HR Trustees winding up pension

simpywimpy

My husbands pension is due to be wound up and we have to accept by the end of this month. Knowing nothing about pensions we are struggling to understand.

Hubby is currently 61. The letter states his pension pot value is £134k and they are planning to buy an annuity with it which will give an income of 7k pa.

There doesnt seem to be anything to say we don't want an annuity buying.

My question is, come April, would he just be able to take the money in full?
OR if we accept the annuity, can we then no longer take any lump sum from it?

It also states from 55yrs he can take 25% in cash. Is this 25% of the 134k? now? If we do that, what happens come April?
Thank you for any help you can offer

jem16

simpywimpy wrote: »

My husbands pension is due to be wound up and we have to accept by the end of this month. Knowing nothing about pensions we are struggling to understand.

Hubby is currently 61. The letter states his pension pot value is £134k and they are planning to buy an annuity with it which will give an income of 7k pa.

There doesnt seem to be anything to say we don't want an annuity buying.

This may be the only option they are able to offer. However you should be able to transfer out to another provider.

My question is, come April, would he just be able to take the money in full?

Yes but you would pay an awful lot of tax on it should you do that as 25% is tax-free and the rest taxable.

OR if we accept the annuity, can we then no longer take any lump sum from it?

If you accept the annuity there is no longer a pension pot from which to take a lump sum so best not to do this if it's not what you want.

It also states from 55yrs he can take 25% in cash. Is this 25% of the 134k? now? If we do that, what happens come April?
Thank you for any help you can offer

The pension company can only tell you what is available from them and what you can do under current regulations. From April 2015 there will be new regulations but providers don't have to offer those options. However you would then transfer to one that does.

simpywimpy

So if HR say we have to accept their annuity, we could then transfer that annuity to one that will allow us to take a lump sum? It just seems strange that we have no idea whether this annuity they are taking out is even competitive and the letter we have to sign absolves them of liability

jem16

simpywimpy wrote: »

So if HR say we have to accept their annuity, we could then transfer that annuity to one that will allow us to take a lump sum?

No it would have to be transferred before any annuity is bought as once an annuity is bought that is usually that - no going back in most cases.

It just seems strange that we have no idea whether this annuity they are taking out is even competitive and the letter we have to sign absolves them of liability

So don't sign it and ask about transferring the pot.

The annuity rate they are giving is 5.2%. You don't say whether that's level or index-linked but I'll guess at level as it's about right for that. Nothing special that rate and you could well do better.

simpywimpy

Thank you. I will email them now and ask what if any other options are available to us.

atush

simpywimpy wrote: »

So if HR say we have to accept their annuity, we could then transfer that annuity to one that will allow us to take a lump sum? It just seems strange that we have no idea whether this annuity they are taking out is even competitive and the letter we have to sign absolves them of liability

HR can't say anything, The pension company is offering you something they want you to buy. you dont have to.

But what is telling you an annuity isn't the best thing to do? will your husband buy an annuity that will pay out to you if he dies? Is he likely to die young or live long?

If you are long lived, an annuity is a guarantee of payments for life. Taking the money out after april could mean losing a lot of it to tax, then spending it all and have nothing left for when you are older?

and you dont have to take an annuity from that company even if you want one. You get a whole of market quote (usually best thru an IFA).

If you are likely to die sooner rather than later, even if you choose an annuity you could get a better rate for declaring medical conditions.

There are lots of things to consider, so take your time and learn about it?

mgdavid

is he still employed and earning? If so then you probably don't need pension income now, so taking an annuity would not be wise. Better to transfer it out to another provider, and maybe buy an annuity when he stops work. The later the annuity is bought, the more income it will provide.

xylophone

You might wish to consult an IFA - indeed, if this was a DB scheme any receiving scheme might require this.

https://www.unbiased.co.uk/