Pension transfer value

whispony · 16 March 2017 at 11:56AM

In the 80s I paid in to a bank pension for a few years, this year I am 60 and can take this pension from July. I was given a forcast of £253 per month or draw down £8900 and a monthly amount of £205. What I wanted to do was withdraw all of the funds and pay off my mortgage. I was told that I couldn't do this and the only way was to do a transfer to something that would let me do the withdrawal so I asked if they could send a transfer forcast. The forcast has now come in and the transfer value is £97121.59, I was surprised as for some reason I expected it to be about £36000 (don't really understand how it works). My mortgage is about £36500 and I really want to pay this off as I now do not work due to ill health. There is still three years mortgage to pay and the amount is £1490 per month. My husband is 65 this year but is not retiring yet due to the mortgage payments. Is there a way I can take down enough to pay off my mortgage and perhaps the rest can be put into something else. Also I realise that I need an IFA and wondered what the best way is to find a good one. Thank you in advance for any help

xylophone · 16 March 2017 at 12:22PM

https://www.royallondon.com/Global/documents/GoodWithYourMoney/COMPANY-PENSIONS-FIVE-REASONS-TO-TRANSFER-OUT-AND-FIVE-REASONS-NOT-TO.pdf

If you want to transfer into a DC pension you will need to take advice from an IFA with Pension Transfer Permission.

See http://www.pruadviser.co.uk/content/knowledge/technical-centre/pension_switches_transfers/

http://www.fsa.gov.uk/smallfirms/resources/factsheets/pdfs/pension_transfers.pdf

https://directory.moneyadviceservice.org.uk/en

Have you and your husband obtained new state pension statements to help with planning?

https://www.gov.uk/yourstatepension?utm_source=Mail-Online&utm_medium=Partnership&utm_campaign=GTKY

xylophone · 16 March 2017 at 12:30PM

And remember that if you do transfer out, there are tax implications on taking the 75% remaining after the PCLS

http://adviser.royallondon.com/technical-central/pensions/benefit-options/emergency-tax-and-lump-sum-withdrawals/

kidmugsy · 16 March 2017 at 12:37PM

whispony wrote: »

In the 80s I paid in to a bank pension for a few years, this year I am 60 and can take this pension from July. I was given a forcast of £253 per month or draw down £8900 and a monthly amount of £205. What I wanted to do was withdraw all of the funds and pay off my mortgage. I was told that I couldn't do this and the only way was to do a transfer to something that would let me do the withdrawal so I asked if they could send a transfer forcast. The forcast has now come in and the transfer value is £97121.59... My mortgage is about £36500 and I really want to pay this off as I now do not work due to ill health. There is still three years mortgage to pay and the amount is £1490 per month. ... Is there a way I can take down enough to pay off my mortgage and perhaps the rest can be put into something else.

Is your ill health likely to be life-shortening? If so, it's reasonable to consider transferring out of a DB pension. Are you likely to return to work at all? What is the present interest rate on your mortgage?

Do you have a projection for the eventual size of your State Pension: do you know when you will be able to draw it?

Now suppose you transfer it. You withdraw the tax-free lump sum: 25% = about £24k. If you have no other income in 17/18 you can also drawdown income of £11,500 with no income tax to pay. (Apparently the way to avoid paying income tax and then having to reclaim it is to withdraw just £10 to begin with, and then take the rest once your provider has been supplied with a tax code for you by HMRC). Total = about £35,500, which would let you clear virtually all of your mortgage; you might want to let the last of it continue until the maturity date.

These manœuvres would leave you with about £60k in the pension. You could then drawdown each year enough to let you just avoid paying income tax, perhaps timing it so that it sees you through to the start of your State Pension.

You'd have to weigh up the attraction of this against the security of £253 per month, index-linked, for life.

whispony · 16 March 2017 at 1:00PM

Thank you for your replies. Both hubby and I have sb figures his will be for him £229.01 (although that was about 1 year ago) and mine will be £155.16. As hubby is not going to retire at 65 this will build up as will his works pension. The plan was I would work until I was 66 and that would cover the mortgage however this is no longer possible due to ill health. I have not worked since May 2016 so would have tax allowance to use.

whispony · 16 March 2017 at 1:10PM

Sorry didn't answer all questions. Ill health is not life shortening just disabilitating to a degree. The bank pension is a final salary and is due to start in July when I'm 60. SB starts when I am 66.
Mortgage interest rate is 3.2 and is tied in until August 2018 with a payment of £1400 if I pay off early. Hubby is arranging to find out about his pension at the moment as his retirement date should be October this year but he has been paying into it for 26 years so far.

whispony · 24 March 2017 at 3:29PM

So an update I've had an IFA out to see me and who says that what I want to do is possible. However the fees they charge are £200 per hour and he is saying it could take 20 hours to do which is a charge of £4000. Is this the going rate or should I look around?

dunstonh · 24 March 2017 at 3:53PM

whispony wrote: »

So an update I've had an IFA out to see me and who says that what I want to do is possible. However the fees they charge are £200 per hour and he is saying it could take 20 hours to do which is a charge of £4000. Is this the going rate or should I look around?

Its in the ballpark of what you would expect

whispony · 24 March 2017 at 4:34PM

Okay thanks in that case I'll probably just go with him as it is a reliable company and local.

Pension transfer value

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