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uptherebels

Short Term Pension

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Suppose you are a couple of years away from retirement, is it possible to start a personal pension, and use it as a sort of savings scheme? If you pay in say, three hundred a month, I assume this would immediately increase because of the tax relief. Then when your retirement is reached, can you get all of the money back straight away? If you take 25% then what's left over is not going to buy much of a pension, so could you get it all back as a lump sum?

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Suppose you are a couple of years away from retirement, is it possible to start a personal pension, and use it as a sort of savings scheme? If you pay in say, three hundred a month, I assume this would immediately increase because of the tax relief. Then when your retirement is reached, can you get all of the money back straight away? If you take 25% then what's left over is not going to buy much of a pension, so could you get it all back as a lump sum?

Yes and no. You could use it as a tax efficient savings scheme but you can only get the 25% back tax free. If your marginal tax rate on withdrawal is lower than on your rate of contribution you will save there too. You will also need to accept market annuity pricing on the rest, which is not necessarily an issue unless you want drawdown rights.

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Yes and no. You could use it as a tax efficient savings scheme but you can only get the 25% back tax free. If your marginal tax rate on withdrawal is lower than on your rate of contribution you will save there too. You will also need to accept market annuity pricing on the rest, which is not necessarily an issue unless you want drawdown rights.

This is very good info but there's a small piece of additional information which might prove useful in OP's short timescale scenario. As long as your pension savings in all pension schemes are valued at less than £18k when you take benefits then you can take all the benefits as a lump sum. Only 25% of that is tax free still, the rest is taxed at your marginal rate, but it means you don't need to accept market annuity pricing or drawdown restrictions.

This is known as the triviality rule should anyone wish to look it up.

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This is very good info but there's a small piece of additional information which might prove useful in OP's short timescale scenario. As long as your pension savings in all pension schemes are valued at less than £18k when you take benefits then you can take all the benefits as a lump sum. Only 25% of that is tax free still, the rest is taxed at your marginal rate, but it means you don't need to accept market annuity pricing or drawdown restrictions.

This is known as the triviality rule should anyone wish to look it up.

Just a more complex point on trivial commutation. I have a fund that may or may not be over 18k when I reach 55, since it now stands a few grand shy with 5 years left. However, I have a contracted out SERPs scheme taking the aggregate over 18k.

Do personal pension contributions stand alone for trivial commutation rules or must they be aggregated with contracted out SERPs thereby disqualifying trivial commutation. I realise ordinary personal pension schemes aggregate but it is unclear with the SERPs contacted out/ personal pension combo.

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