Early pension release schemes

[ddavidm]

I'm sure there are some clever bods here who will know the answer to this.

I have whilst going through some old paperwork found an aged ex scottish widows company pension scheme which was started in my first proper job where I earned a whopping £4900 per annum. As I was only at the firm for about 4 yrs (and I didn't contribute to it) I was pleasantly surprised to discover a current fund value of about 50k.

I am a mere 43, so I'd have at least another 12 years until I could enjoy the whopping 17p / annum pension I'd enjoy. Frankly I'd rather zap a bit of mortgage now or use this to help fund a let to buy deposit.

So, early release....

Doing some research, there are lots of dodgy outfits offering this, from investing in half built hotels in Albania to rice paddies. Putting aside the schemes that would be a) illegal and b) stupid and c) land me with a nice HMRC bill in a year or two, does anyone have experience of release by way of trust mechanism. I have found a company of apparently legit accountants who purport to do just this, but the fees are a rather steep 30%. Is this the going rate? Does anyone know of a better one?

Thanks

 

[Clkrichard]

You cant touch your pension fund before age 55. After that age up to 25% of he fund can be taken as a lump sum free of tax and the balance is turned into income.
There are some very unusual exceptions to this such as you only having a year to live but they are rare.

 

[Dieselman]

There are some very unusual exceptions to this such as you only having a year to live but they are rare.

Once in a lifetime...

 

[renault12ts]

I'm sure there are some clever bods here who will know the answer to this.

I have whilst going through some old paperwork found an aged ex scottish widows company pension scheme which was started in my first proper job where I earned a whopping £4900 per annum. As I was only at the firm for about 4 yrs (and I didn't contribute to it) I was pleasantly surprised to discover a current fund value of about 50k.

I am a mere 43, so I'd have at least another 12 years until I could enjoy the whopping 17p / annum pension I'd enjoy. Frankly I'd rather zap a bit of mortgage now or use this to help fund a let to buy deposit.

So, early release....

Doing some research, there are lots of dodgy outfits offering this, from investing in half built hotels in Albania to rice paddies. Putting aside the schemes that would be a) illegal and b) stupid and c) land me with a nice HMRC bill in a year or two, does anyone have experience of release by way of trust mechanism. I have found a company of apparently legit accountants who purport to do just this, but the fees are a rather steep 30%. Is this the going rate? Does anyone know of a better one?

Thanks

The dodgy schemes include a loan back...and operate from offshore...but ultimately fail...and will sting big time. No one...NO ONE...can do it legit...you will land up in a load of pain. Trust me...I know what I am talking about.

As above, you just can't get your money before 55.

You are talking QROPS (Qualifying Recognised Overseas Pension Schemes). Do a search...there is plenty about them...but don't go there.

http://www.hmrc.gov.uk/pensionschemes/qrops.pdf

 

[LTD]

Do a search...there is plenty about them...but don't go there.

Here endeth the thread.

 

[ddavidm]

That's what I had thought as well.

As I understand this scheme, goes something like this:-

I join as an employee member of an umbrella pension trust
Funds transferred to the trust
I cease membership of the umbrella pension trust
Pension asset now treated as simple asset of a trust
Pension scheme administrator signs fiduciary services agreement which enjoys tax exempt status.
I open ltd company and am appointed as fiduciary of the funds

Apparently this scheme is approved and registered with HMRC. Although not widely known about.

 

[Clkrichard]

Such a scheme would not be approved and registered with or by HMRC. You simply cannot withdraw funds from a registered pension scheme before age 55

 

[Deleted member 37751]

Not meaning to thread hijack, but I'm in a similar position.

I worked for a firm for two years in my early twenties and received a pension update thing stating that my 'pot' was £6k and something. When I contacted the pension company they said I'd have to wait until I was 55! What's the point of that? Why can't they just pay me the money out?

For the record, I have no other pensions and I never intend to start one.

 

[renault12ts]

Not meaning to thread hijack, but I'm in a similar position.

I worked for a firm for two years in my early twenties and received a pension update thing stating that my 'pot' was £6k and something. When I contacted the pension company they said I'd have to wait until I was 55! What's the point of that? Why can't they just pay me the money out?

For the record, I have no other pensions and I never intend to start one.

If you wait 'til you're 60, you can get it all out in cash under "triviality " rules.

 

[LTD]

Not meaning to thread hijack, but I'm in a similar position.

I worked for a firm for two years in my early twenties and received a pension update thing stating that my 'pot' was £6k and something. When I contacted the pension company they said I'd have to wait until I was 55! What's the point of that? Why can't they just pay me the money out?

For the record, I have no other pensions and I never intend to start one.

It's called law. Legally, you cannot receive the benefits until 55 years of age.

There are a few exceptions. Professional sportspersons whose careers are over at an early age may qualify although most would use some form of Employee Benefit Trust.

 

[Clkrichard]

It may well come out in one go under the triviality rules but 75% of that money will be taxed as earned income in the tax year in which it is drawn.
The basic thinking is that we all benefit from tax relief on the money on its way into the pension so it shouldnt be capable of being easily withdrawn " early " and then not used to provide retirement income. There are vehicles which offer tax breaks and withdrawal before age 55 such as ISAs, VCTs, EIS etc but pension funds are the most tax efficient hence the early withdrawal barriers.

 

[Deleted member 37751]

It's called law. Legally, you cannot receive the benefits until 55 years of age.

I get that bit, but it's my money and I'm not allowed it for over twenty years because its the law?

 

[LTD]

I get that bit, but it's my money and I'm not allowed it for over twenty years because?

You signed up to a tax-adventageous scheme that provided enhanced benefits in the future.

 

[Deleted member 37751]

You signed up to a tax-adventageous scheme that provided enhanced benefits in the future.

Funny thing was, I wasn't earning a great deal of money at the time and I didn't put a bean into that that pension fund; it was set up without anyone asking for it and the gaffer paid in.

I am remembering now why I've vowed to never have a pension...

 

[Satch]

Apparently this scheme is approved and registered with HMRC. Although not widely known about.

Ah right.

"Approved" by HMRC?

Well they will have all that in writing then.

 

[renault12ts]

Funny thing was, I wasn't earning a great deal of money at the time and I didn't put a bean into that that pension fund; it was set up without anyone asking for it and the gaffer paid in.

I am remembering now why I've vowed to never have a pension...

Lee, it was free? Why are you complaining?

And , as an employer you will have to set up a pension scheme and enroll your eligible employees into it with in the next three years.

 

[Deleted member 37751]

Lee, it was free? Why are you complaining?

Because I could be putting it to better use than being sat in a bank (pension?) account.

The less I have tied up in the financial sector, the better.

And , as an employer you will have to set up a pension scheme and enroll your eligible employees into it with in the next three years.

I'm planning on being in the Bahamas by then.

 

[renault12ts]

Because I could be putting it to better use than being sat in a bank (pension?) account.

The less I have tied up in the financial sector, the better.

Indeed...but if your gaffer hadn't put it there in the first place...

 

[Deleted member 37751]

Indeed...but if your gaffer hadn't put it there in the first place...

I completely agree, however that is now a moot point; it's now mine and I want to get my grubby hands on it.

 

[renault12ts]

I completely agree, however that is now a moot point; it's now mine and I want to get my grubby hands on it.

Tough...you can't have it.