Taking DC pension when/if CDC pension starts?

[ihatedogs]

Thinking of doing this, my DC pension isn't massive as I've only been in it three years, but it will be enough to leave me mortgage free.
Anyone else looked at this? Any thoughts/ problems?
Whilst it's almost always best to leave your pension until retirement age, the attraction of no mortgage and a lower cost of living has a real appeal.

[RobertT]

Points to consider:

You can't access your money until age 55, rising to 57 in 2028.
You'll probably have to transfer it from Scottish Widows to enable drawdown.
The first 25% will be tax free and if you're income is over £12,570 you'll lose at least 20% tax on the rest.
Are you getting a better return from your investments than the interest rate on your mortgage.
You might be working longer as a result of dipping into your pension early.

I know the benefits of being mortgage free because I am, but I'm not sure I'd be willing to dip into my pension if I was in the same situation as you.

But as ever it's a personal circumstance thing!

I'm not quite sure of the relevance to the CDC scheme starting?

[ihatedogs]

Points to consider:

You can't access your money until age 55, rising to 57 in 2028.
You'll probably have to transfer it from Scottish Widows to enable drawdown.
The first 25% will be tax free and if you're income is over £12,570 you'll lose at least 20% tax on the rest.
Are you getting a better return from your investments than the interest rate on your mortgage.
You might be working longer as a result of dipping into your pension early.

I know the benefits of being mortgage free because I am, but I'm not sure I'd be willing to dip into my pension if I was in the same situation as you.

But as ever it's a personal circumstance thing!

I'm not quite sure of the relevance to the CDC scheme starting?

My plan is to basically make use of salary sacrifice to throw as much as possible into the CDC pension while also being mortgage free and having more funds available to do things in life while I'm still ( relatively) young. There comes a point in life where you have to stop saving for the future and live in the moment.
As you rightly say though, it's a personal choice and won't suit everybody.

[Schiff]

My plan is to basically make use of salary sacrifice to throw as much as possible into the CDC pension while also being mortgage free and having more funds available to do things in life while I'm still ( relatively) young. There comes a point in life where you have to stop saving for the future and live in the moment.
As you rightly say though, it's a personal choice and won't suit everybody.

Once you draw on anything other than the TFLS from a DC pension then you are limited in the amount that you can contribute into a DC pension scheme from that point onward.
I don't know if it would also restrict the amount that you could contribute to a CDC pension scheme, but if so it could scupper your plan to throw money at the new scheme.

[RobertT]

Once you draw on anything other than the TFLS from a DC pension then you are limited in the amount that you can contribute into a DC pension scheme from that point onward.
I don't know if it would also restrict the amount that you could contribute to a CDC pension scheme, but if so it could scupper your plan to throw money at the new scheme.

Good point!

More info on the Money Purchase Annual Allowance can be found here: https://www.moneyhelper.org.uk/en/pensi ... wance-mpaa

I'm not sure whether it's confirmed that CDC will be classed as the same as an individual DC scheme for MPAA purposes, but there's a good chance it will be as they were re-named collective money purchase schemes in the legislation.

[ihatedogs]

A quick read would suggest that my plans are indeed scuppered. Will have another look at my options when CDC becomes a reality.

[rambo1]

Instead of throwing extra into pension can't you start overpaying your mortgage to bring it down? Preferably before interest rates start rising from next yr. Taking a cut in pension by drawing early seems counter productive to me.