Lump sum at 50 to assist post divorce

cmb919396

I am 48 and have pension CETVs totally around £350,000, £180,000 of which is in a "frozen" defined benefit scheme (benefits increase by RPI or 3% per year), the rest in three different DC schemes one of which is contributed to by myself and my employer.

Being recently divorced, I've lost the majority of house equity in the settlement, and think I need a mortgage of £150,000+ to get back on the property ladder.

Q1: could I take the 25% tax-free lump sum at 50 to partially repay the mortgage? And if so...

Q2: can I leave the defined benefit fund intact and take money out of one or more of the others?

Q3: can I continue to contribute to my employer's scheme?

dunstonh

Q1: could I take the 25% tax-free lump sum at 50 to partially repay the mortgage? And if so...

Only by transferring to a personal pension that allows that.

Q2: can I leave the defined benefit fund intact and take money out of one or more of the others?

If you want. Each plan is independent from the others.

Q3: can I continue to contribute to my employer's scheme?

As long as you dont take benefits from that one you can.

EdInvestor

It will be simple to take 25% out of the two old D/C schemes.It wouldn't usually be advisable to transfer out of a d/b scheme at 50, unless you were sure of your investment skills.

You could see if it was possible to transfer the accumulated funds (or a part of them) out of the current employer scheme into one of the other 2 D/C schemes, while opening a new account to get the future contributions. You could then take 25% of the enlarged D/C scheme.

If you are paying in more to the company pension than is needed to get the employer money, then you could also consider diverting the additional money to overpaying the mortgage for a while, especially at current interest rates.

jamesd

While it's possible to do what you ask using the defined contribution schemes, is it actually the best option? Your mortgage interest rate is likely to be lower than the growth rate of the money in the pension so taking the lump sum is likely to leave you worse off than doing it later.

If you do want to see the mortgage outstanding balance reducing at a higher rate now, I suggest that you first do it by dropping any extra contributions to the employer's scheme that are above what is needed to get any matching money they provide.

Regularly reviewing and adjusting the investments you have in the various pensions is one of the things you should do once a year. Particularly for older plans that could be better off moved to a new plan. Unless you have some reason to keep them split, it may be worth combining the two defined contribution plans that the employer isn't contributing to. Perhaps also worth moving some of the funds from the employer one if the employer has no objection and the alternative offers better investment options.

cmb919396

Ok thanks for these comments. I think it may well be worth looking at consolidating the schemes depending on investment performance and charges.

I suppose while interest rates are relatively low, you are right that investment performance may well be better (or should be)