Lost my job at almost 60, what can I do with old company pension to help with debts

barbara22

Lost my job and not hopeful of getting another given circumstances of being almost 60 and being 'summarily dismissed'.

I have a very small inactive old company pension, only worth circa £24000.

Big problem initially is need to clear credit card debts of £5000, especially as one of the debts is with my own bank - as soon as they know they'll just grab the money. This wouldn't have been a problem if I still had a job of course!

I contacted the company administering the pension with a view to seeing if I could 'release' some of the value to pay off these immediate debts, they initially say I can but must take the whole benefits now i.e. get lump sum, and buy an annuity with the balance? I don't want to do this as the annuity on the balance wouldn't yield any 'sensible' income. They're sending me info on this with updated values/options in the meantime.

Is there any way round this, on such a small amount I would have preferred to turn it all in to cash - I'll be 60 in 4 months and eligible for the state pension in 20 months. I could live until then if only this pension were available as cash.

dunstonh

Is there any way round this, on such a small amount I would have preferred to turn it all in to cash - I'll be 60 in 4 months and eligible for the state pension in 20 months. I could live until then if only this pension were available as cash.

Its a pension, not a savings account. So, you cant get any more than 25% out. To do what you want (take the 25% and not the income) would require you to transfer it to a SIPP, personal pension or drawdown plan. Not all plans offer the drawdown/unsecured income option and its rare for employers to offer it on their scheme. Hence the need to transfer.

sleepless_saver

barbara22 wrote: »

Lost my job and not hopeful of getting another given circumstances of being almost 60 and being 'summarily dismissed'.

Big problem initially is need to clear credit card debts of £5000, especially as one of the debts is with my own bank - as soon as they know they'll just grab the money. This wouldn't have been a problem if I still had a job of course!

Open an account with an unlinked bank and make sure everything gets paid into that. Remember to move over any direct debits.

Have a look at the sticky at the top of the debt free wannabee board for where to go for advice on the debts.

jamesd

You don't need to buy an annuity with the balance. If you do want to buy an annuity with the balance you can almost certainly get a better deal than buying one from the company your pension is with. If you just want to take the maximum lump sum you can transfer to Hargreaves Lansdown, take the lump sum and place the remainder into income drawdown. You can take about 6% income a year from the remainder, limited by GAD calculation, not investment performance. That would get you about £6,000 lump sum plus about £1,000 a year.

However, as it's a company pension it might not involve buying an annuity. If it was final salary or other defined benefit type there would be no annuity involved.

It appears that your best option may be to seek advice from a debt help charity like CCCS who can offer you guidance on negotiation reduced payments, suspension of interest and/or an IVA. Given your income now and in the future you seem likely to have difficulty managing to pay off the credit card debt without impoverishing yourself further.

[Deleted User]

I transferred my small pension to sippdeal, £26000. it was easy and didn`t take long. I then took out 25% cash and vested my pension. You can arrange to take out whatever you like per year between limits of £zero and what ever your left over amount will provide, in my case £2035 per annum as total in the sipp is now £33500, I have taken benefits twice so far an am taking another yearly amount of £2035 this year, last two years I took £1050 each year as I wanted to build the sipp up a bit

I am 63 and my sipp is very stable these days, having bought bonds in 2 building societies and the coop bank. They all provide interest to the sipp twice a year, more than enough for my withdrawal and still adding to the sipp value year on year. I like the flexibility a lot eg this year I wanted some extra cash so asked for the amount required to top up to the max allowed ie I had had £1050 and asked foranother £980. The sipp costs £75 plus vat every year to run, same as my dhs sipp which is much bigger. All in all I appear to get better returns than from an annuity and I still `own `it and have a good degree of flexibility and when I pop my clogs then I can leave it to whoever I like, minus tax of course

barbara22

jamesd wrote: »

You don't need to buy an annuity with the balance. If you do want to buy an annuity with the balance you can almost certainly get a better deal than buying one from the company your pension is with. If you just want to take the maximum lump sum you can transfer to Hargreaves Lansdown, take the lump sum and place the remainder into income drawdown. You can take about 6% income a year from the remainder, limited by GAD calculation, not investment performance. That would get you about £6,000 lump sum plus about £1,000 a year.

However, as it's a company pension it might not involve buying an annuity. If it was final salary or other defined benefit type there would be no annuity involved.

It appears that your best option may be to seek advice from a debt help charity like CCCS who can offer you guidance on negotiation reduced payments, suspension of interest and/or an IVA. Given your income now and in the future you seem likely to have difficulty managing to pay off the credit card debt without impoverishing yourself further.

I have entered info online with CCCS and may well contact them by phone in the next few days.

The pension is a 'Buyout plan' transferred several times in to safer investments according to age, if that helps to classify it?

I joined a company scheme very late and the company has long ceased to trade (went bust just after they made me redundant, around 10 years ago). As my health is not particularly good, it looks like an income drawdown plan is the only sensible option?

margaretclare

You could look at getting an 'impaired life' annuity, as you say your health isn't particularly good. But you need to 'shop around'.

Annisele

Drawdown isn't a good idea just because your health is poor. (I'm not saying that it is or isn't a good idea for you - I'm not qualified to give advice - just that poor health doesn't automatically mean drawdown is right).

You could look at "impaired life annuities". If your health isn't as good as average (even if that's just because you smoke) you might be able to get higher annuity rates.

Part of the problem with drawdown is that it tends to need more management than an annuity purchase. With an annuity, you buy it and then you forget about it - you can't 'manage' it because there's nothing to manage. With drawdown, you want to be keeping a careful watch on the investments, deciding how much you want to withdraw, making sure your investments match your attitude to risk, guesstimating what you think annuity rates are going to do in future, taking account of things like mortality drag, and much more (I'm no expert, so I can't tell you how much more).

The fund size means it likely isn't worth getting an IFA to manage the drawdown, so if you're not confident to do it yourself you *might* be better taking an annuity. The Pensions Advisory Service seems to think that if a fund is less than £100k drawdown isn't usually worth it; that's a figure I've seen quoted elsewhere. However, not 'usually' worth it doesn't mean it isn't a good idea for you - and you might decide to just delay purchasing an annuity for a few years.

barbara22

margaretclare wrote: »

You could look at getting an 'impaired life' annuity, as you say your health isn't particularly good. But you need to 'shop around'.

Thanks, I have looked at this, but even with the small amount extra available with 'impaired life' it doesn't stack up well compared to an income drawdown plan. I also hate the thought of 'giving' a company £18000 to get a small amount back on a regular basis - at least with drawdown your original investment is still ongoing and earning. As such, it's also still an available asset in my will.

I'm on a fast learning curve with this subject....

barbara22

Annisele wrote: »

you might decide to just delay purchasing an annuity for a few years.

Exactly so, options are still open with drawdown. Thanks for reminding me!

jamesd

Be sure to discuss your pension situation with CCCS. They will be able to advise you whether you should or should not take any money from it.

The second bank account advice is good.