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Compulsory Redundancy and pension question
Comments
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My HR people are telling me that when my redundancy starts I automatically become a pensioner in their eyes and the pension payments kick in. If this happens and I take up another post in local government within 6 months, I will have to pay significant tax on the pension lump sum plus the annual pension payments will stop. I'm told I will not be able to reclaim that pension when I eventually retire in say 10 years time.
Have a look at this link:
http://www.lge.gov.uk/lge/core/page.do?pageId=4074489
and click on bulletin 68 [FONT="]which states that if you are re-employed within six months in a similar capacity your pension "will become unauthorised payments and be subject to unauthorised payment tax charges[/FONT]".
WW0 -
woolly_wombat wrote: »and click on bulletin 68 [FONT="]which states that if you are re-employed within six months in a similar capacity your pension "will become unauthorised payments and be subject to unauthorised payment tax charges[/FONT]".
I see - it's the 'under 55' thing that causes this. Good find!0 -
I see - it's the 'under 55' thing that causes this. Good find!
Yes I have received the LGPC Bulletin 68 document a couple of days ago. It's useful but also raises more questions.
Having spoken to my pension administrators it appears I can achieve my original goal, which was effectively to keep the redundancy payment and transfer all my existing pension account to a new employer.
To do this I need to insist on opting out of my current scheme immediately whereupon my pension account and all accrued benefits are frozen. I then do not get the pension payment as I'm no longer a member when I leave work at the end of next week.
I can take up employment with the new local authority after one month (realistically it will be slightly longer) thus preserving my redundancy payment. I have this in writing from the relevant people.
On starting with the new employer I can then transfer the frozen account to their scheme - that's what I've been told by my pension administrator anyway. Result
I still have a few points to clarify but the above seems to be a correct view of the situation.
I have further questions regarding tax on pension lump sums but rather than confuse this thread I'll start another one.........
Comments still welcome here though.............0 -
To do this I need to insist on opting out of my current scheme immediately whereupon my pension account and all accrued benefits are frozen. I then do not get the pension payment as I'm no longer a member when I leave work at the end of next week.
Yes, and the employer no longer has to pay a strain charge to the pension fund. Technically the pension will be 'deferred' rather than 'frozen' though, meaning its value will be subject to inflation proofing (which is a good thing).
Yes, you will have 12 months from starting the new job to transfer in/combine the deferred membership from the old one. The decision to combine shouldn't be seen as an obvious one though - given we're talking about membership in the current final salary scheme, the rate of pay in the new job should be at least as good in real terms as the rate of pay in the old, otherwise you will be losing money. Moreover, combining will mean losing any preferential normal pension/retirement age with respect to your existing benefits - i.e., if you combine, all your pre-CARE membership will have a normal pension age of 65. This loss will be made slightly worse if your state pension age is higher than 65, given under the CARE scheme that's coming in (albeit a year later in Scotland), CARE benefits are due from your state pension age and you won't be able to draw your pre-CARE benefits separately (assuming the membership is all against your then-current job).On starting with the new employer I can then transfer the frozen account to their scheme - that's what I've been told by my pension administrator anyway.
As such, unless you can get a new job where the rate of pay, in real terms, is noticebly higher than that in your current post, I would keep the old membership separate if I were you.0 -
^^^^^^Excellent info thanks :beer:
I have a pension from a previous local government job (of approx 10 years service) which I never transferred into my current one (also 10+ years) so the automatic transfer of my current one may not happen either.
Why is nothing simple?
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Why is nothing simple?
Defined-contribution (money-purchase) pension schemes are generally simple, but much less generous than defined-benefit local-government schemes.
Be careful what you wish for, and grateful for the fantastic deal you've been entitled to.
Warmest regards,
FAThus the old Gentleman ended his Harangue. The People heard it, and approved the Doctrine, and immediately practised the Contrary, just as if it had been a common Sermon; for the Vendue opened ...THE WAY TO WEALTH, Benjamin Franklin, 1758 AD0 -
Whatever genius in central government wrote the scheme regulations didn't think of that possibility, i.e., where a redundancy causes an early pension becoming due and the recipient does not want to draw it.
An aside, but I see the final LGPS 2014 Regs now clear this up for England and Wales: the LGPS 2008 Regs had simply 'is entitled to', the new ones 'is entitled to, and must take immediate payment of'. Only took several years...!0
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