Taking workplace pension at 55

[Realist]

Hi Caricature.

You are preumably talking about a private pension there. Every pension has its own rules terms and conditions of course.

One thing to note is that, at least here in the UK, if you take a tax free lump sum from your pension and then pump that same money into another pension to increase your overall tax benefits you can end up with huge tax charges.
It is known as “recycling”. Everything depends on how much cash is being used and what percentage that is of your “lifetime allowance”. I had to sign a declaration form when I started taking my pension stating if I was recycling or not.

[caricature]

Just reread the letter from my then workplace pension provider,

Quote:You are entitled to take a proportion of the pension in tax free cash, by transferring the pension to a new provider, tax free is limited to %25 of the pension. Under the ****** administered scheme the tax-free cash entitlement was more. Unquote.

[caricature]

@Realist

Hi Caricature.

You are preumably talking about a private pension there. Every pension has its own rules terms and conditions of course.

One thing to note is that, at least here in the UK, you can not take a tax free lump sum from your pension and then pump that same money into another pension to increase your overall tax benefits. You have to sign a declaration form when you start taking your pension stating that you won’t do that.

It was a workplace pension under the money purchase scheme not a final salary one.

[swimfeeders]

@Realist

A reasonable plan Swims so long as one is able to survive on that lower paid job wage. Comes down to lifestyle choice and living within one’s means I guess.

My adage has, and will always be, make paying any debts off the first priority because debts accrue interest. Pay the debts off and you massively reduce the overall amount that you will have to pay. Same goes for a mortgage. Pay it off as soon as humanly possible as it can knock tens of thousands of pounds off the total repayable amount.

There’s an interesting debate to be had about whether it is better to sit with debts and pay into a pension, or whether it is better to temporarily stop paying into a pension and instead use the available money to pay off the debts.

In the first scenario, running with debts and/or mortgages, you are accruing lots of interest payments making the total repayable amount much higher than it otherwise would be. In the case of a mortgage the difference in interest paid and total repayment amount is staggering. Pay an extra £100 a month off your mortgage and you could save a stonking amount on the total loan and see the mortgage paid off years earlier.

In the second scenario, you put all available monies into paying off the debts and mortgage instead of paying into the pension pot. So your eventual pension amount is less than it otherwise would be but you’ve saved a collossal amount of money paying the debts/mortgage down.

You’re only getting 20% tax relief on the first £2,880 paid into your pension. The amounts you save by paying down more towards a mortgage is surely phenomenally better no?

Interested to hear yours and others thoughts on the debt vs pension equation.

Hi

I beg to differ.

Tax on your private pension contributions

When I took redundancy, I could not go back to working for the Government as a direct employee for a year and a day without having my Pension reduced.

Time out, back again, part time, 29 and a half hours a week, fixed term contract and paid the lot into a Private Scheme, full tax relief and then took 25% of it, Tax Free, when I finished 3 years later.

If I had worked 30 hours a week, I would have been classed as full time and lost my original Pension.

The rules are complex, but workable.

[Realist]

Sounds similar to where I worked Swim, only for us the stay out period after taking voluntary redundancy was just 6 months. Quite a few people took the pay off and left and then came back as IT contractors 6 months later. They were absolutely quids in. I chose the easy life and just stayed as a long term employee until I eventually took VR.

So when you came back working part time what were you living on? The VR pay off money?

[Floydy]

All workplace pensions are run in a slightly different way. To reiterate my situation, I can take 25% tax free at age 55 without this being further taxed. I have looked into this in depth now and whatever my company’s fault’s they do look after their workforce when it comes to pensions.
My plans are all but ready to be forwarded to L&G when I receive their letter very soon.
Thanks to all of you for the posts in this thread. The further advice has been very useful.

[Kazz]

@Floydy

Hi Kazz.
Reading your post there is easily the closest scenario to what I am experiencing. You took your pension at 55, worked nights and at 60 you are looking at taking another pension - as I will be from my RAF service. Like a mirror image in fact!

I’ve been further looking at this now and it’s really going to prove very useful in clearing mine and my wife’s debts, her car paid off plus paying for mine and my wife’s funerals (in advance), a new bathroom and possibly a nice holiday too - all for a quarter of the pension (the tax free sum).

I will also be able to leave the night shift and beforehand I’ll be talking to my firm about a similar job on the day shift (though ideally I don’t want to work shifts at all anymore) Perhaps even re-training for a different role at the company.
It does make sense to stay with this company though as I’d lose all my holidays if I started again somewhere else - I’ll wait until I’m 60 to do that. We’ll see.

But as you say, we see so many people lose their health due to working nights. I’ve been on them over thirteen years now and I’m almost certain that my chest and coughing complaints are due to these unsociable hours. On my shift of 18 people most of them are or have been suffering illnesses, mostly diabetes-related, heart problems or bad backs and sciatica.

Time to get out then soon and I’m predicting at the most one more year and then it’s time to move on.

Nice post, Kazz. Thank you

I would say DO IT don’t think it.

Oddly I loved nights its just the World works on the dayshift. Expect a withdrawal period when you come off.

[Kazz]

@Floydy

All workplace pensions are run in a slightly different way. To reiterate my situation, I can take 25% tax free at age 55 without this being further taxed. I have looked into this in depth now and whatever my company’s fault’s they do look after their workforce when it comes to pensions.
My plans are all but ready to be forwarded to L&G when I receive their letter very soon.
Thanks to all of you for the posts in this thread. The further advice has been very useful.

L&G must do all the pensions now. :-p Ditto mine was as you say.

[Kazz]

@Mags

Good to see you Kazz

Random posting but finding my feet again.

[Floydy]

@Kazz

I would say DO IT don’t think it.

Oddly I loved nights its just the World works on the dayshift. Expect a withdrawal period when you come off.

A bit like the jet lag-type symptoms I experience every weekend I reckon! :o

@Kazz

L&G must do all the pensions now. :-p Ditto mine was as you say.

Yes, they appear to be very good at it. They certainly keep me informed of changes, etc.