Old employer closing scheme = Options

philatio

I left my old private sector job about 7 years ago now and kept the company pension running. I now work in local government and am in the LGPS.


Pack today in the post saying the old employer is closing down their scheme and I have 3 options. I have £16,500 in the scheme.


Option 1 - Take the money and invest it myself. I'll be taxed on 75% of it.

Option 2 - They will invest it in a Standard Life pension that their trustees have picked.

Option 3 - I can transfer it to my local government pension (assuming LGPS allow it) or to my own private pension scheme.


Now I'll have to do more investigations, but I'm just wondering if people in the know think that one of these options jumps off the page straight away as the one to go for ??

JoeCrystal

I think there is a limit on when you can transfer it to your LGPS, usually, a year within your starting work. So if you are after that date, then Option 3 is not really available.

Cheers,
Joe

Andy_L

is the deal they can arrange with standard life (eg charges & fund selection) better or worse than you can arrange with a private pension?

hyubh

philatio wrote: »

(assuming LGPS allow it)

It's 12 months from joining unless the employer has a formal policy extending it (most don't).

kidmugsy

Well, if option 3 is out, and given that option 1 is barmy (unless you expect to die soon), that leaves .....

mania112

Option 1 sounds like triviality, which is only available to those over 60 and with no other pensions.

mania112

Option 3b is the best option - transfer to another pension.

xylophone

A SIPP might suit as eventually with your LGPS pension and your state pension, flexible drawdown might be available. http://www.hl.co.uk/pensions/sipp

Otherwise http://www.cavendishonline.co.uk/pensions/transfers-and-repensioning/ might be worth a look.

RichandJ

mania112 wrote: »

Option 1 sounds like triviality, which is only available to those over 60 and with no other pensions.

Not if it's winding up. A wind up lump sum is available at any age as long as the fund is < £18k. 25% tax free, tax on the rest.

jamesd

philatio wrote: »

Pack today in the post saying the old employer is closing down their scheme and I have 3 options. I have £16,500 in the scheme.

Option 1 - Take the money and invest it myself. I'll be taxed on 75% of it.

This is a winding up lump sum payment. Ignore anyone who says you can't use triviality, they just don't know all of the rules and are using the wrong rules for the situation, which isn't triviality.

That matters because this is almost certainly your best option of the two available to you now.

philatio wrote: »

Option 2 - They will invest it in a Standard Life pension that their trustees have picked.

Is this a section 32 buyout pension? If so it will come with restrictions. SL probably aren't cheapest and you could probably even beat them with a normal personal pension.

philatio wrote: »

Option 3 - I can transfer it to my local government pension (assuming LGPS allow it) or to my own private pension scheme.

Looks as though you've been an employee too long for this to be available.

philatio wrote: »

Now I'll have to do more investigations, but I'm just wondering if people in the know think that one of these options jumps off the page straight away as the one to go for ??

Winding up lump sum. Almost always going to be the right choice.

The winding up lump sum means you can simply choose to invest the money in any pension scheme you like, without being stuck with an extra SL one apart from any others you may have. You can perhaps do things like buying extra years in LGPS or paying LGPS AVCs with it, then using those AVCs for your final lump sum, avoiding reducing the LGPS income at a bad commutation rate. Those are likely to easily beat the SL option.

The SL option might be of interest if there are any guaranteed annuity rights (GAR) or other special benefits like a guaranteed minimum pension (GMP) compared to a standard personal pension, which could only really apply if it is a section 32 buyout. Are there?

mania112, please consider adjusting your posts about triviality not being available and 3b being the best option now you know that this is a winding up lump sum and the triviality rules don't apply to it.

atush

While option 1 is allowed under winding up, I feel it is a major mistake unless you put that 75% into another pension.

It is pension savings, meant to be used for retirement- not now.