Can I cash in my pension?

shelley17

Hi, OH has a final salary pension from ex employers. He's over 55.
The trustees won't allow him to draw his pension, even though the scheme allows, as they say its detrimental to the fund !

Our only choice is to transfer out of the fund and after 3 months they've at last provided a guaranteed transfer value.

We've got an appointment with an IFA soon, but as the ex employers are also the trustees, I'm now worried that they may refuse to give consent for the transfer just to be difficult.
Can they ever do this?

jamesd

OldBeanz wrote: »

I am 58 and plan to retire at 62/3 when I should have a civil service pension income of just over £20k. I believe the govt are due to review the amount for flexible drawdown every 5 years which would make it difficult for me to plan exactly for this option at either 60 or 66.

The state pensions also count from the time you start taking them, so at state pension age you would have more like £27,000. Prior to that you could use capped drawdown or could buy a level annuity to get over the limit.

OldBeanz wrote: »

The £100k is to cover the gap between her years from 60-67 as we intend to do a fair amount of travelling.

Since she is seven years younger than you, it appears that you would have reached state pension age by the time she is 60. The state pensions then are highly likely to take you over the flexible drawdown threshold.

If they don't then there are a range of options that include combinations of:

1. equity release mortgage to be repaid later.
2. buying a level annuity of sufficient value to get you over the threshold (about 6% of capital value is the cost at the moment if in good health, with no spouse payment, so £1,000 of income would cost £16,666).
3. defer the state pensions for long enough for that to get you over the threshold.
4. capped drawdown
5. other credit
6. other savings and investments

OldBeanz wrote: »

I just assumed the best option would be to let my AVC/SIPP gently mount up but am now beginning to wonder if taking the lump sum and re-investing would be advantageous?

My general approach is:

1. the pension pot is least flexible.
2. so take the lump sum and reinvest outside the pension but just as within the pension as soon as possible, so you see the same pension-like growth.
3. and take maximum income using drawdown as soon as possible and also reinvest that, perhaps into more pension contributions to accumulate another lump sum, or, if needed, just to accumulate more of a lump sum. More pension contributions would probably be favoured by higher rate tax payers but won't always be best, depends on the exact lump sum needs.
4. life assurance if appropriate to cover the changed death benefits after taking benefits (the 55% tax charge if the pot is paid in any way other than transfer into a pension pot for the spouse).

Given your specific situation I think taking the lump sum and reinvesting outside the pension while taking income using drawdown and reinvesting that in more pension contributions is likely to be sensible and meet your needs.

jamesd

shelley17 wrote: »

Hi, OH has a final salary pension from ex employers. He's over 55. The trustees won't allow him to draw his pension, even though the scheme allows, as they say its detrimental to the fund !

An interesting argument and if it is discretionary in the rules governing the scheme they can do this. It is also likely to be detrimental to him and you, so there is an excellent chance that they have helped to save you from a significant mistake.

shelley17 wrote: »

Our only choice is to transfer out of the fund and after 3 months they've at last provided a guaranteed transfer value. ... We've got an appointment with an IFA soon, but as the ex employers are also the trustees, I'm now worried that they may refuse to give consent for the transfer just to be difficult.Can they ever do this?

Yes, perhaps that they can, it depends on the scheme rules.

A transfer value from a final salary pension is very unlikely to truly reflect its value. It also increases risk significantly. For this reason you are likely to find it very hard to get an IFA who will agree to the transfer. There are three main exceptions:
1. when life expectancy is short, so an open market purchase may pay out more based on that than the scheme does with no allowance for it.
2. sometimes for a single person where spousal benefits don't matter but are valuable enough to allow a transfer and single person income to be higher.
3. sometimes when a scheme might be at risk of entering the Pension Protection Fund and the PPF cap could significantly limit the pension received by a higher earner.

Assuming that none of those reasons apply, why does he want to take a final salary pension now and what is the normal retirement date? Do you happen to own a home or have other savings and investments? Usually those things allow more financially beneficial options than taking a final salary pension early and much better ones than a transfer.

dunstonh

The trustees won't allow him to draw his pension, even though the scheme allows, as they say its detrimental to the fund !

