winding up pension what can i do?

xylophone

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

And will you have the discipline to do this? And to avoid debt in future? If so, then as far as I can see,taking the lump sum seems reasonable.

leese2504

Hi There,

I was in a similar position a couple of years ago and my options mirrored yours. I was told at the time that if the pension fund was above 18k i had no option but to reinvest, mine was just under that threshold so i was able to take the cash lump sum.

However i had advisors within the company i had previously worked for whom resolved any of my queries, is there not a contact number on your pack? They will have specialist dealing with the winding up whom maybe able to answer this query more specifically to you.
Oh and i was 28 years old at the time

atush

xylophone wrote: »

And will you have the discipline to do this? And to avoid debt in future? If so, then as far as I can see,taking the lump sum seems reasonable.

That was my point. If you/they got into debt before, you'll do so again. So the pension would be frittered away.

If you do take the LS to pay off your debt, I suggest you get over to the debt free board, post an SOA and get some help lowering your outgoings. Then get saving.

but I suspect, like most who take a LS in your position, that 18K will never be made up as paying 5% of your salary into a pension didn't cause your debt problems to begin with.

nem39esis

Ok, so an update, my fund value seams to have fluctuated over the last 3 months significantly, my initial pack said it was 18,040 then i had a letter to say it was now worth 19,500, upon calling today im told its now at 18,700???? im a little baffled it could alter that much, and makes me wonder.

I was told that as its now over the 18k i wouldnt be allowed to take a lump sum yet HMRC dont say you cant, they just say that anything over this is classed as unauthorised and taxed ddifferently. So why cant i do this? any winding up pension experts? Are they right? or are they maybe just saying no for the sake of it. I can imagine theyre allowing it for the chief execuitives!

atush

Ok, so an update, my fund value seams to have fluctuated over the last 3 months significantly, my initial pack said it was 18,040 then i had a letter to say it was now worth 19,500, upon calling today im told its now at 18,700???? im a little baffled it could alter that much, and makes me wonder.

Have you actually looked at the stock market recently?

As to helping, you are obv going to spend it so I'm out.

dunstonh

0 then i had a letter to say it was now worth 19,500, upon calling today im told its now at 18,700???? im a little baffled it could alter that much, and makes me wonder.

Markets are 10%-20% down on recent highs (depending on the market). It is that reason why people are told to reduce their investment risk as they get closer to retirement as suffering drops like that in the short term leading up to taking benefits doesnt allow much time for recovery.

I was told that as its now over the 18k i wouldnt be allowed to take a lump sum yet HMRC dont say you cant, they just say that anything over this is classed as unauthorised and taxed ddifferently.

The criteria is
1- sufficient lifetime allowance available.
2 - all entitlement of benefits under the scheme must end
3 - The amount paid must not exceed £18,000

If the member is under the age of 60, the employer (or former employer) who has paid into the scheme in respect of the member is not making any pension contributions to any other registered scheme in respect of that member.
The employer (or former employer) must undertake to HMRC not to make any such contribution to another scheme in respect of the member for at least one year after the commutation payment is made.

HMRC RPSM09300160 clearly states that "If the payment is made on or after 6 April 2012 the winding-up lump sum cannot be more than £18,000. Any amount over these limits will be an unauthorised payment."

A scheme is unlikely to want to create an unauthorised payment as it is subject to three tax charges. An unauthorised payments charge, unauthorised payments surcharge and a scheme sanction charge.

The rate of the unauthorised payments charge is 40 per cent.
The rate of an unauthorised payments surcharge is 15 per cent. This means with the unauthorised payments charge the total tax rate payable is 55 per cent.
The rate of the scheme sanction charge is between 15 and 40 per cent of the unauthorised payment and depends on whether or not the unauthorised payments charge has been paid.

I can imagine theyre allowing it for the chief execuitives!

Unlikely chief executives would only have less than £18,000 in pensions. No sensible person would.

nem39esis

As you say 55% would be lost if it was an unauthorised payment so not really worth doing at all. Hopefully the market will have dropped enough to enable me to take a lump sum under 18k.

In answer to previous concerns over spending. My my calculations im effectively paying out nearly £400 in payments a month on cc and loans etc. whilst i can afford this, the long term effect of this is that i pay way more in interest. so by clearing it now. That £400 could be put into my pension which would be nearly quadruple my contributions. i cant incease my contributions if my money is going to paying off debt. Despite this dept being as cheap as possible its still debt until paid off and still stops me from saving for the future

jamesd

It's entirely possible that it's under £18,000 after today.

atush

nem39esis wrote: »

As you say 55% would be lost if it was an unauthorised payment so not really worth doing at all. Hopefully the market will have dropped enough to enable me to take a lump sum under 18k.

In answer to previous concerns over spending. My my calculations im effectively paying out nearly £400 in payments a month on cc and loans etc. whilst i can afford this, the long term effect of this is that i pay way more in interest. so by clearing it now. That £400 could be put into my pension which would be nearly quadruple my contributions. i cant incease my contributions if my money is going to paying off debt. Despite this dept being as cheap as possible its still debt until paid off and still stops me from saving for the future

And again I say there are better ways to deal with debt than robbing your future. And the debt free board is the way to go. Start with snowballing, slamming the highest % debt first (probably a CC) alongside reducing your spending via the aforementioned SOA.

ermine

nem39esis wrote: »

.
£400 in payments a month on cc and loans etc[...]
Despite this dept being as cheap as possible its still debt until paid off and still stops me from saving for the future

Nope. It isn't the debt that stops you saving for the future. Go to the bathroom and look in the mirror. You are now looking at what stops you saving for the future.

If you buy something on credit, you get it NOW. What people don't seem to get is also you end up paying about 120% for all your stuff. Would you seek out a store that offered

Pay only 20% extra on all stock, now!

Well, if you buy stuff so you end up servicing £400 worth of loans a month, then that's roughly what you're doing.

You don't have a pension problem. You have a living above your means problem.