Cryst, a few things to consider. Please bear in mind that I know very little about your circumstances, so perhaps not all relevant.

With your initial tax-free withdrawal at 55, I would suggest drawing out only what you need/want (to clear debt, home improvements, new car etc), as opposed to all of it. Many people withdraw all if it just because they can. The mistake here is that they are taking money out of an environment where it is invested and growing tax free into a current account where it is doing nothing. You’re likely to be better off leaving it invested in the pension and drawing the rest out later when you need it. Unless you are using the pension to buy an annuity, there is no obligation to take the full 25% in one go.

You refer to drawing down if needs be. I presume you’re referring to flexi access drawdown here? If so, its important to be aware that once you with withdraw £1 of flexible income (such as drawdown), you will trigger the ‘Money Purchase Annual Allowance’ (MPAA). This means that your annual pension contribution limit will instantly reduce to £4,000 gross per tax year. If it’s your intention to increase your contributions after the debt has cleared, this might cause you a small problem.

You mention that annuity income counts as earnings. This is same as any taxable withdrawal from a pension. The same would apply if you were receiving income from drawdown.

Rather than the 30-day cooling off period, the bigger concern around annuities at present is that the low interest rate environment combined with increasing longevity is driving down rates. They are at an all time low.

To give you an idea, the best rate today for a healthy 65-year-old, on the most basic shape (no inflation linking, no guarantee period, single life) will get a 4.785% rate. Meaning a £100,000 pension will buy a guaranteed income of just £4,785 per annum.

With regards to paying only 20% tax rather than 40%, one of the key benefits of using flexi access drawdown is that you can tailor your income to suit your circumstances. Therefore, you could draw a small amount, if you wish, which keeps your total income within say the 20% basic rate threshold. With an annuity it pays a fixed amount which you cannot ever change once it has been set up – thus in your example possibly paying 40% whilst you are still working.

As a general rule, if you have any, it’s usually best to spend your non pension savings first and try to leave your pension until last. There are income tax and possible IHT benefits to this.

Additionally, if you’re still working and have enough income to cover your outgoings, you’re best off deferring any withdrawals. The pension will have more time to grow and it will buy you more income in future when you actually need it to replace your earnings. There’s no point withdrawing income, which will be taxed, if you don’t need it. Leave it invested to accumulate in a tax advantaged environment for as long as you can.

You're welcome, I'm always happy to share some wisdom if I can help. You're certainly not alone with the savings, but it's good that you have a couple of pensions. Many have neither.

It's very rarely a good idea to clear out an entire pension pot, and it's a big worry that people are still doing this. Unless there is debt to clear, it's rather senseless as you get taxed heavily to withdraw it all as a lump sum and it's no longer invested once in a current account.

In answer to your question, yes, if you withdraw taxable income from your frozen pension, it will trigger the MPAA and effect the contribution limit to your live pension. To add some clarity, taking the 25% tax free cash is fine, it's only the taxable income that will trigger it.

Once you're closer to age 55, I think you'd benefit from speaking with an IFA. They'd save you some tax and guide you down the most suitable route to meet your objectives.

Anyway, I know where to come if my boiler packs in

I would argue the markets rebounded too far to quickly, fuelled by Governments flooding the markets with liquidity. Corporate earnings this year and perhaps next will be decimated. Market tends to look 12/18 months ahead. Long term charts suggest Ftse could test 2008 low of sub 4000. If it does that would be the time to get the wheel barrow out.
As for the view that the stock market is a mugs game, it certainly is for day traders. Stats would suggest that less that 10% day traders make money over an extended period of time. However those that take a longer term view and do a little research can make money. There are many well respected posters on financial bulletin boards and Twitter that have been around for decades. Their views are definitely worth following. However they are out numbered 10 fold by the pump and dump merchants.
I have been a successful buy and hold investor for over 30 years. It is certainly worth the effort.

Some of the investments were not liquid.

