Cashing in an old pension...

**TykeMerc** · 13 October 2015, 08:16

Pretty sure you're right.

I've worked with a fair few ex Forces lads, their pensions are treated as income as are the initial lump sums. Unless there's some special rules on the new lump sum thing that started recently.

Bummer that really.

**Sausage Surprise** · 13 October 2015, 10:48

Just checked with accountant and it will be treated as income on the SA. Doesn't seem much point it taking it now.

**Dallas** · 13 October 2015, 10:52

I have a session booked with a IFA next week and will be asking if it is worth taking the hit now when you know and can control the tax somewhat or leaving it dormant to be worth nothing 20 years from now.

It's all a gamble of course but if I can take the hit and control the longer term outcome is that not worth it for a couple of K vs unknown future policy change?

**Sausage Surprise** · 13 October 2015, 11:24

Originally posted by Dallas View Post

I have a session booked with a IFA next week and will be asking if it is worth taking the hit now when you know and can control the tax somewhat or leaving it dormant to be worth nothing 20 years from now.

It's all a gamble of course but if I can take the hit and control the longer term outcome is that not worth it for a couple of K vs unknown future policy change?

Good point. Something to consider.

**ContrataxLtd** · 13 October 2015, 12:05

Originally posted by Sausage Surprise View Post

I think I know the answer to this but just want to confirm it...

I go down the route of min wage plus dividends to the 40% threshold each year.
I have a small pension lying around with £28k in it. If I want to take the whole lot as a lump sum 25% is tax free (£7k) so they deduct "emergency tax" from the remaining £21k leaving me with around £22k in my pocket.

However my question is... Am I right in thinking that when it comes to my SA the extra £22k will be counted as income therefore my dividends will be liable to the upper tax limit and I'l get a nice big tax bill for 2015/16??

Hi Sausage Surprise,

As your accountant has confirmed, the £21k will be income to yourself (just think of it as salary) so will use up a considerable chunk of your basic rate band and push dividends into the high rate so in effect a double whammy.

One thing I've found out with a few clients that have looked at doing this, if there are any guaranteed annuity rates, links to final salaries etc. then it's seeming almost impossible to actually get the money withdrawn. This is on the basis that an IFA needs to confirm that it's in your best interest to withdraw the money and in most cases it isn't (in their eyes perhaps) so they can't make the necessary declaration and such the pension company won't allow the withdrawal.

Martin
Contratax ltd

**Sausage Surprise** · 13 October 2015, 15:47

Originally posted by ContrataxLtd View Post

Hi Sausage Surprise,

As your accountant has confirmed, the £21k will be income to yourself (just think of it as salary) so will use up a considerable chunk of your basic rate band and push dividends into the high rate so in effect a double whammy.

One thing I've found out with a few clients that have looked at doing this, if there are any guaranteed annuity rates, links to final salaries etc. then it's seeming almost impossible to actually get the money withdrawn. This is on the basis that an IFA needs to confirm that it's in your best interest to withdraw the money and in most cases it isn't (in their eyes perhaps) so they can't make the necessary declaration and such the pension company won't allow the withdrawal.

Martin
Contratax ltd

Thank for that Martin. Much appreciated.

**MarillionFan** · 14 October 2015, 14:03

Originally posted by Sausage Surprise View Post

I think I know the answer to this but just want to confirm it...

I go down the route of min wage plus dividends to the 40% threshold each year.
I have a small pension lying around with £28k in it. If I want to take the whole lot as a lump sum 25% is tax free (£7k) so they deduct "emergency tax" from the remaining £21k leaving me with around £22k in my pocket.

However my question is... Am I right in thinking that when it comes to my SA the extra £22k will be counted as income therefore my dividends will be liable to the upper tax limit and I'l get a nice big tax bill for 2015/16??

Can you not pay a whole load of money from the company into the pension & get additional tax relief and making it tax deductible, then cash it in?

Cashing in an old pension...