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    • spitfire21
    • By spitfire21 17th Jul 17, 10:50 AM
    • 8Posts
    • 1Thanks
    spitfire21
    Enhanced transfer value query
    • #1
    • 17th Jul 17, 10:50 AM
    Enhanced transfer value query 17th Jul 17 at 10:50 AM
    Good morning all.
    On Saturday morning I received a letter, out of the blue, from a former employer. I worked for them for four years in the 80's.
    The letter told me the company is offering an enhanced transfer value of nearly £90,000 on a pension I didn't even know I had! Part of the offer is that I get advice from an IF A, but can't get an appointment until a week tomorrow.
    Basic, and rather embarrassing question is, is this the fantastic windfall it appears to be, or am I missing something very obvious? The paperwork seems to state clearly that I can take this money as cash, 25% tax free, balance taxable as income. I took early retirement at 59 last year and this level of cash would be life changing for me. Literally, as it would mean my wife could retire too. I calculate that if I took the cash over this and the next financial year I would see around £77,000.
    You can see why it seems to good to be true but, if it is true, I'd love to tell my wife, and waiting another 8 days will be agony.
    Please, can anyone tell me if I am understanding the situation correctly, or am I fundamentally misunderstanding the situation?
Page 1
    • xylophone
    • By xylophone 17th Jul 17, 11:04 AM
    • 22,881 Posts
    • 13,243 Thanks
    xylophone
    • #2
    • 17th Jul 17, 11:04 AM
    • #2
    • 17th Jul 17, 11:04 AM
    It would seem that you have a deferred DB pension - it may have been of the "non contributory" type, or perhaps you didn't notice that you were contributing from your salary.

    Presumably the alternative to the offer is the possibility of a lump sum and a regular pension.

    The reason that advice from an IFA ( one assumes one who is a pension transfer specialist) is required is that you have safeguarded benefits whose value is in excess of £30,000.

    http://www.pruadviser.co.uk/content/knowledge/technical-centre/pension_transfer_conversion/
    • spitfire21
    • By spitfire21 17th Jul 17, 11:17 AM
    • 8 Posts
    • 1 Thanks
    spitfire21
    • #3
    • 17th Jul 17, 11:17 AM
    • #3
    • 17th Jul 17, 11:17 AM
    Yes, it was a defined benefit scheme. I was made redundant and this coincided with a bereavement, so wasn't quite thinking straight at the time. I knew I had been contributing but thought this had been rolled into a G R E buyout policy with contributions from a previous job. Checking buyout paperwork, that wasn't the case, so the pension is kosher and includes, as you say, a £200 monthly pension or reduced pension and relatively small lump sum.
    My query, I suppose, is whether I'm understanding correctly that the £90,000 E T V is available to me as cash, subject to tax other than the 25% tax free element.
    • ischofie1
    • By ischofie1 17th Jul 17, 11:22 AM
    • 175 Posts
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    ischofie1
    • #4
    • 17th Jul 17, 11:22 AM
    • #4
    • 17th Jul 17, 11:22 AM
    I wouldn't quite use the term "too good to be true" just yet.
    You need to know what pension you'd be giving up to receive this £90K.
    Only then will you know if it's good or not.
    This is the missing piece of the jigsaw that people on this board would need to know in order comment further.
    • ischofie1
    • By ischofie1 17th Jul 17, 11:26 AM
    • 175 Posts
    • 137 Thanks
    ischofie1
    • #5
    • 17th Jul 17, 11:26 AM
    • #5
    • 17th Jul 17, 11:26 AM
    Yes if you transfer you can take 25% tax free with the remainder taxed at your marginal rate for whatever year/s you withdraw it.

    There will also be a cost for the IFA to conduct the transfer.
    • sandsy
    • By sandsy 17th Jul 17, 11:28 AM
    • 1,176 Posts
    • 679 Thanks
    sandsy
    • #6
    • 17th Jul 17, 11:28 AM
    • #6
    • 17th Jul 17, 11:28 AM
    If you proceeded to accept the transfer, the money would have to be transferred to a personal pension in the first instance.