If it was allowed in the scheme rules then the trustees would not need to make a decision. Most schemes have early retirement subject to trustee approval.

Our only choice is to transfer out of the fund and after 3 months they've at last provided a guaranteed transfer value.

We've got an appointment with an IFA soon, but as the ex employers are also the trustees, I'm now worried that they may refuse to give consent for the transfer just to be difficult.
Can they ever do this?

The stats are around 95% of defined benefit schemes should not be transferred. So, statistically, you would expect the IFA to tell him that it is wrong to transfer the pension.

Why does he want access to the pension early?

atush

Why does he want to draw this pension early? When he could be losing 25-50% of it's value thru actuarial reduction (even if they allowed this).

As there is a spouse/partner to inherit, and possibly dependents (you don't say) and it is a FS scheme I am thinking A, it is not good to take it even if you can, and b- you won't be able to find an IFA who would sign off on it

shelley17

Thank you jamesd ,dunstonh and atush.

The situation is the company laid him off work after a workplace accident stopped him being able to do his job 7 years ago.
They refused Ill health retirement at the time, this after 30 years of service.
We've muddled along but financially we're struggling. He was a manual worker and since the accident, isn't able to do that kind of work. There's no way anyone will employ him at his age and with his health problems, so he's been self employed, doing whatever he's able to.
We don't claim any benefits as apparently he's not disabled enough, and since we don't have any assets or own our own home, this pension is all we've got.
We don't want to be in position where we have to rely on state handouts, especially since he paid in for years to this pension.

So, we'd like to have a regular monthly income to take the pressure off.
I know we'll be losing a vast amount, but the thought of struggling until he's 65 is making me ill.

wallpaperman

plunkett30 wrote: »

Hello,

I am a journalist working on a current affairs programme and I'm looking to speak to people who have been ripped off by pensions liberation companies who were persuaded to release their pensions before 55 and were subsequently hit with a tax penalty and may have lost their money.

I doubt you will find many people who have, at the moment, been hit by a tax penalty for the unauthorised payment.

At the moment HMRC are still registering schemes at the drop of a hat, with next to no evidence of how these schemes will operate going forward, so I'd be shocked if they'd actually got to grips and penalised anybody yet.

The cynical amongst the people who work in the pensions industry feel that the pension companies will be left to carry the can for this when HMRC do fully get to grips, and get their fingers out, and stop making it easy than it should be for these scam pension providers to get a foot in the door.

atush

The situation is the company laid him off work after a workplace accident stopped him being able to do his job 7 years ago.

Workplace accident, injured. Why haven't your union supported him in his claim? did you/can you consult a solcitor? What sort of payoff did he get due to his injury causing him to no longer be able to work?

Did you appeal the ill health retiral refusal? It seems this is the least he should have gotten if he was injured at work and can no loinger work.

Sounds like this isn't a pension query, but an employment/legal one.

atush

plunkett30 wrote: »

Hello,

I am a journalist working on a current affairs programme and I'm looking to speak to people who have been ripped off by pensions liberation companies who were persuaded to release their pensions before 55 and were subsequently hit with a tax penalty and may have lost their money.

We would need them to consider being interviewed on television about their situation and help highlight some of the problems so other people don't fall victim to the same scams.

Please email me at jamiewelham@gmail.com

Kind regards

James

Have you asked the moderators if you can Traul for business here?

shelley17

Hi Atush
There was no union, we did take legal action for injury, he got £15,000 .
We didn't appeal the ill health retirement refusal as ex employers, who are also the trustees, said they'd taken actuarial advice and it was detrimental to the fund. That was quite a few years ago.

When we asked for a guaranteed transfer value four months ago, we asked at the same time if early retirement under the existing scheme could be considered since OH had already hit 55 (under scheme rules you can retire at 55 with trustees consent) but they won't answer. They seem to conveniently ignore that part of the letter.
I've asked again, in writing via email (which I cc to another trustee)
but don't expect an answer.

Bottom line is we'd like to draw from existing scheme but if they wont allow it (which I'm 99.9% confident they won't,given their refusal for ill health) our own option is a transfer, and even then it seems they could block that too.