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  • FIRST POST
    • liketoknow
    • By liketoknow 19th Mar 17, 1:40 PM
    • 58Posts
    • 22Thanks
    liketoknow
    Being stupid or doing the right thing?
    • #1
    • 19th Mar 17, 1:40 PM
    Being stupid or doing the right thing? 19th Mar 17 at 1:40 PM
    I reached retirement age for state pension early last year. I was told that if I claimed it then - January, I would get approx 108 a week as I didn't have enough qualifying years but if I left it until April, I would get more, I qualified under the old scheme. I didn't and don't want to retire yet so I have left it in the pot to get more when I do retire. I also have a very small private pension, there was 24000 in it last year, don't know how much that would make me each week although I would probably take the 25% tax free lump sum out of it before claiming it weekly.
    I still work but only part time, I am 64. I only earn just over 5000 a year but get WTC of just over 52 a week.
    I have put off claiming my State pension, because I would lose my WTC and thinking that by saving it, I would get more when I do retire but, I am struggling with my bills.
    If I do claim my pension, I know I would lose my WTC but would be about 50 a week better off. I don't know if I would have to pay tax, although my earnings are probably set to go down a bit this year anyway.
    If I retired, I believe that my pension would be made up to 155 anyway by Pension Credit, or Universal credit as I believe it is changing to, so is there any point in my not claiming my state pension now? Doesn't it mean that I will still end up with 155 or whatever it goes up or down to, just get less Pension/Universal credit?
    I would leave my private pension where it is until I did give up work altogether. Would that be taken into consideration though when calculating how much Pension/Universal credit I would get? Or would that be on top of the 155?

    I am very confused at the moment. Thanks in advance.
    Last edited by liketoknow; 19-03-2017 at 1:43 PM.
Page 4
    • liketoknow
    • By liketoknow 30th Mar 17, 1:15 PM
    • 58 Posts
    • 22 Thanks
    liketoknow
    If you want to make pension contributions in this tax year you need to do it before 5 April.

    As previously explained, this can be up to net relevant earnings.

    The tax relief received on the 16-17 year relates to that year's contributions even though received later.

    You can make another contribution up to net relevant earnings (or 2880 if less) in 2017-18 and receive tax relief.
    Originally posted by xylophone
    As the official take over date is April 1st, which is Saturday, the next working day is Monday 3rd so I think it will probably be too late to bother with this year anyway so I think I am going to have to forget about this tax year.
    I have not got my books up to date for 2016-2017 anyway so not sure what my earnings will be, although I could finish them off in time as I know no more will come in now. My earnings will probably be more this year than I am expected to earn next year.
    I take it the pension payments will not be counted as relevant earnings in respect of paying into a SIPP?
    I think its highly unlikely that I would want to pay in more than 5000 from my Tax free lump sum anyway though as I have some debts I want to pay off. An extra 1000 TR will come in handy for that.
    Can the contribution for the following year be paid in over the year, ie, so much a week/month, I'm sure you or jamesd mentioned it in another post?
    • atush
    • By atush 30th Mar 17, 1:21 PM
    • 15,829 Posts
    • 9,595 Thanks
    atush
    If it is possible time wise though to get the 25% tax free lump sum and open a SIPP, can I put more in than 2800, say up to 5000? I know the tax relief wouldn't go in until May but would that count as 2016/2017 or 2017/2018, in other words could I do it again in 2017/18?
    Originally posted by liketoknow

    You wont get the 25% TFLS from the DB pension in this tax year.

    If you want to make a 2880 contribution, and get 720 TR this year, you need to open a P or sipp by the end of day April 5th. Using savings you have now.

    Next year you can put in (or this year if you have enough savings) you can put in 2880 or you entire earned income (net of tax as you will get the TR back) into the PP/Sipp
    • liketoknow
    • By liketoknow 30th Mar 17, 1:34 PM
    • 58 Posts
    • 22 Thanks
    liketoknow
    You wont get the 25% TFLS from the DB pension in this tax year.

    If you want to make a 2880 contribution, and get 720 TR this year, you need to open a P or sipp by the end of day April 5th. Using savings you have now.

