# Cash in Pension to reduce Mortgage?



## Mel (16 Jun 2011)

I'm disgusted with the recent raid on pension funds, I didn't think any government would stoop so low. I've paid diligently into a pension fund for the past 8 years, as advised and encouraged by the government, even though I could ill afford it. 
I only have a small pot, say circa. 20K at present value. 
I'm considering cashing this in and paying it off against my mortgage - 
value of house, estimate 160K max, balance on mortgage I think around 200K, tracker rate of 2.5% with a favourable contract that allows me to make additional payments, lump sum payments with the option to withdraw them at a later date. 
I'd like to hear opinions on the pros/cons of cashing in current pension, paying this into mortgage to reduce the balance/monthly repayments, and perhaps saving or investing in a different way rather than continue with the pension, or alternatively continuing the pension as it's a work scheme with employer matching contributions. 
I'm a single parent with no other supports at present.


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## Sunny (16 Jun 2011)

You can't cash in your pension except under rare circumstances.


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## Mel (16 Jun 2011)

Oh. I did this in a previous job - when I left I had an option to leave the contributions where they were or cash them in - at the time I cashed them in. 
What are the circumstances?


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## Sunny (16 Jun 2011)

Mel said:


> Oh. I did this in a previous job - when I left I had an option to leave the contributions where they were or cash them in - at the time I cashed them in.
> What are the circumstances?


 
I think it is if you are in the job less than 2 years(??) or at a certain age and the scheme allows you to.


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## Mel (16 Jun 2011)

Thanks Sunny.
I'm feeling more like a sitting target with every passing week...


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## LDFerguson (16 Jun 2011)

If you're over 50, you can check if there are early retirement options.


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## koscienly (20 Jun 2011)

That's strange Sunny.  I recently had my pension released.  I think it's just knowing the right people that can do it for you.


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## angela59 (21 Jun 2011)

koscienly said:


> That's strange Sunny. I recently had my pension released. I think it's just knowing the right people that can do it for you.


 

Hi Koscienly,

Was it worth your while by the time you paid the tax on pension when you drew it down?

angela59


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## elcato (21 Jun 2011)

Up until a few years ago I believe you could cash in a pension as long as you were less than two years in the scheme. You would pay tax on this obviously and you couldn't take any employer contibution with you. Currently, if your employer matches your contribution of  say 5% it means that you are getting 10% into a pension fund and if you are in the top tax bracket this would mean for 2% of your net income you are getting 10% into a pension fund. The annual fee the government charge will cost you is not much compared to what your fund is (although I'm not defending the charge). So perhaps you should think about it like a small bonus for now. Of course they will reduce the tax breaks for this in time and you will pay more but for the 20k in your pension it has only cost you 4k over the last 8 years assuming there was no real gain in that time.


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## Dave Vanian (21 Jun 2011)

koscienly said:


> That's strange Sunny. I recently had my pension released. I think it's just knowing the right people that can do it for you.


 
Are you referring to the practice of transferring a fund overseas to a country where the regime is more relaxed like New Zealand by any chance?  The guy in the middle takes a big commission for facilitating this. 

Do you know what the tax implications are in the various jurisdictions through which your pension fund must pass?  Including when you bring the money back into Ireland?  

Have a read of [broken link removed] also, or just Google "Trust Busting QROPS".


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## koscienly (21 Jun 2011)

Hi Dave,

Thank you for the article.  I found it interesting and informative.

The scheme you referred to seems to be similar to the one I used.  I felt the charges were reasonable and not too high. 

My position simply was I needed to access a pension I had paid into for a long time to help try save my business .  I'd stopped paying in to the pension a few years back and every year I got my statement my fund seemed to be depleting.

I feel lucky to have been introduced to a guy that was able to get my pension fund back, despite the pension company telling me this could never be done.

After I read your article I read more on your website.  I have to say I found it very professional.  Congratulations on it, I may need to use your service sometime in the future and I certainly know my best man who is from London will be interested to read about your services.  Thanks for your help and advise.


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## Brendan Burgess (21 Jun 2011)

kos

Are you based in Ireland? I don't think that this works for Irish pension holders. It has been discussed on askaboutmoney before.

Brendan


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## Dave Vanian (21 Jun 2011)

For the record, that's not my website, nor have I any connection with that business.  I just posted the article for information.  

kos - How did you deal with the taxation issues in Ireland and overseas?  

What percentage of the fund did your guy charge?


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## koscienly (22 Jun 2011)

Dave,

Sorry I thought that was your website, apologies, nonetheless I found it very interesting.  Probably not a great idea to be discussing taxation issues on the web or charges, but it was a resonably small percentage charge for the service.  Do you provide a similar service?

Ben,

Yes, I'm based in Ireland and yes, this can be performed for Irish pension holders despite what you may have heard.  I had heard that too, infact I had contacted my pension company numerous times and was told same.  A few months back I was worried about next week not when I reached 65. I hope that helps you.


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## Dave Vanian (22 Jun 2011)

koscienly said:


> Probably not a great idea to be discussing taxation issues on the web or charges, but it was a resonably small percentage charge for the service.


 
Why not?  If it's above board, then it would serve to educate other users on how these arrangements work.  That's what Askaboutmoney is all about - sharing information.  

What was the percentage charge?



koscienly said:


> Do you provide a similar service?


 
No.


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## koscienly (23 Jun 2011)

What are the tax implications Dave?


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## koscienly (23 Jun 2011)

Dave,

Do you not believe the service exits in Ireland?

What advise would you give a man who is broke, behind on his mortgage, had no joy whatsoever with the banks and is about to lose him home.  Then suddenly he realises he had a chance to reclaim his pension.


