You don't need to be an 'investor' to invest in Singletrack: 6 days left: 95% of target - Find out more
A previous employer went bust last year and as part of the process the pension scheme is being wound up/transferred.
I don't have a lot of money in the scheme and one option is to take the cash, subject to tax.
The question I have at this moment is what tax would this be? income tax, national insurance, both, some other?
Taxed as regular income isn’t it? So depending on which tax bracket you’re in could really hurt your contributions.
That's the bit I am not sure of, I am guessing just income tax. For the sake of a couple of hundred pounds just trying to figure out whether I take the cash and use it for holiday money, or just let it the administrator do there bit and transfer it to a new scheme.
I've had that. Don't know if rules are still the same (was a 10 years ago).
Known as a winding up lump sum.
25% was tax free (like a pension, even though I'm way off pension age). The remainder was taxed like income.
I presume if you can transfer it direct to another pension then it might be tax free.
thanks mick, sounds like how I read the letter.
I can transfer it, but as mentioned it is only a couple of hundred pounds, probably makes more sense to pay off the credit card etc.
A transfer, I assume, will be to the Pension Protection Fund (PPF).
When the PPF take over a scheme there is a reduction in benefits.
If previous employer went bust I don't think you have an option to transfer but I'm not a pensions expert.
Do you know if the PPF are involved? If yes, call them direct and ask what options you have. If they're not or you're unsure, call the administrators and ask what's happening with the pension scheme.
Sounds a very small amount. I thought it wasn't just giving back what you'd put in, but rather discharging their liability from supplying you a pension x years down the line. Hence my 3 years of apprentice wage (i.e small) payments gave me about £11k before tax.
But thinking about it, mine could have been a bit different - it was a big pension scheme that was being sold to an insurance company - so maybe it was an enhanced payment by the new scheme owner to get rid of very long term liabilities.
frank, PPF isn't listed as an option. I have three, transfer the money to a scheme of my choice, I assume tax free, let the administrator pick a scheme and they will do the transfer, or finally tax the cash and walk away, but subject to tax.
frank, PPF isn’t listed as an option. I have three, transfer the money to a scheme of my choice, I assume tax free, let the administrator pick a scheme and they will do the transfer, or finally tax the cash and walk away, but subject to tax.
Yes, the PPF isn't a pension fund, they just manage collapsed pension funds and transfer it to someone else etc.
I would transfer the remaining funds to another pension either an existing one or open a low cost SIPP eg with Interactive Investor, as that will be the most tax efficient option.