Cash is what people feel comfortable with. It does depreciate it's worth but it's there and accessible and the losses are minimal in the small picture. The big picture of the future has been shown to be very short for some recently, sadly. In the case of cash familiarity breeds comfort not contempt. I mean bank accounts etc not just on the hip.

Agree 100%

You learn more about finance from reading Rich Dad, Poor Dad or Richest man in Babylon than in you’re entire school life.

Most people still follow outdated principles set by their parents or grandparents which are now not really applicable.

Since we left the gold standard and became a currency due to inflation there is pretty much no point now in savings.

It’s all about investments. Buy assets, not liabilities!

"It feels much better than it ever did, much more sensitive." John Wayne Bobbit

I have been managing my ISA and pension assets for over 30 years having worked in designing and developing computer systems in asset management for american banks most of this time both permanent and freelance. I understand the financial world better than most. I am now going to take my permanent company pension and may transfer into my own company pension, but I am forced to take IFA advice to allow me to do this. I know my options and how they work. Two questions:- A) how can I not involve an IFA ? B) how much would I expect to pay for advice I don't need or want ? Tx

It sounds like the pension you wish to transfer is a Final Salary (Defined Benefit) pension.

If so, and the transfer value is over £30,000, it is a regulatory requirement that you must receive advice to transfer. No provider will accept the transfer without proof that you have received advice. There is no way to avoid an IFA here.

This advice is expensive as it is deemed to be high risk, and usually not suitable to give up a risk free, inflation linked, guaranteed income for life in exchange for a lump sum where you bear the investment risk yourself.

I say it's usually not suitable, but the adviser will base their recommendation on your personal circumstances, such as experience, capacity for loss, family situation, other assets etc, and they may deem that it is suitable for you.

As a rough estimate, you might see a flat fee of around £3,500 plus a implementation fee of around 2% of the transfer value.

Many advisers have stopped writing this business recently as the PI insurance costs have become so expensive, which is reflected in the high charges.

However, if it is a defined contribution (or money purchase) pension, there is no requirement to receive advice. You will get the standard risk warnings which you can choose to ignore.

Hope that helps?

My (frozen) pension is with a company whom supply an FCA with the annual costs of maintaining the pension. Admittedly they might be slightly biased but legally cannot advise advice that will be bad advice and potentially cost you money, whether in an investment to withdrawal or from you to an investment. I learnt years ago that you have to (even verbally) instruct what you want to do, not ask if you can do it. Then it can be discussed including the negatives. Ie can I withdraw this blah blah is different to I want to withdraw this blah blah. The wording makes a big difference as once the advice or money movement is done you sign that you instructed rather than asked. Weird but legally you made the choice. Bear in mind at the end of the day it is your money and really you can do what you want.

Morning John, good question.

My thoughts are that as interest rates are so low, you would be better off dragging out that mortgage for as long as you can and instead divert the extra 10% into an investment which is suitable for your risk appetite. If you're new to investing, it would be sensible to discuss with an adviser who could recommend something suitable.

As you have a relatively long investment time horizon (5-10 years), the short term volatility is less of an issue for you, so can afford to take a little more risk (and likely better returns). By saving and investing for 5-10 years, you will have a larger lump sum at the end of that period compared with the reduction of your debt.

The lump sum at the end of the 5-10 years will provide you chunk of money to either pay towards your current mortage or towards the new house.

Think of this way, 5% growth (not guaranteed, but realistic for a 'moderate' investment) vs 2% interest to be repaid. 3% difference may not seem much, but it is huge if compounded over 10 years.

It's sounds like you're in the trap of long term cash savings in your ISA. Your 1.16% interest compared to 2.5% inflation means your cash savings are losing their spending power by approximately (2.5% - 1.16%) 1.34% per year. A cash ISA can be transferred into a Stocks and Shares ISA. As its a transfer, it doesn't count as a contribution.