    Next year you can put in (or this year if you have enough savings) you can put in 2880 or you entire earned income (net of tax as you will get the TR back) into the PP/Sipp
    Originally posted by atush
    Yes, I think I have already abandoned that idea as the ball wouldn't start rolling until at least 3rd of April and I presume they may get bombarded with questions in the first month or so.
    I don't have any savings to do it myself this year, it was going to have to be funded by the lump sum payment.
    I will stay on SP for a few weeks while I have time to sort it out, then defer that for the works pension.
    Does the pension count as earnings with regards to paying in to a SIPP?
    • xylophone
    • By xylophone 30th Mar 17, 2:01 PM
    • 21,327 Posts
    • 12,253 Thanks
    xylophone
    my pot should have increased by around 8.5% a year, which to me sounds good.
    DB pensions do not have a "pot".

    If you have a deferred pension with GMP and that GMP increased by Fixed Rate( probable but not certain, see BW link re GMP), then it only has to be revalued at this rate up to GMP age (60 for a woman).

    However, if benefits are deferred after that, the GMP is further revalued by one seventh of one per cent for each week of deferment .

    When you left Wimpey, if you had a deferred Contracted Out DB Pension, you should have been given a Statement of Deferred Benefits showing GMP at leaving (this is the portion that has to be revalued) and the excess over GMP.

    As you left before 1985, the excess may or may not have been revalued - see https://www.barnett-waddingham.co.uk/comment-insight/blog/2012/07/24/revaluation-for-early-leavers/ - this would depend on your scheme.

    You might find this worth a read ( the Diageo DB scheme).

    http://www.mydiageopension.com/dps/Pages/Pensioners_Pensioners_PensionIncreases.aspx

    You should ask Hymans how and if your pension will increase in payment.


    If I have understood it properly, I would be better to leave it all in until after April 6th, then draw out my 25% tax free to open the HL SIPP.


    You are restricted as to the amount that you can pay into your SIPP (see previous) - and recycling lump sums can be fraught....

    http://adviser.royallondon.com/technical-central/pensions/contributions-and-tax-relief/recycling-of-tax-free-cash/
    • xylophone
    • By xylophone 30th Mar 17, 2:04 PM
    • 21,327 Posts
    • 12,253 Thanks
    xylophone
    Does the pension count as earnings with regards to paying in to a SIPP?
    No - pension income does not count as relevant earnings.
    • liketoknow
    • By liketoknow 30th Mar 17, 2:28 PM
    • 58 Posts
    • 22 Thanks
    liketoknow
    DB pensions do not have a "pot".

    If you have a deferred pension with GMP and that GMP increased by Fixed Rate( probable but not certain, see BW link re GMP), then it only has to be revalued at this rate up to GMP age (60 for a woman).

    However, if benefits are deferred after that, the GMP is further revalued by one seventh of one per cent for each week of deferment .

    When you left Wimpey, if you had a deferred Contracted Out DB Pension, you should have been given a Statement of Deferred Benefits showing GMP at leaving (this is the portion that has to be revalued) and the excess over GMP.

    As you left before 1985, the excess may or may not have been revalued - see https://www.barnett-waddingham.co.uk/comment-insight/blog/2012/07/24/revaluation-for-early-leavers/ - this would depend on your scheme.

    You might find this worth a read ( the Diageo DB scheme).

    http://www.mydiageopension.com/dps/Pages/Pensioners_Pensioners_PensionIncreases.aspx

    You should ask Hymans how and if your pension will increase in payment.


    If I have understood it properly, I would be better to leave it all in until after April 6th, then draw out my 25% tax free to open the HL SIPP.


    You are restricted as to the amount that you can pay into your SIPP (see previous) - and recycling lump sums can be fraught....

    http://adviser.royallondon.com/technical-central/pensions/contributions-and-tax-relief/recycling-of-tax-free-cash/
    Originally posted by xylophone
    I would only put a maximum of 5000 into the SIPP its a bit difficult working out what relevant income is going to be though until the end of the tax year, especially as pension income isn't counted.
    • liketoknow
    • By liketoknow 30th Mar 17, 2:43 PM
    • 58 Posts
    • 22 Thanks
    liketoknow
    So, up to now, these are the questions I have got to ask,

    Is it defined benefit or defined contribution? If it's defined contribution does it have a guaranteed annuity rate or guaranteed minimum pension and what are the values and other terms of those? Is the value of the guaranteed benefits more than 30,000?
    Is flexible drawdown allowed on the 75% remaining after I have taken a lump sum or can it be transferred to a SIPP with another company who allows this?
    If flexible drawdown is allowed if left with you, do you charge for that?
    If I take my 25% lump sum and leave the rest to draw a pension weekly/monthly, will the pension increase in payment and if so, how?

