£220 million in defecit. Deferred pensioner, should I take cash to leave?

Spendless

Between 1991 - 1997 I worked f/time and had a non contributory final salary company pension. I was made redundant at the end of 97 when another company took them over. I have not contributed to a pension since mainly as I have only worked briefly, part-time or not at all due to going on to have a family.

The company that took over my old employer have written to me as a deferred pensioner stating that there is currently a defecit of £220 million in their pension fund. The Trustees of the pension reduced the trasfer values by 11% in 2005 and have recently increased this reduction to 13%.

I am being asked if I would transfer my entitlement into another pension, and as an incentive the 13% that it is currently underfunded would be paid to me as a cash lump sum.

As I don't currently work (I have a pre-school age child) and am unlikely to do so for at least the next 18-24 months. Am I right in thinking the only thing I could transfer into is a stake-holder pension?

I am 40.

EdInvestor

There seems to be a new ruling on these "inducements" which will mean they will be taxed, if I understand it correctly.

http://www.scottishlife.co.uk/scotlife/web/site/BeeHive/BeeLines/BHBLJan07Page10.asp

dunstonh

As I don't currently work (I have a pre-school age child) and am unlikely to do so for at least the next 18-24 months. Am I right in thinking the only thing I could transfer into is a stake-holder pension?

No. You can use Section 32, Stakeholder, Personal or SIPP.

I just did a review on a pension in a similar position as yours (Booker) and these types inducement based transfers are becoming more common.

Spendless

dunstonh wrote:

I just did a review on a pension in a similar position as yours (Booker)

What a co-incidence

Ed-investor- As I'm not a tax payer (at home with kids) and the lump sum offered is just over £2k would I be paying tax and NI

EdInvestor

Ask the company offering the transfer.

Spendless

EdInvestor wrote:

Ask the company offering the transfer.

Thank you, I will do. My own feelings are that I should have a personal allowance of around £5K and if I'm not using it cos I don't work, I don't see that I should have to pay tax and NI on a £2k windfall, which is the only 'income' I will receive.

What are the views on taking the money out and putting it into something else as oppossed to leaving the money in there? What I'm thinking is I've been left for 9 years and at 40 I have some years to go before I retire. When the pension is already in so much defecit, I think I'm going to be a long way at the back of the queue when it comes to me receiving anything on retirement.

dunstonh

We cant tell without figures. However, the one I did had a critical yield of 8% which is high but possible. I havent used a stakeholder as 8% average is harder to achieve on a stakeholder. I wanted the better funds.

I dont know if you are reading the other thread in progress today about occ scheme security but if I was in the booker scheme, I would see this as a way out while you can. I see that scheme going bad.

Spendless

dunstonh wrote:

I dont know if you are reading the other thread in progress today about occ scheme security Is this the one by James? I've just had a look

but if I was in the booker scheme, I would see this as a way out while you can. I see that scheme going bad.

That I admit is my gut feeling too. I just didn't know whether a cash bribe was clouding my judgement.

dunstonh

They have the cash today to fund it. Who knows if they have will have the cash later? This is the judgement call you have to make.

Booker seem to do more damage than good to companies they get involved with so I wouldnt have much confidence in them (my family background is retail, hence how I know people who are ex Nurdin & Peacock).

EdInvestor

It looks like any inducements that have already been offered won't get caught in the tax net

Spendless

EdInvestor wrote:

It looks like any inducements that have already been offered won't get caught in the tax net

Do you have any more info on this? Last week I received a letter saying it probably will be subject to tax and NI. It means £500 less for me. I can probably get my tax back as I'm not a tax payer (currently a SAHM) but I don't think you can claim NI back or can you