    Whilst you could then withdraw it all in cash, that's a silly idea as any amounts withdrawn form part of your taxable income for the year and a massive income in 1 year also means a massive tax bill. Better to withdraw it slowly to make it last as long as possible and minimise any tax liability.

    But an adviser will talk you through all the implications, including crucially whether taking the transfer might be the wrong thing for you to do, depending on your other sources of retirement income.
    • whispony
    • By whispony 17th Jul 17, 11:33 AM
    • 84 Posts
    • 36 Thanks
    whispony
    • #7
    • 17th Jul 17, 11:33 AM
    • #7
    • 17th Jul 17, 11:33 AM
    Hi sorry to jump on your thread but I have a similar situation with a bank pension from the 70s. Gives me roughly £9000 and £200 a month pension or if transferred it's worth £97000. My plan was to transer to a draw down and take 25% to pay off the mortgage. I contacted a IFA who after weeks has come back to me and said they would not do what I want as the pension has benefits and it would not be morally correct. I have just turned 60 and due to ill health have not worked for the last year so the idea of paying off the mortgage was great. If I go to another IFA are they all likely to refuse? Is there anything else I can do?
    • xylophone
    • By xylophone 17th Jul 17, 12:24 PM
    • 22,881 Posts
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    xylophone
    • #8
    • 17th Jul 17, 12:24 PM
    • #8
    • 17th Jul 17, 12:24 PM
    Did you consult a pension transfer specialist?

    Are you on benefits?

    Have you obtained a new state pension statement?

    https://www.gov.uk/check-state-pension
    • xylophone
    • By xylophone 17th Jul 17, 12:34 PM
    • 22,881 Posts
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    xylophone
    • #9
    • 17th Jul 17, 12:34 PM
    • #9
    • 17th Jul 17, 12:34 PM
    My query, I suppose, is whether I'm understanding correctly that the £90,000 E T V is available to me as cash, subject to tax other than the 25% tax free element.
    You have taken early retirement- you are receiving an income?

    If you transfer the deferred DB to a DC arrangement, any withdrawal over the 25% lump sum will be taxed as income in the tax year you receive it.

    You would not wish to be paying any more than you must to the tax man.

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

    Have you and your wife obtained new state pension statements?

    What were your "starting amounts" at 5.4.16?

    https://www.gov.uk/check-state-pension
    • Malthusian
    • By Malthusian 17th Jul 17, 1:02 PM
    • 2,887 Posts
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    Malthusian
    I have just turned 60 and due to ill health have not worked for the last year so the idea of paying off the mortgage was great. If I go to another IFA are they all likely to refuse? Is there anything else I can do?
    Originally posted by whispony
    Have you looked into whether the scheme will allow early retirement on ill health grounds (and at what penalty)? If so is it better to take the income which would help cover the mortgage repayments and then provide you with a guaranteed income for life once the mortgage is paid off?

    Impossible to say from so little information whether advising you to transfer would be morally right or not, but in general terms advising someone to transfer out of a DB scheme is the most fraught thing an IFA can do and is assumed to be misselling until proven otherwise. Another IFA may give you a different opinion if they take a different view of your circumstances or are more keen to take your money. But impossible to say how likely that is without knowing more.
    • xylophone
    • By xylophone 17th Jul 17, 1:31 PM
    • 22,881 Posts
    • 13,243 Thanks
    xylophone
    Have you looked into whether the scheme will allow early retirement on ill health grounds (and at what penalty)?
    It has just occurred to me that scheme NRA may have been 60 which the OP has just reached.

    If so, I wonder if the option of a transfer still exists?

