Cashing in Two Small Pensions in UK

L

LiferT

Registered User
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Hi

I wonder if anyone can help.

I am 58 and have an occupational (Defined Contribution) pension with a main Irish pension provider.

I worked in the UK many years ago and have 2 very small private pensions valued at £7,000 and £12,500 respectively. The annual pension from these will be insignificant and I would like to either cash them in or transfer them to my main Irish based pension fund.

I am working currently and plan to retire at 65 years. I pay tax at the marginal rate.

Should I cash the pensions in now, take 25% tax free lump sum and pay tax on the remainder? Will the tax paid be paid on my Irish income or UK (zero) income?

Alternatively, should I wait until I retire, and cash out the funds, and pay tax at the rate applied to my very much reduced retirement income.

Is transferring the UK to my Irish pension fund a viable alternative, or will the fees charged be prohibitive?

Many thanks in advance for your assistance.

LT
 
A friend cashed in a UK pension last year, 40% tax was deducted in UK then in Ireland he had to pay a small amount of USC on it. He then reclaimed some of the UK tax on a form downloaded from the HMRC website as he was on the lower tax bracket. It makes no difference whether you take money now or when you retire but if you leave it be, it will hopefully continue to grow.
 
Worth looking as well to see if you have any entitlement to the UK state pension and what that does to your Irish one.
 
If you don't need the additional income for the next 7 years, I wouldn't be inclined to draw the pensions down now.

  • You can leave the funds where they are and draw them at 65.
  • If your current DC scheme can accept transfers from the UK, you may be able to transfer the funds into it. You'd have to ask the scheme administrators if it can accept such a transfer and give them details of the UK funds.
  • Alternatively you can transfer them into personal policies here in Ireland.
There are quite a number of factors to be considered in deciding which of the above three options is best. Taxation, charges, options at retirement, currency exchange (now or later), fund choice ... ideally you would need to evaluate the three options under each of these headings before making a decision.

Regards,

Liam
www.ferga.com
 
Hi All

Many thanks for taking the time to respond to my query.

I think that I will do nothing until I reach 65. I will then take the 25% cash free lump sum from each of the UK pensions and take the remainder of each in cash which will be taxable. Hopefully I will only need to pay tax at the lower rate on the remainder.

Does anyone know whether the tax rate that will be applied will be based on the year that I draw down the cash i.e. when I am retired at 65, or based on my income from the previous year, when I will be working full time and paying tax at 40%?.

Best regards

LT
 
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