Trivial Commutation Over £18k ??

qwerty444

Hope someone can kindly advise me re trivial commutation of pension plans.
My current situation, followed by 3 Q's...

My £50k mortgage is due to finish its 25yr term in a few weeks time.
This is funded by 2 'pension mortgage' plans that I have not always been paying into (interest only to the mortgage company - always up to date).
Am currently receiving pension credit (since January 2012, self-employed under tax threshold during 2011).
The total 'pot value' of these plans is approx £23k (10k + 13k).
Am considering applying for trivial commutation on both these plans and pay any penalty (40% ??) to DWP for exceeding the £18k limit.
The funds would be used to pay off part of the outstanding mortgage.
This would be better for me than taking a smaller 25% pot and receiving a small pension (which would only get deducted from my pension credit).
The mortgage co have said they may be able to extend the mortgage term and to carry on paying interest until we move (hope to downgrade next year and buy outright).

The Q's:
1) Is this a feasable plan to consider ??
(the over £18k legal aspect)

2) Will this affect my pension credit even if I immediately pay the net pot amount to the mortgage company ??
(I fear retribution for my sudden wealth increase !!)

3) Is it possible to extend a mortgage or is a new mortgage normally necessary ??
(may not get a mortgage on pension credit income)

I always knew I would have to cross this bridge sometime, and it's approaching fast...
Many thanks.

jem16

qwerty444 wrote: »

The Q's:
1) Is this a feasable plan to consider ??
(the over £18k legal aspect)

No - trivial commutation is only applicable if the total of all your pension pots is less than £18k.

kidmugsy

Transfer 2x£2000 out to two other separate pensions. Then cash these in under the "stranded pots" scheme. You are now left with £19000 less expenses. Invest in something volatile and cash it in when the value sinks below £18k. Done!

Smirn

I have 2 pension pots, but in total £820 over the £18K. How do you go about transferring the smaller of the two (£5780) into a 'volatile' fund hoping it goes down?

jamesd

You use whatever normal way your pension provider gives for changing your investments. It's easiest if there are dealing charges or other fees because you can finely control how much you spend that way.

Smirn

thanks for your reply. I can't find an IFA who will take on the case, I need a high risk so hopefully the value will fall, Anyone know any websites which deal with pension transfers? I really need the lump sum to keep my home from being repossessed. After I was made redundant I got into financial difficulty. I have an arrangement in place, but there will come a point when my lender will want to see I can resume my mortgage payments and pay arrears. Being 59 and in poor health outlook is not very good. A lump sum will enable me to pay off arrears and give me the leeway to sell my house and be in control of the decisions rather than have repossession proceedings begin. The £40 odd pound per month the 2 pensions together is not going to make much difference to my situation, but the lump sum would put me back in control. ANy hints or tips welcome!

dunstonh

I can't find an IFA who will take on the case

I wouldnt either. What you want to do would be a nightmare to transact compliantly. It would be a upheld complaint/regulatory fine waiting to happen.

Early commencement is currently a high risk hot potato. Taking fees purely to bring the pension pot lower is a compliance nightmare.

Smirn

Thanks for replying. I wouldn't complain if the value went down! But I suspect that's not the problem! Oh well, btw what is 'early commencement'?

Freecall

I am not sure why you want to employ an IFA.

If the schemes have some benefit (such as guarantees) and the providers are insisting on the use of an IFA then you would probably not want to move them anyway.

If not, then just transfer them the a PP or SIPP and trade them down in value - if that really is what you want.

jamesd

If you haven't discussed selling the house with arrears you should do that. A lender would normally agree to that, with the money from the sale used in part to clear the arrears.

You can try contacting the pension company to ask them how you can change the investments you're using. They should be able to tell you how to do that without you needing to use an IFA. I'm assuming that these are fairly normal defined contribution pensions, not some sort of final salary or other defied benefit type.

Smirn

thanks for the replies. Yes it is a normal defined contribution scheme. If I am able to get my pension pots below £18K it would put me in control of the selling of my house (not much equity in it anyway), give me time to find rented house etc. I don't want to be at the behest of my lender. Think I'll try the transfer route and hope the value goes down sufficiently (as I said before, the pension from £5780 odd is insignificant. If I can't find a job, I'll lose most of this pittance anyway because of the tapers in Council Tax and Housing Benefit, or whatever they're called now(!)