Questions about Pension

bellkat

I'm hoping someone could help by answering a couple of questions about my pension.

I left my job with a major bank about 2 years ago through ill health. I have a deferred pension with them. I will be 50 next year.

I understand I can take 25% of my pension as a tax free lump sum when I am 50.

My questions are:

Do I leave my pension with them until I am 50, then take the 25%? I think I would then have to transfer the remainder to another fund, is this correct?

Or do I transfer the pension now elsewhere? The transfer value is just over £30,000.

Also any advice on who to contact to help with transferring would be appreciated

Thanks for any help

dunstonh

I understand I can take 25% of my pension as a tax free lump sum when I am 50.

No. Assuming its a final salary pension (not many are personal pensions) you have to ask the trustees if they will allow early commencement of the pension on grounds of ill health.

Do I leave my pension with them until I am 50, then take the 25%? I think I would then have to transfer the remainder to another fund, is this correct?

Depends on the type of pension. See above. If they allow commencement you will have to take the lump sum entitlement and the income. Not one or the other.

Or do I transfer the pension now elsewhere? The transfer value is just over £30,000.

The pension, again assuming final salary, is probably worth far more where it is. if they don't allow you to commence benefits, then you could transfer it to a PPP and commence that. However, the benefits would almost certainly be massively below what would be paid by the final salary scheme.

bellkat

Thanks for your advice.

I have already made some enquiries with them about taking my pension early due to ill health and I don't think they will agree to it.
I am aware that transferring will reduce the benefits, but I will need to go ahead if the bank won't let me take my benefits early.

Thanks again

dunstonh

I am aware that transferring will reduce the benefits, but I will need to go ahead if the bank won't let me take my benefits early.

Not only reduce them but totally destroy them.

By transferring them, you will be looking at a lump sum of £7500 and income of £1190pa level or £719 p.a. increasing by RPI.

Pension trustees can often be persuaded once aware of the full facts. Especially if the illness will result in a reduced life expectancy.

Debt_Free_Chick

An ill-health pension is often an enhanced pension i.e. better than the normal early retirement pension you would be offered. As such, the employer effectively subsidises the cost of providing ill-health pensions, and as a consequence, they are often only available to current employees. Did you not apply for an ill-health pension when you left?

Anyway, as you now have a deferred pension, you should be able to opt to recieve an immediate pension at any time once you reach age 50 (under current regulations, which change in April 2006). The immediate pension is normally a reduced pension and usually "cost-neutral" i.e. there is no additional cost to the scheme for allowing you to take a reduced pension now - this is reflected in the level of the reduction which is likely to be around 6% for each year left between the date you retire and the normal retirement date. So, retiring 10 years early is likely to mean a reduction of 60%.

If the scheme thinks you are applying for ill-health retirement and refuses, then you should simply ask them whether you can take an early retirement pension. Check the scheme booklet, but make sure you read the section that applies to deferred pensioners and not those who want to retire from the bank's employment with an immediation pension (IYSWIM).

HTH

bellkat

Thankyou for your helpful advice.

I think I will wait until next year, and then decide whether or not to transfer.