Divorce settlement - pension share advise needed!

pennywinks

I have been awarded a pension share of my ex's private pension. My problem is, if I add it to my existing pension scheme would it mean that I can't cash it in when the law changes in April as I am already drawing my pension. Or should I put the money into a new account which will let me take the lump sum in April and do with it what I want? Any advise will be much appreciated. The amout is around 18k. Thanks in advance

atush

What type of pension does your ex have? A DC/money purchase, or a DB/final salary type? I am going to assume door no1. Because with option2, you'd really want to leave it there in your name if possible and draw it at the scheme age?

then, what type of pension are you drawing? A DB pension, or a DC pension in Drawdown or did you buy an annuity? If you can add it or would want to will depend. With the above case in choice2 (DD) I would add it, the other two you cant.

As to what to do with it if you cant, then you would open a new pension that allows DD, preferably flex DD. You take the TFLS, invest it in cash or S&S isas, then invest the rest for DD for when you need it.

pennywinks

We both have Aviva pensions. He is 20 years younger than me so does not draw his pension yet. Idon't understand your reply - please translate into easy language. If I've understood the one bit, I bought an annuity ten years ago - I wasn't offered any other choice.

atush

Ok.

so he has a DC (ie defined contribution) pension. You may not have been offered a choice, but you may have had one and didn't take it. If you bought your annuity after April 5th 2006? Or some date in 2006? Basically in 2006 you no longer had to buy an annuity but you seem to have been on the cusp of this so may have been forced. BUT you did have the open market option, where you offered your retirement pot to other companies who might offer you more money. and if you had any ill health issues you should have gotten an Enhanced annuity and even more cash.

You had a DC pension too, but have taken yours already. So have an annuity, So no, you cannot add this pension to your old one.

But you can open a new PP, and put the money into it. And you c an even add to it, up to any earned income you have from PT work, or 2880 per year (whichever is higher), and the govt will gross up your pension by basic rate tax (BRT) or to 3600 from 2880.

so you then would be able to: Take 25% of the pension out tax free (ie the TFLS) and take the rest as income. Best to do this as tax efficiently as possible. If you give details on income and age a strategy could be supplied.

AS for other abbreviations, we had a sticky at the top with all these, but they were amalgamated (you can find them in the one sticky above if you look hard enough)''Ib the mean time

DD= draw down

DB= Defined benefit/final Salary (FS)

And do say who your Annuity was bought with. And if you were/are in ill health as there might be possible compensation. Esp if you are with Friends Provident who have apparently made mistakes in 40% of their annuities in that they had poor maths 0 levels/GCSEs and have done their calculations wrong.

jamesd

You can't add the money to your existing pension because you already spent that to buy the annuity that is now paying you income.

You would get the money in a pension pot of your own with Aviva. After 6 April 2015 you will have two major options:

1. Take a 25% tax free lump sum of £4,500 and place the remaining £13,500 into flexi-access drawdown. You can take that £13,500 out as fast as you like but it's added to your taxable income so it's better to take it out gradually to ensure that you pay no higher rate income tax.

2. Use a new option with the complicated name Uncrystallised Funds Pension Lump Sum (UFPLS) to take out as much as you like whenever you like. For each amount you take, 25% is tax free and 75% is taxable income. This is the simpler option and I suggest that you use this one to gradually take out the money over two years.

In addition, if you reached your state pension age already or will do so in the next year, you have the option of deferring your state pension. You can do this even if you already claimed it. The pension will increase by 10.4% for each year of deferral. This is usually an excellent way of getting an income, beating annuities for those in normal good health at normal retirement ages.

To be able to say whether deferring the state pension is a good idea or whether something else might be better we'd need to know your age and rough state pension amount. This is because the deferring deal gradually gets less good as you get older, until by age 75 it can start to be less good than another option that you will have later this year, buying more state pension.

We also need to know more about your health. This is because there are "enhanced annuities" that pay out more than normal annuities to people with lower than normal life expectancy. It's possible that one of these might pay you more.

Please also say whether you have any urgent need for a lump sum or any high costs debts. Also please say whether you think that your current income is OK or whether more would be good and whether you want to try to keep money available to be inherited after your death.

pennywinks

Thank you very much for that useful information. I now know that when I am awarded a pension share I need to put it into a separate new pension to consider my options after April 2015. I am most grateful
:beer: