Lump Sum and thresholds

fiona1875

Hi I wonder if anyone can help. My husband passed away two years ago leaving a pension worth approx £20k. Since his death the value is frozen other than some NI contribution now taking the fund to approx £21k. The pension is with Legal and General and they are just holding the money for me because I want to take it as a lump sum payment and not reinvest it or take an annuity. My problem is the government threshold for lump sum payment is £18k and is apparently going to decrease to £15k rather than increase. Is there anyway I can get them to release the money, perhaps paying me £18k and investing the rest with them. Or indeed I am that desperate that I would happily just take the £18k forgetting the rest. Please can anyone advise.
Many thanks

dunstonh

Since his death the value is frozen other than some NI contribution now taking the fund to approx £21k.

That isnt frozen. That term relates to something different.

The pension is with Legal and General and they are just holding the money for me because I want to take it as a lump sum payment and not reinvest it or take an annuity.

If there are non-protected rights then it is paid out as a lump sum. If there are protected rights then it has to be paid out as an income. (if it is a mixture of both, then it is split in two and distributed as lump sum on NPR and income on PR). Age has nothing to do with it so waiting isnt going to change that.

My problem is the government threshold for lump sum payment is £18k and is apparently going to decrease to £15k rather than increase.

It isnt reducing to £15k but staying at 18k but the pension is already through that at 21k. So, it cannot be taken under triviality as effectively, it has already crystallised at 20k.

Is there anyway I can get them to release the money, perhaps paying me £18k and investing the rest with them.

see above regarding protected rights/non protected rights

fiona1875

Thank you for this. I am guessing it is non-protected rights as they were going to annually keep me updated on the government threshold to see if it increased to enable me to take it as a lump sum payment. Had the sum been less than £18k they would have let me take the lump sum payment. Therefore if it is non-protected is there anything I can do to let them pay me £18 and invest the rest? I appreciate your help. I know nothing about pensions so laymans terms would be great. Many thanks

dunstonh

I am guessing it is non-protected rights as they were going to annually keep me updated on the government threshold to see if it increased to enable me to take it as a lump sum payment.

If it was non-protected rights, you would have been paid it as a lump sum within days of the death certificate and bank details being provided.

Had the sum been less than £18k they would have let me take the lump sum payment.

I think there is some confusion here. On death, the pension suffers a lifetime allowance calculation at that point. So, triviality has never been an option as the value was above the limit on death. So, waiting as you have been has only delayed what should have been done two years ago.

Who is giving you advice on this? If its a financial adviser, then you need to discuss this fully with them and perhaps get a second opinion. If its the insurance company then they will not give advice but will just take instructions from you.

The bottom line is that triviality is not an option and has never been an option for you.

Take a look at the statements. It will show how much of the fund is made up of protected rights and non protected rights. Let us know what it shows.

fiona1875

Thank you. It is Legal and General who have given me this information, and the pension is with them. I will have a look at the policy and statements (not sure I have any, only letters from L&G) to see if it mentions a split. Many thanks

fiona1875

I have spoken to them and apparently the whole sum is protected. They have advised however that a triviality payment can be made if the threshold was to ever increase to above the lump sum value as it is based on the year in which they pay out, not when the fund was placed on hold as it were. I guess I have no option but to opt for annuity payments. Many thanks for yoru help with this.

fiona1875

I have spoken to Legal and General and the Pension Advisory Service. As of 6 April 2012 there will be the abolition of Protected Rights. Legal and General advised that this would mean I could take my fund of £21800 as a lump sum. However the Advisory service said no as the threshold would not change. I am confused. If the protectred rights will have to be treated as un-protected rights then why can I not take a proprtion of the money as a lump sum as of April?

dunstonh

Legal and General advised that this would mean I could take my fund of £21800 as a lump sum.

you cannot.

However the Advisory service said no as the threshold would not change.

That is correct.

Also, my current understanding is that it only applies to protected rights post 2012. Not those that have crystallised pre 2012.

I am confused. If the protectred rights will have to be treated as un-protected rights then why can I not take a proprtion of the money as a lump sum as of April?

Because death occurred prior to 2012 and you receive the benefits crystallised. Changes will apply to uncrystallised protected rights.

Is the pension now in your name or is it still set up in the name of your husband?

fiona1875

I am not sure. Correspondence is address to me with no mention of his name, but when I call they ask for the deceased's name, therefore I assume it is still in his name.

dunstonh

fiona1875 wrote: »

I am not sure. Correspondence is address to me with no mention of his name, but when I call they ask for the deceased's name, therefore I assume it is still in his name.

To be honest, this is a mess. It sounds like the pension is still in his name (no need to ask for his name if not). It should have been paid over to you following his death. This may explain why they are getting the rules mixed up.

I suggest you visit a local IFA and get them to sort it out. You have already missed out on 2 years of annuity payments and annuity rates were higher than 2 years ago. So, this delay is costing you.