Cashing in company pension

MABLE

I have accepted an offer from my former employer of a lump sum payment of £27,000 and a pension of 3600 per year. However I have been advised I have to give them 6 months notice and I can take the pension from 1 April 07. This is a final salary scheme. What concerns me is that when they come to paying out the amount it may be less than the original figures quoted.
Apparently it is calculated on a monthly basis. Any advice would be appreciated.

ReportInvestor

Is this an offer? It sounds as if they just paying your pension due?

MABLE

Sorry to clarify this is an estimate and it just concerns me that I have commited myself to taking the pension and may then turn out to be alot less than estimated as it is reviewed on a monthly basis but I have to give them six months notice.

ReportInvestor

Do you have any choice, or are they just operating to your retirement timescale?

Can you postpone it to a later date if you choose? Do you have an alternative? Would you want to postpone it?

If it's a final salary scheme then it is linked to your final salary - not any investment performance . The "estimate" therefore has a fixed point of reference.

You are a lucky girl unlike the majority of the population. I suspect there's nothing to worry about.

MABLE

ReportInvestor wrote:

Do you have any choice, or are they just operating to your retirement timescale?

Can you postpone it to a later date if you choose? Do you have an alternative? Would you want to postpone it?

If it's a final salary scheme then it is linked to your final salary - not any investment performance . The "estimate" therefore has a fixed point of reference.

You are a lucky girl unlike the majority of the population. I suspect there's nothing to worry about.

I do not need the pension at this moment in time as I have a full time job with another final salary scheme. However I am worried if I leave it for another 4 years the benefits I am being offered may not be available then or could be reduced. I was going to put the lump sum into a high interest savings account.

seven-day-weekend

Is it an 'actuarilly reduced' pension?

i.e. Are you taking early retirement and giving up a proportion of your pension to do so?

If it is, they can insist on six months notice.

However, if you are on a final salary scheme, what you will receive is likely to be more rather than less than your estimate.

MABLE

seven-day-weekend wrote:

Is it an 'actuarilly reduced' pension?

i.e. Are you taking early retirement and giving up a proportion of your pension to do so?

If it is, they can insist on six months notice.

However, if you are on a final salary scheme, what you will receive is likely to be more rather than less than your estimate.

When I asked for a quote last year from my former employer I was advised in todays money I would get £6700 per annum but if I take my 25% this will obvisouly be less. If I take the pension 8 years early they are offering about £27,000 and pension of £3600 per annum. I have read so much in the media about company pension schemes becoming worthless I do not want this to happen to me.

EdInvestor

As you can see your pension is being cut almost in half :eek:

Do you have any reason to believe the company or the pension scheme is in any kind of trouble?Even if it is, you would be covered for 90% of the full pension by the Government Pension Protection Fund.If this is a vague worry you have, based on bad publicity about pensions rather than any real evidence of failure, you probably should leave it alone.

You might like to have a word with these people though:

https://www.opas.org.uk.

They are very helpful and have no "hidden agenda".

MABLE

EdInvestor wrote:

As you can see your pension is being cut almost in half :eek:

Do you have any reason to believe the company or the pension scheme is in any kind of trouble?Even if it is, you would be covered for 90% of the full pension by the Government Pension Protection Fund.If this is a vague worry you have, based on bad publicity about pensions rather than any real evidence of failure, you probably should leave it alone.

You might like to have a word with these people though:

https://www.opas.org.uk.

They are very helpful and have no "hidden agenda".

I appreciate that the amount would be reduced but if I invest the lump sum and the £3600 before tax I think I would be no worse off. If the pension scheme or company did collapse I could not doubt get 90% of the pension fund but the problem for me is what would that amount be if the worst happens.

EdInvestor

Perhaps you should try to find out what tax free cash you would get at NRD.

Over 20 years if you took the money now it seems you would get

20 x 3600 = 72,000 (minus tax( @ what rate?) plus interest for first 8 years) + 27000 (plus interest long term)

whereas if you waited you would get

12 X 6700 = 80,400 (minus tax )

+ ? tax free cash


I agree it's not a clear cut decision at present.

MABLE

EdInvestor wrote:

Perhaps you should try to find out what tax free cash you would get at NRD.

Over 20 years if you took the money now it seems you would get

20 x 3600 = 72,000 (minus tax( @ what rate?) plus interest for first 8 years) + 27000 (plus interest long term)

whereas if you waited you would get

12 X 6700 = 80,400 (minus tax )

+ ? tax free cash


I agree it's not a clear cut decision at present.

First of all thanks for all your help. I contacted the website you referred me to and spoke to an advisor and I put my situation to him. I told him I did not require the pension at present and I further advised that if I were take it now I would lose 30% but at 60 would only lose 5%. He thought I should should wait as now there is a protection fund I would get 90% of my pension if anything happened to the scheme I am in. I suppose I been worried by all the recent press coverage and people losing their pensions.