Can I cash in my pension?

RichandJ

Judyhall wrote: »

I have a final salary pension.i worked at the Nat west from dec71 to June 84. My pension is now with Rbs.I am 56 and would like to take out a sum from my transfer value which is £50000. Rbs state I can only have£5800 in cash whereas I believe I can take out 25% which would be £12000. They are adamant this is all I can have in cash. Is this right. Also would any one know any company which would buy this pension and offer me up to 25% cash. A higher sum is very important as I want to help my son adapt his house due to being diagnosed with Muscular Dystrophy at27.

You can't take cash out of a transfer value, this is simply the scheme actuary's estimate of how much it would take to purchase the deferred benefit you have and is the figure available for transfer to another pension arrangement.

The other cash sum being quoted to you is probably based on the actual pension if you took early retirement from the scheme and is a different calculation altogether.

You could, possibly, take the transfer to a personal arrangement and then take 25% of the value as cash, but that would require an IFA sign off to transfer a final salary pension.

Nobody can 'buy' the pension, it doesn't work like that.

dunstonh

You could, possibly, take the transfer to a personal arrangement and then take 25% of the value as cash, but that would require an IFA sign off to transfer a final salary pension.

One that would be difficult for an IFA to justify as the cost of doing this to the pension holder would be significant. Based on virtually no information, I would expect the advice to be to use personal savings or take out a loan. The loss on the pension by transferring it to an IVPPP and taking 25% would likely far exceed the interest on the loan.

jamesd

Remortgage or increase your mortgage or have him do that. It'll be far cheaper than what you're considering.

The amounts aren't very large so you may well be able to get the money using 0% offers on credit cards and refinance those every year or so to keep the cost down if you don't want to use a mortgage.

It's very likely that it will be a bad idea to take more than the minimum lump sum from your RBS pension. The exchange of income for lump sum tends to be on very unfavourable terms for people taking larger lump sums.

Gettingeven

Here's the thing...I have a deferred pension. The transfer value in January 2010 was £115,218.
GMP £4,800.75. (revalued at 4%)
Non-protected rights pre. 1997 £18,346.79,
post April 1997 £92,070.59.

Preserved pension at 31/12/2009, the date I left the scheme, was £8,883.80, lump sum £26,651.40
Post 97 pension £6,653.40
Pre 97 pension £1,730.16
GMP £500.24

Scheme retirement age is 63.

I've asked for a transfer value as I'm finding it very hard to pay my way, with a mortgage and credit card bills. I've tried to make ends meet but my life style is decreasing in quality month by month (a common problem at the moment, no doubt).

I'll be 55 next year (June). I would like to consider taking the cash via a SIPP, and leaving the rest until I'm 65, to grow (I hope). I do have a medium-high attitude to risk. Alternatively, I could take the pension via a SIPP, too, and reinvest in my new company's group money purchase scheme. (I am paying 8% salary and my employer is paying 12% of salary into the scheme with my new employer).

I know it's a risk, but then, I can't see how I could repay the credit cards etc. If I also use the lump sum to considerably pay down the mortgage I reckon I would be substantially better off now - I know the risk - ie. that I'm coming out of a g'teed pension, with widow's benefits and escalation (I'm married, my wife is the same age, and she is a member of a final salary scheme too).

What do you guys think? Would it be a terrible move to make? Am I right in thinking that with gilt prices very high, my transfer value may have increased quite alot, enabling me to take alot more cash than was available over 2 years ago??

dunstonh

What do you guys think? Would it be a terrible move to make? Am I right in thinking that with gilt prices very high, my transfer value may have increased quite alot, enabling me to take alot more cash than was available over 2 years ago??

Whatever you think, you are going to need to use an IFA. so, it is more about what the IFA thinks. That will largely depend on the critical yield and the size of the loss you will suffer in doing this (and it will almost certainly be a very large loss - possibly into 6 digits)

Gettingeven

dunstonh wrote: »

Whatever you think, you are going to need to use an IFA. so, it is more about what the IFA thinks. That will largely depend on the critical yield and the size of the loss you will suffer in doing this (and it will almost certainly be a very large loss - possibly into 6 digits)

6 digits! How so? The fund is only worth @ £115,000 anyway.

Also, can't I do this execution only anyway, using a Hargreaves Lansdowne SIPP - which was what I intended to do?

I know it appears like I want jam now, and not tomorrow, but needs must, sometimes? I've been helping out family members (sons) and have run out of money, basically. I thought if I just took the lump sum and paid off all my debts, the remaining fund could continue to grow until I'm 65, which, along with my new company pension scheme as outlined, wuld still leave me with a fairly decent pension at 65? What's the point in being lumbered with growing debts now, only to use up all the lump sum at 63 to do it then! The mortgage and cc cost @ £500 per month, so I would be saving that every month NOW. That's a substantial saving every month, isn't it?

dunstonh

6 digits! How so? The fund is only worth @ £115,000 anyway.

Lets say the decision costs you an average of £8000 a year in lost income. If you live 25 years then you have lost £200,000.

Also, can't I do this execution only anyway, using a Hargreaves Lansdowne SIPP - which was what I intended to do?

No. Transfers of defined benefit schemes require an IFA to sign off on them. It is because 9 out of 10 cases looked at should never be transferred. The FSA takes a default position that defined benefit transfers are mis-sold unless proven otherwise and this applies to non-advice cases as well.

xylophone

It's another expensive option but would you be allowed to draw benefits with actuarial reduction at 55? You would get a lump sum and a monthly pension, but of course there would be the taxation aspect to consider.

Gettingeven

dunstonh wrote: »

Lets say the decision costs you an average of £8000 a year in lost income. If you live 25 years then you have lost £200,000.



No. Transfers of defined benefit schemes require an IFA to sign off on them. It is because 9 out of 10 cases looked at should never be transferred. The FSA takes a default position that defined benefit transfers are mis-sold unless proven otherwise and this applies to non-advice cases as well.

So articles such as these are totally irresponsible, then?

http://www.investorschronicle.co.uk/2011/11/11/your-money/time-to-ditch-your-final-salary-pension-4IAaFYPvYsoJZ7RKZfSzcO/article.html;jsessionid=A45EA72B6EB48FC60387C9EB13790585.mps-apr-01-8109

With hindsight (as usual!), I reckon I could've doubled my transfer value since 2009, to be honest. But I take your point.

Gettingeven

xylophone wrote: »

It's another expensive option but would you be allowed to draw benefits with actuarial reduction at 55? You would get a lump sum and a monthly pension, but of course there would be the taxation aspect to consider.

Yes, I could - I think the reduction is @ 6% for each year, so at 55 I would be looking at around 48% reduction! Ouch.