little pension schemes + the fortcoming legislation (6th april) ?

bigjohn

I have a couple of small pension arrangements - from former employers. I had intended to just leave them where they are.

Unfortunately I have little or no faith in any of them (the former employers that is). So I've been thinking about what I should be doing with the funds.

Additionally, yesterday on the way home from work, I caught some of Radio 4s' "Money Box" programme. The part that I heard was about the up and coming legislative changes regarding pensions (which the presenter said that most of which are good changes, but a few of the important ones will have the deadline of the 5th April).

The bits that I'm thinking of, relate to being able to "cash in" small pension pots of (currently) up to 2.5k (whereby 25% is tax free and the other 75% is taxed as income when converted to cash). The 5th April change is to do with the amount that you can cash in and what amount of your total pension savings it represents (I didn't catch the bit about how much the 2.5k must/should represent, but after the 6th April, the amount changes to 15k but that must be the total sum of the pension savings).

My point (or question)?

Can anyone point me toward any links for criteria of amounts/ages/other requirements for this because it would seem that just doing nothing might not be an option, but I don't know?

Obviously I'd need to find out as soon as possible, because of the rapidly approaching 5th April cut off date for applications to "cash in" any small amounts (which I'd ideally like to put into an ISA or something like that).

regards

John

p.s. Oh and I understand that this type of thing is being done, because of an apparent reluctance by the savings/pension companies to issue annuities for "very small" pension pots.

EdInvestor

Old and new trivial commutation rules

Tahiti

I'm intrigued why you would specifically cash the stakeholder plans in before A-Day. Am I missing something? I thought all commuted rights were assessed at a higher rate in terms of a lifetime allowance if taken before A Day.

In my simple mind, I would therefore think that 25% tax free cash would be better taken post A Day. In an Occupational Scheme, I can see the logic if the cash is higher than 25%, but even that can be secured in many cases.

I'm sure there's something, but what am I missing?

Pal

You can only take trivial commutation if you are aged over 50 - not sure if that applies to either of the posters on here.


Tahiti - the reason that they might "retire" and take the cash pre A-day is that currently you can take a cash lump sum from EVERY scheme that you have that is worth less than £260 a year.

From 6 April, the limit goes up to £750 a year, but it is the maximum you can take from all schemes combined. Once you have cashed in pensions worth £750 you cannot take any more and you have to buy an annuity with 75% of the remaining money.

Tahiti

Shows what I know! I was told that £15k was the limit for commutation post A Day (based on 1% of the lifetime allowance).

I also thought the triviality rules changed to age 60+ post A Day, but I don't know where I heard that.

dunstonh

Personal pensions go to age 60 and will be 1% of the lifetime allowance from 6th April. That's where you heard that.

Pal would know more about the occupational pension side.

Tahiti

At least I'm not going completely mad. I just have a general interest rather than in depth knowledge. My query was referring to stakeholders, though I hadn't heard about a £750pa limit. Occ pension rules are way beyond me anyway.

Pal

I may have confused issues slightly. The £750 limit is for defined benefit pension schemes, and is actually a bit misleading.

The limit is 1% of the lifetime allowance as you have said. 1% as at A-Day is £15,000. To get to the final salary equivalent you divide the £15k by 20, which gives you the £750 pension limit.

For personal pensions and other money purchase funds the limit is £15,000 as you said, but as mentioned before, it is cumulative over all of your pension schemes.

Apologies for the confusion - original answer was in a hurry!

ceegee

Pal wrote:

You can only take trivial commutation if you are aged over 50 - not sure if that applies to either of the posters on here.


Tahiti - the reason that they might "retire" and take the cash pre A-day is that currently you can take a cash lump sum from EVERY scheme that you have that is worth less than £260 a year.

From 6 April, the limit goes up to £750 a year, but it is the maximum you can take from all schemes combined. Once you have cashed in pensions worth £750 you cannot take any more and you have to buy an annuity with 75% of the remaining money.

I had an old small company pension with a previous employer. The scheme allowed for you to take your pension at age 50, with their say-so. I was 50 two weeks ago. They paid out my "trivial" pension as a lump sum, which they would not have been able to do after A-Day, not at age 50. So I had fallen into a small "window" of opportunity, time-wise and age-wise.

The amount was £716.53 and it was doubly delicious as it was tax-free! That was a pleasant surprise. I had thought that as I was still working and paying tax at 20% that my lump sum would be taxed too. But no!

Debt_Free_Chick

bigjohn wrote:

I have a couple of small pension arrangements - from former employers. I had intended to just leave them where they are.

Unfortunately I have little or no faith in any of them (the former employers that is).

Would you like to tell us your concerns?

It's just that increasing regulation probably means that your pension is safer now than at any time in the past ... so perhaps your fears are ... um .... unfounded?

Let us know and see if we can allay your concerns.

mariegriffiths

I have several pensions from various employers and am under 36. Is it worth transfering them before 5th April? Is it worth transfering/combining them full stop?
Is transferring/combining possible?