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  • FIRST POST
    • theoutdoorman
    • By theoutdoorman 8th Jul 17, 8:15 AM
    • 6Posts
    • 1Thanks
    theoutdoorman
    Pension Scheme being wound up
    • #1
    • 8th Jul 17, 8:15 AM
    Pension Scheme being wound up 8th Jul 17 at 8:15 AM
    Hello
    A old Company Pension scheme is being wound up by my employer / trustees,

    When I last looked at my the fund I was told there was £22k I am now being told there is only £14K as the rest is being used to wind up the scheme?

    Thats a lot of money?

    I am only 53 so they say my options are as follows

    1) Transfer the money to the new scheme
    2) Withdraw the money but loose 55% of the 14K

    I thought that if the scheme was winding up by the Company and the Company is solvent that I would be still given the option to withdraw the money at a rate of 25% tax free and then the rest at my normal tax rate which is only 20% as I don't earn a lot.

    Your comments and advice would be most useful

    Thanks
Page 1
    • xylophone
    • By xylophone 8th Jul 17, 9:24 AM
    • 23,679 Posts
    • 13,804 Thanks
    xylophone
    • #2
    • 8th Jul 17, 9:24 AM
    • #2
    • 8th Jul 17, 9:24 AM
    https://www.pensionsadvisoryservice.org.uk/pension-problems/pension-security/your-scheme-is-winding-up



    http://adviser.royallondon.com/technical-central/pensions/benefit-options/winding-up-lump-sums/
    Last edited by xylophone; 08-07-2017 at 9:30 AM. Reason: add link
  • jamesd
    • #3
    • 8th Jul 17, 11:44 AM
    • #3
    • 8th Jul 17, 11:44 AM
    There's a constraint on when winding up lump sums can be paid: the employer must not be making ongoing contributions to a pension for you and must agree not to do so for a year from when the winding up lump sum is paid.

    It seems that this may apply to you. If so, check the value to you of a year's ongoing employer contributions. If that is less than the uplift from tax relief on paying 25% of a winding up lump sum into a pension you can tell them that you want them to make that undertaking and that you will opt out for the required year so you can receive a winding up lump sum.

    The rest of this post only applies where you are not a continuing employee, though it seems that you are.

    They seem to be getting that 55% wrong. That's the rate normally used for an "unauthorised payment" but your pot value is low enough for you to be able to take a "winding up lump sum" instead, as explained at the Royal London link. Your age is irrelevant for this.

    Where a winding up lump sum is payable you should normally take the lump sum and not the transfer choice. This is because the payment includes 25% tax free and you can use that to pay into another pension and get tax relief on it. You lose this uplift on the 25% if you take the transfer option instead.

    Ask them to explain why they are telling you that there will be an unauthorised payment deduction when you should be entitled to a winding up lump sum. It's possible that the value of your benefits using the required calculation is above the threshold even though the payment amount is below it.

    Also check whether it was possible to take benefits - pension income - from age fifty. If possible this may get you more money in total.
    Last edited by jamesd; 08-07-2017 at 12:01 PM.
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