paid into other personal pensions during your working life, and the value of all your pensions added together exceed £18,000 – House of Fraser should not be making the offer to you.
If House of Fraser pays you this amount, and it is subsequently found to have been outside the rules (see above) – then you could find that you are landed with a tax bill for the tax relief that you were given on the original payments into the plan.
If the payment is all within the rules – my advice it to take the money. It is the reason that the rules for trivial amounts were created – knowing that you would get a very bad annuity rate with such a low pension sum.
it says the rules have changed to allow this payment, and the value is the equivalent of a transfer value if i were to add it to another fund, as i am below pension age. I have filled the form in and my OH has suggested I use it to invest in a 50% share in a remote aerial surveying drone/device as a way of generating income in the future. (that previous sentence ref the drone should be in inverted commas and with a lol at the end but i shall pretend i am taking his idea seriously.