Truely Independant Financial Advice

I have recently been made aware of a pension that I didn’t know I had (so essentially free money, right…) and for possibly the first time in my life I want to do something sensible with it.

It’s currently valued at £64k and I have a rather large mortgage that I will still be paying long after I reach retirement age. I’m trying to work out when would be the best time to cash some of it in and reduce the term of my mortgage. I’m got about 4.5 years left on a fix so am limited to how much I can repay.

If I withdraw 25% of the fund it will reduce the term by 2 years 4 months and save £19K in interest.

If I withdraw enough to cover the max allowed repayment it will reduce the term by 5 years 3 months and save £40k in interest.

My IFA’s advice is to move the pension fund (which I will have to do regardless of final decision as the current fund only allows me to withdraw the full amount, putting me firmly into the 40% tax bracket) but wait until the fixed rate period is up before making any payments off the mortgage. WWSTD?

Could you wang it in another pension pot and the draw down 25% of the combined badger tax free?

And then, I found sixty four thousand pounds. Down the back of the sofa….

What interest rate are you paying on the mortgage, how has the pension performed historically (no guarantee of future obvs), how is the pension invested and what are the ongoing fees? That’s all going to influence what you do with it.

Yes, but my pension pot is pitiful and I’m going to paying into a pension of some sort for another 12 years at least. As I understand it, taking the tax free sum essentially closes the pot to new investment.

Sounds complicated – coke and hookers it is then!

How old are you? You can’t take any money out of the pension until at least 55,or possibly later depending on when you hit 55.

Also if you still plan to contribute to your other pensions for a few more years you need to ensure that you don’t trigger the mpaa limit by taking money out of thelis pension

I’m 55.

I’m 55.

Result! Just the mpaa to avoid then, assuming you still plan to make significant pension contribs for a few more years yet

Significant is a relative term…

You can take the 25% and leave the rest invested – if that saves you 2 years mortgage and £19k interest then it’s a no-brainer. You move the pot into a drawdown pension, but leave the 75% invested.

I hit 55 in two months, and I’m fortunate I have four schemes, two of which aren’t ‘needed’ for retirement. I’m looking at taking the 25% and leaving the rest invested. We don’t have a mortgage (paid off), so my choice is to access a decent lump sum to be able to change our lifestyle and travel more whilst I can still pay into my main pension. Seen too many folk (family and friends) get to mid 60’s and their plans have gone to poop. Mine is an ‘active’ plan.

Most of us will never get to the MPAA limits unless you are loaded. I’m in a final salary scheme, and the ones I am accessing are old ones that I paid into when much younger.  My official retirement is in 12 years, I suspect it will be earlier, if my adult kids are financially independent before then (hah hah hah) – I was married by 25, own house etc etc. My son is 24 and not any chance he’s moving out. Daughter 21.