Can I cash in my pension?

jamesd

If there is no reasonably rapid response you may wish to say that you want to use the "internal dispute resolution procedure". That is a formal step that is required before referring a decision to the Pensions Ombudsman.

SippTechie

wallpaperman wrote: »

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.

I can confirm that HMRC has started to apply tax penalties on at least some of the individuals who have liberated their pensions. One of the individuals who did this sent the letters they'd received from HMRC to us (we're not their SIPP provider) to see if we could help.

I've also heard third hand from a pension lawyer that HMRC has attempted to apply a tax charge on at least one pension provider that was inadvertently used as a channel through which pension funds were liberated.

I'm sure there will be lots more cases, but HMRC has definitely started to try to apply the tax charges.

atush

jamesd wrote: »

If there is no reasonably rapid response you may wish to say that you want to use the "internal dispute resolution procedure". That is a formal step that is required before referring a decision to the Pensions Ombudsman.

I agree, if they refuse to answer your question, file a formal complaint so you can go on the the ombudsman. What does your doctor think about your husband's condition re:work? Will they write a letter to support your claim?

It seems to me the company is dragging their feet on this, as yes it is detrimental to their fund. But given his accident at work, and the Very small payment given, you have a case they should agree his retirement. Esp if you are prepared to accept the actuarial reduction (which then protects the fund a bit) as immediate pension after injury/illness thru work is fairly standard.

Don't email, write a paper letter and keep copies of your correspondence in case you escalate to the ombudsman.

Going this route should be much more fruitful financially in the long run that trying to transfer a DB pension.

gadgetmind

An IFA I was chattting to recently (relax, social situation!) told me that he's currently handling a few such schemes to access pensions in a flexible and tax efficient way.

I may have forgotten or misunderstood a few details, but it revolved around moving the pension to what sounded like a SSAS, formally relinquishing your pension rights thus putting the scheme into excess, moving the excess into an offshore trust, and the trustees then finding a suitable beneficiary to receive the whole pension (minus fees) as a tax free sum.

The IFA assured me that it was all so above board that a well-known Labour ex-PM had used the same technique.

dunstonh

gadgetmind wrote: »

An IFA I was chattting to recently (relax, social situation!) told me that he's currently handling a few such schemes to access pensions in a flexible and tax efficient way.

I may have forgotten or misunderstood a few details, but it revolved around moving the pension to what sounded like a SSAS, formally relinquishing your pension rights thus putting the scheme into excess, moving the excess into an offshore trust, and the trustees then finding a suitable beneficiary to receive the whole pension (minus fees) as a tax free sum.

The IFA assured me that it was all so above board that a well-known Labour ex-PM had used the same technique.

I spoke with a quite advanced accountant who effectively said the same as that. Although he added the caveat that it whilst it appeared lawful, it wasnt within the spirit of the rules and HMRC would be unlikely to be look at a small volume of cases of relatively small amounts. However, the minute it started to become large enough for them to justify resources, they would be on it and its one of those things that could come back and bite.

gadgetmind

I doubt the unspecified ex-PM's pension was small beer and it must have caused HMRC a little embarrassment!

mania112

thistledome wrote: »

Does this also apply to a trivial lump sum commutation payment?

A self employed friend of 62 has been told that he can take his entire pension fund of £15k this year (from 2 small personal pensions). Then he can re-invest some of it in another pension scheme after april next year and then take that out again as a trivial lump sum. Thus getting tax relief over the 2 years instead of just 1.

This sounds completely mad to me, surely HMRC won't allow people to do this?

I don't have any financial knowledge, but this sounds wrong to me, if not illegal. Sorry if it's a daft question, but I'm worried he is about to do something that could get him into trouble.

TIA

EDIT: Yes! You can contribute to a pension after Triviality but can only use Triviality rules once.

jem16

mania112 wrote: »

No. Once you exercise triviality you are no longer permitted to contribute to a pension.

Can you give the links to that rule?

As far as I'm aware once you exercise triviality you can no longer pay into that pension but there appears to be nothing that stops you opening a brand new pension.

Triviality lump sums are not PCLS so no problem with recycling. From here;

http://www.scottishwidows.co.uk/Extranet/Literature/Doc/FP0289

Trivial commutation lump sums and winding up lump sums are not
PCLS and can be recycled.

jem16

thistledome wrote: »

Does this also apply to a trivial lump sum commutation payment?

A self employed friend of 62 has been told that he can take his entire pension fund of £15k this year (from 2 small personal pensions). Then he can re-invest some of it in another pension scheme after april next year and then take that out again as a trivial lump sum. Thus getting tax relief over the 2 years instead of just 1.

This sounds completely mad to me, surely HMRC won't allow people to do this?

Can't see any reason why not provided the total value of his pensions is under £18k and it's done within 12 months of exercising triviality. So there would only be about £3k to work with but possible.

mania112

jem16 wrote: »

Can you give the links to that rule?

As far as I'm aware once you exercise triviality you can no longer pay into that pension but there appears to be nothing that stops you opening a brand new pension.

Triviality lump sums are not PCLS so no problem with recycling. From here;

http://www.scottishwidows.co.uk/Extranet/Literature/Doc/FP0289

As ever, you're right. I'm not sure where I got that from.

But here: http://www.hmrc.gov.uk/manuals/rpsmmanual/rpsm09105070.htm is probably what I was confusing it with - Triviality is not available a 2nd time.