    Also ask for an up to date statement of benefits

    Added - What was the normal retirement age for the scheme? If it was over 60, what has been happening in terms of the pension, has it been added to and is it still being added to, if so, by how much?
    Last edited by liketoknow; 30-03-2017 at 3:31 PM.
    • Neasy
    • By Neasy 30th Mar 17, 3:02 PM
    • 53 Posts
    • 64 Thanks
    Neasy
    Ask what the normal retirement age was, and if you are already older than that, ask what has been happening to your pension in the meantime.
    • liketoknow
    • By liketoknow 19th Apr 17, 2:36 PM
    • 58 Posts
    • 22 Thanks
    liketoknow
    Hi Guys, not been on for ages as nothing was happening about my pensions. As I thought the new company was inundated with requests and questions and as my pension hadn't started, I was not a priority. I have chased them up though as I do at least need my lump sum even if the pension doesn't start this month. I am hoping they will pay the lump sum this month, they have said they will see what they can do.

    I have at least got the figures. The weekly amount will only be about a quarter of what am getting now on my state pension but that should be ok as I want to settle some debts with the lump sum then perhaps put the rest where I can get some interest, its only just under 6000, so not a lot to play with but will probably keep the state pension on for another few weeks before deferring it again, that will be a bit more to pay some bills with. The DWP haven't sent me the letter yet asking me what I want to do with the deferred amount.
    I will be taking the tax free sum, as I have said but on the form, it asks if I will be putting any of it into another registered pension scheme. I think that is to do with recycling, as xylophone mentioned above? I do want to put some into the HL Sipp scheme that people are talking about where if I put in 2880, I'll get tax relief but probably don't want to do that yet as I want any left to earn some interest and I don't think the SIPP scheme earns interest? Or am I wrong about that?
    I would probably not do it until nearer the end of the tax year so I knew how much I could draw out without going over my personal tax allowance, at my calculations at the moment, I should be able to draw all out and not be over, although I know I need to leave a bit in anyway to not incur charges. I just thought that it would give me another little lump sum to use this time next year, hopefully.
    If I put the money in an ISA or something similar, then drew it out to start a SIPP around the beginning of next year, would that still be considered recycling? If so, how would I be able to do it? Would I need to be paying in each month?

    I didn't get all of my questions answered yet, I told them that the figures were my priority at the moment but they did answer some over the phone. They don't do drawdown or not on my pension anyway. I can't take the lump sum and then transfer it to a company doing drawdown. They haven't given me the option of drawing it all either. Just either to have it all as a regular monthly payment or having some as cash and the rest as regular payment, which is what I am going to opt for.
    The paperwork does say that I will get the regular income for the rest of my life and it does say that it will increase each year.
    • xylophone
    • By xylophone 19th Apr 17, 4:17 PM
    • 21,327 Posts
    • 12,253 Thanks
    xylophone
    They don't do drawdown
    Have Hyman confirmed that what you have is a deferred defined benefit pension from your employment with Wimpey?

    If so, drawdown is completely irrelevant to your case.

    You will be taking a Pension Commencement Lump Sum which will be tax free and then a monthly scheme pension.

    If this is the case, how will your pension increase in payment?

    And see post 20 - have you yet had a statement of benefits from DWP?

    Is a COD shown?
    • liketoknow
    • By liketoknow 19th Apr 17, 7:23 PM
    • 58 Posts
    • 22 Thanks
    liketoknow
    Hi, thanks,

    No they didn't answer the questions yet, so I don't know if it is a deferred defined benefit pension or not. but they did say drawdown wasn't an option.

    I'll have to look at the wording, but it did say it would increase annually.
    Yes, I have had the statement of benefits from DWP but I did not understand it.
    I'll put it on later, just waiting for someone to arrive at the moment.
    Thanks for the reply
    • xylophone
    • By xylophone 20th Apr 17, 11:07 AM
    • 21,327 Posts
    • 12,253 Thanks
    xylophone
    I have had the statement of benefits from DWP but I did not understand it.
    Something like this?


    HOW YOUR BENEFIT IS MADE UP

    Basic State Pension

    Pre 97 additional State Pension
    less Contracted-Out Deduct ion (COD)

    Total payable

    Post 97 additional State Pension

    Graduated Retirement Benefit

    The amount each week is
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