Age 55 Tax Free Cash – Pension Commencement Lump Sum (PCLS) Reqiured.
The aim of this section is not to advise you but merely to highlight some facts and scenarios for your consideration when thinking about pensions, Tax Free Cash, PCLS, the potential sources for this and the earliest age at which it can be accessed. For all scenarios there is an advice process which has to be paid for, ongoing service fees, and charges to consider. The advice process looks at your position and retirement options and enables us to look carefully at each of your pension policies in turn and advise you accordingly so that you can make an informed decision.
The earliest age for retirement using a Pension is age 55 for men and women. One can of course retire earlier if you have alternative income and funds but you cannot access your pension funds until at least age 55 is reached. The only exception being extreme Ill Health (Terminal), or a scheme with an earlier retirement age as a statute. If this is not suited for you then regard age 55 as the start point at which you can do this.
At age 55 you can access one or any multiple of your pension pots.
The main sources can be from any of the following
- Personal Pension, or Personal Pensions (PP)
- Previous Company Final salary Scheme that you are no longer contributing into from a former employer and you transfer the fund out.
- Early Retirement from a previous final salary scheme with the trustees of the scheme agreement and there may well be an early retirement penalty to do so which could also affect the Tax Free Cash and income.
- Stakeholder Pension Policy (SHP)
- Free Standing Additional Voluntary Contribution (FSAVC)
- Executive Pension Plan (EPP)
- Company Defined Contribution Plan
- Group Pension Policy (GPP)
- Self Invested Personal Pension (SIPP)
- Small Self Administered Scheme (SSAS)
Note: Government Schemes that are Unfunded such as Police, Fire, NHS, Teachers etc are exempt from any transfers as of April 2015 which means that you cannot transfer out even if you wanted to.
In this example we will assume there is one personal pension involved and a paid up company final salary scheme (Paid up meaning that you were a member of the company scheme but have since left that employer and no longer contribute into it). You have decided to opt for a Flexi Access Drawdown Policy instead of an annuity. This example is also to show you that you can combine different types of retirement plans into the same single pot. (We are not saying that this is the best for you this is merely an example of Tax Free Cash from two different scheme types)
The Pensions will have to be transferred into a single new Flexi Access Drawdown Policy.
Personal Pension A. Current Value £50,000.00.
Final Salary Pension Transfer Value B. Transfer Value £250,000.00.
Combined values of Pensions A & B = £300,000.00
25% as Tax Free Cash or PCLS will be £75,000.00 paid up front tax free on transfer into a Flexi Access Drawdown Policy.
If a Flexi Access Drawdown policy was used, the remaining fund £225,000.00 will remain invested according to your attitude to risk and from this amount the adviser fee and any charges will be drawn on completion. Ongoing advice is required via a Flexi Access Drawdown Policy because it is an invested contract.
The benefit of this being the Tax Free cash is a true representation of the fund value on the day of transfer into the Flexi Access Drawdown Plan.
As you have only taken the Tax Free Cash and no income or none of the actual fund you are still able to pay in up to £40,000.00 per year in pension contributions to your current scheme or company scheme if have one that is. This is the maximum annual allowance allowed for pension contributions currently. This can be paid into any of your current pension schemes not yet touched. For many this is of course not possible of viable to do.
Should you subsequently take an income or access the fund then your annual allowance will drop to £4,000.00 maximum pension contributions. For many this is still a high amount of contribution facility and may not make any difference to them but it is a consideration never the less.
Any income or funds taken from the remaining fund will be taxed as income under PAYE at your highest rate, so in this instance an large capital withdrawal would incur a large tax payment.
It should be remembered that taking the Tax Free Cash from one or all of your pensions at age 55 or before your intended retirement date will decrease the value of your plan and in turn could reduce your eventual retirement income later in life. Likewise accessing and withdrawing your pension funds or funds on top of your Tax Free Cash will also reduce your eventual retirement income.
There is an advice process to go through to ensure what is best for you and that you have a full and complete understanding of your current situation and you are able to make an informed decision. Please complete the contact us details and we will be in touch shortly.
What do our customers say about us?
We love our customers and are fully dedicated to keeping their trust by providing them with the best advice to fit their needs.
Dear First Place Financial Ltd
Thank you for your help with my transfer. I have now been able to use the Tax Free Cash to reduce my mortgage which has made me better off each month. Things are looking up.
Having bought my flat from the council a few years ago they decided to re roof the block and whilst it was free to council tenants, those like me who had bought in good faith were sent a bill from the council for our share of the cost. Thanks to your help we were able to get his money by way of Tax Free Cash from one of my old pensions and we were able to settle the council bill without any further borrowing. Now the income pays for a nice holiday each year.
We asked for help regarding our retirement planning. First Place Financial Ltd were able to check every policy that we had and then offer relevant and clearly understandable advice to us about what we can and can’t do and as such we formulated a plan which was best for us. Thank you so much for all of your help.