winding up pension what can i do?

nem39esis

I have recently left my p[revious employer and started work with a new company. Because my previous employer was bought out they are winding up the pension plan. I received a pack from them a montha go with several options, the one that interested me was having a lump sum payment. Basically this would allow me to clear a lot of debts which realistically if done would allow me to save more into a pension in the long term and catch up again.

The original letter said I had a fund value of £18056.00

I note however people saying I cant take anything over 18k as a lump sum so if based on this info does that mean I can only reinvest it in another pension?

atush

I do not know of any circumstances you can take a pension as cash, if over 18K and you are under age 60.

Is this a Defined Benefit/Final salary pension or a Money purchase one? Was one of the options to transfer the pension?

What is the name of the company?

Froglet

First off,if you are under 55 you will not be able to take any of the pension.I would assume you have been working for the company for more than 2 years with that amount,so unlikely to be able to get back what you put in(your contributions only) which can apply if you leave a company after a short time.

If you are talking about the trivial pension payment of under the 18k mark then again you still need to be over 55 and a lot of it is taxed,i believe you get the first 25% back tax free and pay tax on the rest.

A poster with more expertise than me will be able to answer your query in more depth i'm sure.

molerat

Froglet wrote: »

First off,if you are under 55 you will not be able to take any of the pension.I would assume you have been working for the company for more than 2 years with that amount,so unlikely to be able to get back what you put in(your contributions only) which can apply if you leave a company after a short time.

If you are talking about the trivial pension payment of under the 18k mark then again you still need to be over 55 and a lot of it is taxed,i believe you get the first 25% back tax free and pay tax on the rest.

A poster with more expertise than me will be able to answer your query in more depth i'm sure.

The pension is being wound up so a lump sum, if below £18k, is available irrespective of age. Been there, got the t shirt (and the cash).

Just thinking out loud .... is a partial transfer out a possibility still leaving a substantial winding up sum ?

atush

The original letter said I had a fund value of £18056.00

the fund is over 18K so it is a moot point? Unless there is a market correction. Or a switch into Japan funds?

Froglet

molerat wrote: »

The pension is being wound up so a lump sum, if below £18k, is available irrespective of age. Been there, got the t shirt (and the cash).

Just thinking out loud .... is a partial transfer out a possibility still leaving a substantial winding up sum ?

Oh,sorry if i got it wrong then,i honestly thought it was to do with age and whether you had any other pensions.

jamesd

Assuming that the winding up lump sum is the full value with no reductions, it'll be best to take that lump sum. If the value is higher than the lump sum limit you can ask them whether you can forfeit the extra. You could also ask whether it's possible to do part transfer, part winding up lump sum if the amount is well in excess of the 1% of the lifetime allowance limit. Alternatively the excess could be treated as an unauthorised member payment*, for which there will be assorted tax charges that will take about half of the extra.

However, we don't know the other options and without knowing them it's impossible for us to say whether this lump sum would be the full value or a good deal. It would also be good to know whether you are aged 55 or over and potentially able to take a 25% pension lump sum plus income under normal rules.

*ignore the reference to 1% of the lifetime allowance on the page linked to, that was recently changed to a fixed £18,000 limit, which is now higher than 1% of the lifetime allowance

nem39esis

Well im not 55 im 30. The company was halcrow, now ch2m. My options according to the document i have is
1. Transfer to the default arrangement (Scottish widows pension)
2.transfer to an alternative pension arrangement
3.draw my pension (cant do this as under 55)
4. Take a winding up sum

Nowhere in the document does it say if i can take part lump some part transfer so i dont know.

Guess what im looking for is someone whos been in the same boat and had a sum over the 18k limit so i know what happened.

atush

Find out the difference in any LS and any transfer value. Ie if you take a LS it is reduced.

If you can take it as a cash LS, that would be great- unless you spent it. it really needs to be in a pension for when you want to retire. Taking it could seriously put back any retirement you plan. And will also place it into an area that will be taken into acct for means tested benefits, or could be seized by creditors.

In the pension, it is safe from both of those, as well as being frittered away.

jamesd

Is this a defined contribution pension? One where you can pick the investments, rather than one where the payout is 1/60th or 1/80th of your pay or similar.

nem39esis

It was a pension where you could pick the investments or just go with different risk packages. Based on an employers contribution equaling mine so i gave 5% of my salary to my pension.

The hope was that the payment if able to take as a lump sum payment would allow me to pay off some debts as to me theres very little point saving if constantly paying out interest on something. This would effectively clear all my debt allowing me to be able to save more in a pension anyway as i would t need to pay so much in payments to credit cards etc