I have a private pension which is still running but I do not put any money into it. I put money into my works one which I have done for the last 7 years. My question is I am 55 next year can i cash this in for the full amount.
Lots of ifs and buts. How much is in the pot? Are there any special terms - Garanteed annuity rates (GAR's) etc?
You can take up to 25% of the pot tax free. The remaining 75% depends. Some/most older pension plans don't support the new pension freedoms, so your existing provider may only be able to offer you an annuity. If that's the case, and you don't want an annuity, you'll need to transfer the whole pot to another provider that does support the new pension freedoms BEFORE you take the 25% tax free.
Once the money is in a plan that does support the new pension freedoms, then you can still take the 25% tax free. The remaining 75% will be taxed as income as and when you take it - at whatever your tax rate is - either 20% or 40%.
So for instance, suppose the 'pot' is £100K. You can take £25K tax free. The remaining £75K is taxed as income in the year you take it. If you take it all as one lump sum in one tax year then it's added to your income (salary) for that year, and chances are a fair wodge of it will be taxed at 40%. However, if you take it over several tax years (say £7.5K for 10 years) then only the £7.5K is added to your salary for each year, and assuming that income total is less than £46K (the current 40% band limit) you will only pay 20% tax on it.
Or you can just leave the 75% invested in the pension till you actually retire. Chances are your tax rate will be less then.
EDIT: And another thing. If/once you take a single penny from the 75% you are limited to what you can pay into any future pensions to only £4K p/a. If you don't pay in that much at the moment then probably no worries. But it will stop you boosting your pension pot as you get closer to your desired retirement age.