Cash out at 55

Chrisrm777

Hi
I have a pension worth iro £35k and and I'm in a final salary scheme with 15 50ths paid up at the moment.

Can I cash out of the final salary scheme when I reach 55 next April?

atush

Who is your pension with and where do you get 35K? AS a DB pension generally isna't valued that way, more by using the multipier on your final salary with the company.

Plus, it will be worth more than any transfer value at retirement age.

What do you propose to do with the money, and what will you retire on if you spend it now? You could live to 90 or more?

If it is an unfunded public service DB pension, the govt is putting the kibosh on any transfers out.

Your_Hero

By 'cash out' I'm assuming you meant take early retirement. You should speak to the pension trustees as it is at the discretion whether you can retire early or not. The normal retirement age of DB schemes are usually 60 or 65. You will face actuarial reductions too for each year you retire early.

xylophone

And see also http://www.pensionsadvisoryservice.org.uk/pension-reform/budget-2014

"Defined Benefit Transfers" if what you are considering is a transfer to DC.

dunstonh

I have a pension worth iro £35k and and I'm in a final salary scheme with 15 50ths paid up at the moment.

Are these two pensions or the same thing?

Chrisrm777

Sorry to clarify the 35k is a personal pension that I've had for years and not been contributing to because of my company scheme. I have been told that as on next April I can cash out my DB scheme with my current employer and transfer that to my personal pension plan. Is that correct?

atush

No, it is not. It might be possible you could get an IFA to sign off if you were ill and not likely to make old bones and had no spouse and dependents. But again, it could depend on who your DB pension is with.


i think you need to tell us who your DB pension is with, as you clearly dont under stand quite how valuable it is?

In any case the changes are as regards your DC personal pension. Which from next april you could take/withdraw completely. It must be said that this may not be in your best interests, as much of the pension would be taxed at 40% as 75% of it counts as income and you also are still working.

Better to leave it where it is, or pay more into it. Then take it when you want to retire from your current position and live on it until your DB pension pays out. This way, you would pay little to no tax on it, and you would not reduce your valuable DB pension.

Chrisrm777

I know it's worth quite a bit, as it stands now if I went at 55 it would be worth iro 10k pa at 60 that increase to 16 k or 11 k if I took 84 k lump sum. I don't really want to say who tha company is but it's a Global American company with an annual turnover of 30 Billion.

Now I know that if this was a personal pension to get a 10k anuity at 55 the pot would be worth what 350 - 400 K at a guess. What I want to know is that with the changes to the pension rules, can I convert the DB pension to a personal pension thus giving control of the lump sum to me.

This is a classic case of me speaking to an 'expert' in a pub. It all seemed too good to be true, hence the need for proper advice

mgdavid

Chrisrm777 wrote: »

I know it's worth quite a bit, as it stands now if I went at 55 it would be worth iro 10k pa at 60 that increase to 16 k or 11 k if I took 84 k lump sum. I don't really want to say who tha company is but it's a Global American company with an annual turnover of 30 Billion.

Now I know that if this was a personal pension to get a 10k anuity at 55 the pot would be worth what 350 - 400 K at a guess. What I want to know is that with the changes to the pension rules, can I convert the DB pension to a personal pension thus giving control of the lump sum to me.

This is a classic case of me speaking to an 'expert' in a pub. It all seemed too good to be true, hence the need for proper advice

Good - you're smart enough to realise this sounds too good to be true (and is!). With a DB scheme you do not have a 'pot' with your name on it, there is just a commitment by the employer to pay you the calculated pension amounts on retirement.
'equivalent pot' is used in cases of divorce, and rarely, in cases of extreme ill-health and short life expectancy. It is theoretically possible to transfer out of a DB scheme but the rules require an IFA to sign it off and normally they won't becuase it is tantamount to financial suicide.
The pensions legislation changes of this year and next all relate to DC pensions, not DB.

xylophone

This is a classic case of me speaking to an 'expert' in a pub. It all seemed too good to be true, hence the need for proper advice

Does your DB scheme permit the pension to be taken before Scheme Pension Age?

If so, under what circumstances? I would imagine than except in the case of serious ill health, taking benefits early would mean an actuarial reduction.

Otherwise, if what you were considering was a transfer out of your DB to a DC, see link in 4 above (which also has guidance regarding accessing your existing DC/any other DC pension).

See also https://www.moneyadviceservice.org.uk/en/articles/transferring-out-of-a-defined-benefit-pension-scheme

Linton

Chrisrm777 wrote: »

I know it's worth quite a bit, as it stands now if I went at 55 it would be worth iro 10k pa at 60 that increase to 16 k or 11 k if I took 84 k lump sum. I don't really want to say who tha company is but it's a Global American company with an annual turnover of 30 Billion.

Now I know that if this was a personal pension to get a 10k anuity at 55 the pot would be worth what 350 - 400 K at a guess. What I want to know is that with the changes to the pension rules, can I convert the DB pension to a personal pension thus giving control of the lump sum to me.

This is a classic case of me speaking to an 'expert' in a pub. It all seemed too good to be true, hence the need for proper advice

I doubt very much that if you were able to get a transfer it would be anywhere near £350K. You can get some idea of equivalent cash from your lump sum figures - at 60 you would lose 5K/year in exchange for £84K lump sum. But £84K wouldnt buy you a £5K index linked pension.