private pension. 25% early release??

kimberley1459

Hi My husband wants to release 25% of our private pension.
we have recieved the forms to release it, but they charge 900 pound commision, also our remaining pot can no longer be taken as a cash lump sum!!! we would recieve 95 pound a month untill death. there will be 26.000 left after taking 25% out... in my calculations that means we wud have to live for another 24 years to get all our money back. as we are both of ill health we know we wont be around that long..... im very confused what to do??
any advise would be greatly appreciated.. thanks kimberley

xylophone

Hi My husband wants to release 25% of our private pension.
we have recieved the forms to release it, but they charge 900 pound commision, also our remaining pot can no longer be taken as a cash lump sum!!! we would recieve 95 pound a month untill death. there will be 26.000 left after taking 25% out... in my calculations that means we wud have to live for another 24 years to get all our money back. as we are both of ill health we know we wont be around that long..... im very confused what to do??
any advise would be greatly appreciated.. thanks kimberley

:eek::eek::eek:

Be very, very careful!!!

our private pension.

Pensions relate to individuals, though there can be spouse benefits.

How old are you/your husband?

It is not normally possible to access your pension before the age of 55 except in certain strictly limited circumstances.

Have you been approached (or have you approached) one of these "release your pension early" outfits?
See https://forums.moneysavingexpert.com/discussion/3447527

kimberley1459

Hi my husband is 55 i am 54 it is not a joint pension its soley in his name and we are seperated! he sent of for the forms which he gave to me to read!! hence my confusen!!! thanks for reply.

xylophone

we are seperated! [/B

If you are separated (contemplating divorce?) then even greater care is needed.
Professional advice?

Linton

I assume that your husband has just asked your pension provider for a quote. This is often a bad idea. It is strongly recommended that he gets his pension through an IFA. An IFA will quite likely be able to get a better deal, will be able to get an enhanced pension if his ill health justifies it, and will be able to talk him through all the details. The IFA will want paying, but that should be entirely or mostly covered by the commision that the pension company wont be keeping for themselves.

On to some of your points....

You say it will take 24 years to get the value of the pension pot back. The government statisticians predict that people of your age of average health can expect to live til their mid/late 80's. And of course you could live longer than that. This is what an annuity gives you - the pension company takes the risk that you live too long.

Once your husband reaches 55 he can take a 25% lump sum, the rest must be used to provide an ongoing income. So you cant take the lot as a lump sum.

Finally as has been said it is his pension and must provide for his retirement. By default it will cease paying when he dies. He can take a reduced pension to provide his wife (you) with a % of his pension (50%, 66%, 100% whatever), after he dies which will pay out until you die should that be later. The complication is your separation. I believe that were you not to be his wife when he dies you would not be entitled to anything from his pension.

It seems to me that you both need professional advice and not act too hastily especially if you think the separation will be permanent.

jamesd

At 55 it is normal to be able to take 25% of a personal pension as a tax free lump sum. The remaining 75% has to be used for income in some way, though that income doesn't have to be taken immediately, it can be left to grow until some later retirement, called income drawdown. It's also possible to use income drawdown to provide income instead of buying an annuity.

Given his ill health he should not buy an annuity from the company where his pension is but should consult a proper IFA, all three letters. The 25%/75% split can't be changed (at least for pensions where money was first paid in recently) but there can be a substantially higher annuity payout amount each year for those who have conditions that are likely to reduce how long they will live.

So it's important to know who he sent the forms to, what type of business they are and where the pension money currently is.

If choosing to buy an annuity you need to know that if it is a single life annuity all payments will stop after his death. Except that there are guarantees that can be bought for a small reduction in the income level that would pay out for five or ten years from the day the annuity payments start.

Any pension benefits to a spouse would go to the spouse at the time of death, if any. Unlikely to be you unless there is a high chance of the separation ending, though if you are still married it would probably be you.

Were the two of you divorcing, a divorce settlement would start out by providing each of you with half of the value of pensions like this, assuming it's a standard defined contribution pension. You could then each take 25% and buy an annuity or use drawdown in your own name. This split and all other financial matters can be adjusted, say if one of you needs more cash than the other for some reason.