Sacrificing some of my Pension Asset

chorsfie

Hi

One of my previous employers is closing the pension I was in has given me 3 choices;

a) Cash in the scheme but lose about 15% of the fund
b) Transfer the fund to my current employer with the same lose 15%
c) Do nothing and it will be transporting automatically into a different product

Now I was only in this scheme for less than 5 years so its not massive, my current employer says they will offer me 1,36% of my annual salary into my scheme with them, this doesn't sound like much but then I've got no idea. So my 3 questions are;

1) How can I avoid the loss, this company is telling me I've got no choice but to accept, is this right even when they are forcing me to close it?

2) How do I measure whether transferring this fund into my current pension is a good offer

3) If I cash it in, which is my preferred choice because I'm investing everything I can into my employers Share Save to supplement my pension, so don't need to rely on this. DO I have to pay tax?

Any help would be appreciated.

Craig

dunstonh

1) How can I avoid the loss, this company is telling me I've got no choice but to accept, is this right even when they are forcing me to close it?

Yes.

2) How do I measure whether transferring this fund into my current pension is a good offer

Complete an analysis using TVAS (transfer value analysis software/system)

3) If I cash it in, which is my preferred choice because I'm investing everything I can into my employers Share Save to supplement my pension, so don't need to rely on this. DO I have to pay tax?

are you sure "cash in" is an option. Normally the option there is to transfer to personal pension, stakeholder pensions, SIPP or Section32 buy out bond?

chorsfie

Thanks for the reply, so even though I'm being forced to take action because the pension is being wound up I have to accept such a large loss, is there no avenue for appeal?

I will take a look at the calculator, thanks

Yes I've been given 5 options actually;

1) Take a lump sum if the fund is less than £15, which it is
2) Transfer to another pension
3) Trasnfer to my employers pension
4) Take Benefits if I'm over 50 (which I'm not)
5) Do nothing and the fund will transfer into a Trustee Transfer plan in my own name

Sorry, I don't know what these are; "stakeholder pensions, SIPP or Section32 buy out bond"

Currently be prefered option is No 1) and have done with it but really don't want to pay the penalties.

I really do appreciate your help here

Cheers Craig

dunstonh

Thanks for the reply, so even though I'm being forced to take action because the pension is being wound up I have to accept such a large loss, is there no avenue for appeal?

There is a shortfall as there isnt enough money in the post. You want 100% but there may only be enough to pay out 70%. If the kitty is empty, you cant get more.

Yes I've been given 5 options actually;

1) Take a lump sum if the fund is less than £15, which it is
2) Transfer to another pension
3) Trasnfer to my employers pension
4) Take Benefits if I'm over 50 (which I'm not)
5) Do nothing and the fund will transfer into a Trustee Transfer plan in my own name

number 1 is available to you under triviality rules. If the cash value is the the same as the transfer value then you should take the cash and invest it. If the transfer value is higher, then you should consider transferring it.

It should be noted that you will pay tax on 75% of the lump sum they pay out if you choose option 1.

Sorry, I don't know what these are; "stakeholder pensions, SIPP or Section32 buy out bond"

They are types of pension but dont worry about that at this stage. Only if the transfer value is higher than the cash value would you consider these options.

EdInvestor

It should be noted that you will pay tax on 75% of the lump sum they pay out if you choose option 1.

This is quite normal of course. All pension income is taxed.

Strange how many people seem to have missed this point. :rolleyes:

Paul_Herring

It should be noted that you will pay tax on 75% of the lump sum they pay out if you choose option 1.

This is quite normal of course. All pension income is taxed.

All except the 25% lump sum (if taken) that isn't taxed....

Xbigman

I had a pay out under the trivial pension rules last year for a previous employer that went bust. The reciever wound up the scheme and I had a payout of near 7k that both the reciever, tax office and pension co. all said was not taxed. Are you saying this should have been taxed in some way?
Regards



X

dunstonh

Post 6th April 2006 triviality rules changed. Was yours before or after this?