Frozen or Dormant pension

[realitybites]

This is probably a stupid question but I have to ask. I left RM 5 months ago at 61. Does my pension still accrue interest. I have only researched it briefly and should have been doing my research well before now. Would the money be better served in a high interest easy access account like monument. Can anyone tell me if there is a way to limit tax and draw my entire pension over a period of 6 years. Many thanks. Should have mentioned it is the RMDCP policy

[RobertT]

Your pension will still be invested in the fund/s you've chosen and therefore it's value will fluctuate along with them.

When you access it you can usually take 25% tax free, with the remainder being classed as income and coming under normal PAYE tax rules.

It's not possible to just move it to a savings account, but you can change your investments within the pension to something that meets your requirements. Or else move it to a personal pension with the choices you want.

Taking it all out in one go will generally be a bad move as you're more likely to hit the higher tax band. So drawing it down over a period of time is usually best.

I'm not sure if Scottish Widows offers drawdown via the RMDCP, but I don't think they do. If they don't, you'll have to transfer out to a personal pension.

This gives a general guide to how your pension works: https://www.moneyhelper.org.uk/en/pensi ... on-schemes

[realitybites]

Thank you, as always, very informative

[realitybites]

Can I ask a quick related question. Would it be worth paying a lump sum into my pension even though I have left RM. I was thinking around £50k. Or would it be better sat in the bank

[RobertT]

You won't be able to pay into your RM pension if you've left the company. But if you transfer it out of the RMDCP and into a personal pension, you will then be able to contribute more.
Or just start a new pension for that money.

There are limits to how much you can pay into pensions in any one year and get tax relief.
That's usually equal to how much you earn, up to a maximum of £60k.

If you've already accessed the taxable element of any DC pension, that limit reduces to £10k into DC plus £50k into DB.

If you have no income from work, you can still pay in £3,600.

All limits include tax relief and any employer contributions.

The benefit of pensions over a savings account is you get tax relief on your contributions, giving you an instant 25% uplift on your money. For example: Put £10k in a SIPP and the taxman adds on another £2.5k.

But there are limits to when you can access your cash and how much you can take tax free.
Plus the investment choices are clearly different.

Generally it's best not to put too many eggs in one basket, but ultimately where you put your money is a choice you make for yourself or with the help of an IFA.

[realitybites]

Fantastic, thanks again for all the useful info