    http://www.pruadviser.co.uk/content/knowledge/technical-centre/transfer_pension_scheme/
    • spitfire21
    • By spitfire21 17th Jul 17, 2:35 PM
    • 8 Posts
    • 1 Thanks
    spitfire21
    Thank you all for your considered responses.
    I took the decision at 59 to retire and quit a job I hated. I took one of my three pensions (actually four I now find out). This pays me a little over £9,000 a year. I am then using the tax free lump sum I took to top up my income until I'm 65, at which point I will take my other two pensions (that is, the ones I knew about). State pension kicks in at 66. We have other savings, no mortgage and no other debt. My wife works three days a week and earns pretty good money. The plan was that she work until I'm 65. She is four years younger than me. On that basis we have a good life, several holidays a year, two cars, a decent savings pot, and we can do pretty much what we want.
    Now comes along, out of the blue as I said, what looks like a game changer. I know what I'm proposing might horrify some forum users but it seems to me I have an unexpected chance to really make a difference to the life my wife and I, and our children and grandchild, have. I'm not currently a taxpayer, so it seems to me if I took this transfer in cash in two tranches, one FY 17 and one 18, I minimise my tax liability to sub 20%, given my present "income" is actually below my annual allowance.
    My wife could take her modest pension now, and we could use the transfer cash to top that up to a very acceptable income. Given we have savings aside from what I'm using to top up my pension, I'd have no qualms about using a wholly unexpected chunk of capital in this way.
    • xylophone
    • By xylophone 17th Jul 17, 3:19 PM
    • 22,881 Posts
    • 13,243 Thanks
    xylophone
    State pension kicks in at 66
    Have you and your wife obtained new state pension statements?

    What were your "starting amounts" at 5.4.16?

    https://www.gov.uk/check-state-pension
    • spitfire21
    • By spitfire21 17th Jul 17, 3:21 PM
    • 8 Posts
    • 1 Thanks
    spitfire21
    C£155 per week but not sure how that's relevant to my query.
    • Silvertabby
    • By Silvertabby 17th Jul 17, 3:45 PM
    • 1,524 Posts
    • 1,817 Thanks
    Silvertabby
    C£155 per week but not sure how that's relevant to my query.
    xylophone always asks that - he's on a mission to ensure that everyone on these boards knows their State pension forecast!
    • spitfire21
    • By spitfire21 17th Jul 17, 3:56 PM
    • 8 Posts
    • 1 Thanks
    spitfire21
    Ah, that explains it!
    • AnotherJoe
    • By AnotherJoe 17th Jul 17, 4:09 PM
    • 7,247 Posts
    • 7,764 Thanks
    AnotherJoe
    Hi sorry to jump on your thread but I have a similar situation with a bank pension from the 70s. Gives me roughly £9000 and £200 a month pension or if transferred it's worth £97000. My plan was to transer to a draw down and take 25% to pay off the mortgage. I contacted a IFA who after weeks has come back to me and said they would not do what I want as the pension has benefits and it would not be morally correct. I have just turned 60 and due to ill health have not worked for the last year so the idea of paying off the mortgage was great. If I go to another IFA are they all likely to refuse? Is there anything else I can do?
    Originally posted by whispony
    You dont need the IFA to agree.

    All you need is an IFA to prepare a report. If that says they advise against it there are still some pension companies who will accept a transfer from what is called, I believe, an "insistent client".
    • xylophone
    • By xylophone 17th Jul 17, 5:27 PM
    • 22,881 Posts
    • 13,243 Thanks
    xylophone
    C£155 per week but not sure how that's relevant to my query.
    It seems to me wise for all those on NSP to check....

    https://www.royallondon.com/Global/documents/GoodWithYourMoney/TOPPING-UP-YOUR-STATE-PENSION-GUIDE.pdf
    • whispony
    • By whispony 18th Jul 17, 1:24 PM
    • 84 Posts
    • 36 Thanks
    whispony
    Thank you for your replies and sorry to take so long to come back. I turned 60 last Friday and the pension was due to start when I turned 60. The IFA took away all the information on my pension and my husbands pension to see what could be done. She had been looking into them for over two months and as a result I have missed the date to let Lloyds know what I wanted to do with it. She is happy to transfer my husbands but not mine. The main problem is that our mortgage is £1500 per month so obviously paying this off would make a huge difference. What information do you need to help me with this? Sorry but I find all the pension information quite confusing. TIA
    • kidmugsy
    • By kidmugsy 18th Jul 17, 1:54 PM
    • 9,629 Posts
    • 6,384 Thanks
    kidmugsy
    what is called, I believe, an "insistent client".
    Originally posted by AnotherJoe
    That's a piece of jargon I like: clear, terse, and not at all pompous or affected.
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