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## Dave Vanian (23 Jun 2011)

I'm just curious to hear from someone like yourself who has actually released an Irish pension fund before retirement, to understand what the tax implications are, including when you bring this money back into Ireland and also what the charges for doing it are.


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## Sunny (23 Jun 2011)

koscienly said:


> Dave,
> 
> Do you not believe the service exits in Ireland?
> 
> What advise would you give a man who is broke, behind on his mortgage, had no joy whatsoever with the banks and is about to lose him home.  Then suddenly he realises he had a chance to reclaim his pension.



Are you involved with these service providers? You sent me a PM offering me the name of the person who did for you if I rang you. I am more interested as Dave says, in finding out the tax implications of what you did. Not sure why you won't share it on this forum.


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## koscienly (23 Jun 2011)

Apologies to Sunny, I'm new to this and I thought I was replying to a PM and no is the answer to your question, certainly not.  

Taxation issues are something I know little about.  I believe they're are many taxation experts on these matters that can offer you advise.  

What would you do in my situation Dave?  Stay broke? or release the pension, pay the charges and the tax, and have enough to pay your bills again and feed your family.


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## Dave Vanian (23 Jun 2011)

I understand fully why someone would want to release their pension early in certain circumstances.

I'm just curious as to why you seem reluctant to share what the charge for this service is, or what the advisor told you about your tax position in relation to what you were doing.


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## koscienly (26 Jun 2011)

Dave,

The charge for the service was 10% but I was told it depended on the size of the pension.

I'm not really sure how it was done but i know my pension was transferred overseas.

It took 3 months for the process to complete.  The service throughout was very professional and very helpful.

Would I recommend it?  Yes, certainly if you are in the same position I was in.


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## Dave Vanian (28 Jun 2011)

Thanks for the reply. Frankly I wouldn't touch this type of service with a barge-pole, for several reasons. In no particular order: - 


The service is unregulated, so you're entrusting your pension fund to an unknown entity who is going to move it through various countries around the world. You have no protection if the entity doing it happens to be a scammer and makes off with your fund when it reaches an offshore location.
While not currently illegal, this sort of service (moving pension funds around the world to avail of more favourable retirement rules in another jurisdiction) is against the spirit of both Irish and UK pensions legislation. The UK HMRC are well aware of the practice and have made some preliminary moves already to stop it. See Singapore, for example.
Although you may have got away with it now, there's no guarantee that someone availing of this type of service can't be slapped with a tax bill in the future from any one of a number of countries, if it turns out that they had no legitimate connection with the country to which they transferred their pension funds.
The charge for doing this is high. Commission of 10% of a pension fund. 
I've seen some very suspect practices for promoting this type of service, which would make me wary of the type of people involved. For example, I've seen instances where people connected with such trust busting businesses will anonymously register on money advice sites just to plug the service and will even send private messages to anyone who expresses an interest. If the business was legitimate, they wouldn't need to resort to such underhand sales shilling.


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## rustbucket (28 Jun 2011)

Dave

Have to agree with your concerns wholeheartedly.Dont think that moving pensions abroad to avoid paying penalties and taxes is a good idea, especially if it is an unregulated service.

However, isnt it about time that the practice of cashing in your pension early should be allowed and becomes regulated? Certainly the portion that the pension holder has paid directly.

The current economic climate means that many people are struggling financially and they should be allowed the option of cashing in a pension legally and without too much penalty involved in Ireland.

If someone needs money to meet mortgage commitments or loan repayments because of situations that are largely out of their control they should be allowed use whatever assets they have to meet those obligations. Is a pension not an asset?

And if it is an asset they should be allowed dispose of it, especially in a market where the vast majority of them are nowhere near worth the value of what people have put into them.

Certainly from my own perspective, my other half has an old pension that she made contributions about €10k. We could certainly use that €10K now rather than watch it diminish further and further with no option as we are both no longer working full time.


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## Sunny (28 Jun 2011)

rustbucket said:


> Dave
> 
> Have to agree with your concerns wholeheartedly.Dont think that moving pensions abroad to avoid paying penalties and taxes is a good idea, especially if it is an unregulated service.
> 
> ...


 
Think most people would agree with you but apparently Joan Burton is afraid of undermining the pension industry. So allowing people to access their own money will undermine the industry but a 0.6% tax on those savings won't. Welcome to Irish politics.


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## expatworld (28 Jun 2011)

*Pension*

Anyone with a private or occupational pension who no longer lives in the UK or intends to leave within the next 12 months can transfer their pensions abroad inot a QROPS. This transfer is tax free, but tax any cash taken depends on where you are resident at the time.


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## Dave Vanian (29 Jun 2011)

Hi expatworld, 

How would you reply to the suggestion in [broken link removed] and others that trust-busting is against the spirit of the QROPS legislation and therefore may well be clamped down on by HMRC, with possible adverse consequences imposed retrospectively on people who avail of such a service?

Also - what formal protection do clients have when their money leaves this jurisdiction?


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## expatworld (29 Jun 2011)

@Dave Vanian,
I was not talking about trust busting at all, one has to be 55 or over to take any cash from a private pension and than only a miximum of 30%
Have a nice day


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## elcato (29 Jun 2011)

> only a *miximum *of 30%


That makes it clear as mud so ..... which is the typo ?


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## Dave Vanian (29 Jun 2011)

expatworld said:


> @Dave Vanian,
> I was not talking about trust busting at all, one has to be 55 or over to take any cash from a private pension and than only a miximum of 30%
> Have a nice day


 
Bearing in mind that this is an Irish website aimed at Irish residents, what benefit is this service you're promoting, to an Irish resident?


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