Unlock some pension value?

gerrybhoy1974

Hi there, I hope someone can give me the answer i'm looking for... I left IBM in 2002, and have a tiny amount of pension value accumulated with them. The value of the units is £5744.69. I spoke to someone at IBM pension trust who said that I cannot take any money out of it the way it stands, however I can transfer to a different private scheme that allows me to get access to some of the funds. Is this correct, how would I go about this?
Grateful for any advice, as this is where my knowledge dries up!
Cheers
Gerry

PS... I should say that I am 33 yrs old

MikeJones_2

Hi Gerry,

For most of us*, the earliest age you can access your pension benefits in the UK is currently age 50, rising to age 55 on 6th April 2010. Early payment will depend upon the scheme rules or policy provisions.

Some pension arrangements, notably many defined benefit schemes (such as a final salary scheme which is one type of defined benefit scheme) may permit earlier payment on the grounds of ill-health, but this too will depend upon the scheme rules or policy provisions.

* Some pension schemes may have an earlier retirement age, previously agreed by HMRC because of the nature of the members' occupation (such as footballers).

Mike Jones

I work in the field of Pension Education and Pension Guidance in the UK. I am a current member of the Specialist Pensions Forum as well as being a Voluntary Adviser for The Pensions Advisory Service. I work with scheme members, employers, trustees, scheme administrators and advisers on most things to do with employer sponsored pension schemes. The views expressed by me in this thread are my personal opinions. You should seek professional advice from an appropriately experienced and qualified adviser.

gerrybhoy1974

Thanks Mike, but what could the guy have been talking about?... He knew my age and said I might be able to transfer it into some sort of account that I can tak some of it as cash. It is just going to waste sitting there as I am now starting life as a teacher and can't transfer it into that scheme. So if it is in any way possible to get even a small amount back then I would sacrifice a bit of it to get at the funds.
Thanks

LongTermLurker

gerrybhoy1974 wrote: »

Thanks Mike, but what could the guy have been talking about?... He knew my age and said I might be able to transfer it into some sort of account that I can tak some of it as cash. It is just going to waste sitting there as I am now starting life as a teacher and can't transfer it into that scheme. So if it is in any way possible to get even a small amount back then I would sacrifice a bit of it to get at the funds.
Thanks

It's not going to waste; it's either making/losing money through investments or it's guaranteeing you a %age of your final salary. It's still there to be taken when you retire, and can be combined with other pensions when you choose to use them. I have a few pensions and one or two are that small.

I think there is some rule about cashing in small pensions (<£16k springs to mind) but I'm not sure if that is only possible if all your pensions are worth less than £16k combined.

Is there any particular reason why you don't like where it is at the moment?

gerrybhoy1974

Hi, I am starting as a teacher and will be on a good final salary pension from now on. I would just prefer the money in my bank to pay off some debts just now if it were at all possible as my pension needs are now sorted with the teachers' plan.
If I leave it til I retire in 27 years, then I will get a ridiculously low monthly payment from it, so transferring it out into a product were I can get some of the cash seems the best option, especially as I don't mind losing some of it.
Cheers

And yes I read about the trivial amount thing (not sure i understand it though). This is my only pension at the moment, so its really not worth anything to me sitting where it has been for the last 6 years.

lisyloo

Hi Gerry,

You can take 25% as a lump sum when you retire, do you think this is what he might have been referring to?

As far as I know there are only 3 ways to get money out of pension

1) if you retire
2) if you die
3) if you are terminally ill with less than a year to live

Other than that my understanding is that it's tied up.

gerrybhoy1974

Hi Lisyloo.... i'm not sure what he meant, but he seemed sure I could do it if willing to lose some of it. They are putting together a fund value document, or something like that to take to another company or account. I am very out of my depth here, so this may seem like a silly question....can i sell the fund?

LongTermLurker

Ah no: http://www.pensions.co.uk/annuities/trivial_pensions.html

If an investor's total pension funds amount to less than 1% of the lifetime allowance (this stands at £1.5 million for 2006 and is set to rise over 5 years to £1.8 million), it is possible to take the funds as a cash sum rather than having to take it, part at least, in the form of a pension.

For anyone in this situation, with a fund (which must take into account all their pensions for example company pension, personal pensions, AVCs and any pensions already in payment) of less than £15,000 (for 2006), 25% of the withdrawal is tax free and it can be taken at any time between their 60th and 75th birthdays.

Without the trivial pension rule, when you retire, you can take 25% tax free and the rest has to buy an annuity or go into drawdown/ASP
With the triviality rule, it looks like between 60 and 75 you can take the 25% tax free and withdraw the rest, subject to tax and subject to a maximum total pension pot of less than 1% of the lifetime allowance at that point (so currently less than £15K, but that figure should rise each year).
So in your case, as I suspected, you can't take out the money until you're 60.

gerrybhoy1974

it's all a bit rubbish isn't it.... the money is not going to be of any MAJOR benefit when I retire. It would just be handy to get a hold of the money i'd paid into it to pay off some remaining debt to make me debt freeeeee.
Thanks again
Gerry

lisyloo

it's all a bit rubbish isn't it....

No, it a long term plan to sae for retirement.
This is pretty basic and should have been explained to you.
It's not an "emergency fund" or for any other purpose.
It's purely for retirement savings.
If that's not what you wanted then you should not have used a pension plan.

the money is not going to be of any MAJOR benefit when I retire

It should be a contributory benefit.
Bear in mind that you have had tax relief on your contributions (AND possible employer contributions) so it's much more than if you'd jsut put your own money somewhere.
If it's not in the best place, then review and move it to an appropriate fund where performance and charges are appropriate.

It would just be handy to get a hold of the money i'd paid into it to pay off some remaining debt to make me debt freeeeee.

That may be so, but you tied it up into a long term plan.
Perhaps you should have put it into a cash ISA or savings account instead if flexibility had been a requirement.
No doubt you wanted the tax relief and/or employer contributions.

Did the advisor at the time ask you about your requirements for flexibility?
Did you say you ight want the money medium term?
If you did then they should not have advised you to take a pension.

LongTermLurker

gerrybhoy1974 wrote: »

it's all a bit rubbish isn't it.... the money is not going to be of any MAJOR benefit when I retire. It would just be handy to get a hold of the money i'd paid into it to pay off some remaining debt to make me debt freeeeee.
Thanks again
Gerry

But you do get tax relief at source on your contributions, and presumably your employer will have contributed half as well, so it's a bit unrealistic to expect to use a pension as a short term savings account. I guess they could allow you to take out the amount you'd put in less tax, but to do that they'd have to look at your tax level each year you contributed (20%, 22%, 40%) and then back-calculate what your tax liabilities would have been if you hadn't paid into the pension (eg keeping the money and not paying it into a pension may have made you a 40% tax payer that year), so it's easy to see why they wouldn't want to offer that option.

The long and the short is it's intended as a long term savings vehicle to save for when you retire, and you get good tax breaks to compensate for the lack of access.