Pension Query - please go gentle on me!

CrazyRed

Hi,

Not normally a "regular" on this board but am on here to ask a question on behalf of my MIL.

Background : MIL is 71, and retired. Through circumstances outwith her control, she needs to lay her paws on a reasonable-sized chunk of money ASAP.

I understand the pension draw-down rules are changing this tax year. MIL currently gets a significant "main" pension from her former employer, a second, considerably-smaller pension (from a very old employer) and, obviously, the State Pension.

As I said, she needs to lay her grubby mitts on a sizeable-ish chunk of money for home repairs and improvements (£16-20k) and asked me earlier if the new pension rules could mean that she can "cash in" the pension pot and take either a lump sum or (better still) the whole "pot" of the smaller pension after April 6th?

A quick bit of research suggested this COULD be possible, but (unlike most other things in her life/yard/home) I know very little about pensions so wanted to ask you knowledgeable folks whether this is feasible?

Thanks in advance for any information that can be provided.

McKneff

Just from reading other posts on pension subjects, I believe that once you have bought your annuity and had your lump sum, that was it, you cant go back and undo your pension lol.


I think its a case of looking elsewhere for money.

CrazyRed

Thanks, McKneff. She didn't take any sort of lump sum from either of the private pensions (that I do know).

I've advised her to make a phone call to the pension provider to ask the question, but wanted to try and get some information in the meantime before she got around to calling them.

Oh well, she'll just have to extend her lifetime mortgage, then

Linton

Once a pension is in payment there isnt anything you can do.

mgdavid

if already being paid pensions, it sounds very much like they are either annuities or DB (final salary type) pensions, in which case they cannot be 'undone', so no lump sums possible.

agarnett

A couple of months ago, there was a kite flown by Liberal pensions minister Steve Webb about considering whether persons such as your mother-in-law could sell their already in payment annuities in some kind of second-hand annuity market.

Google Steve Webb sell annuity to instantly see several hits commenting on what the fuss was about.

As we have seen with so many pension changes, it is unwise to ever say never, but what you ask seems less likely right now as the government is gearing up to reel-in fast the other kites flown on DB scheme transfers which have been part written into law already of course.

All pretty disgraceful politics really and an invitation to fraud by the pension schemes themselves who broadly have now been invited via another kite message to protect themselves in any way they see fit from a run on the 'bank' when a scheme's accountable backers (the employer company making the original pension promise) disappears into the shadows, and members a-plenty want their cash out before the next crazy idea locks them in.

atush

You need to A- research her pensions.

Are they DB/Final salary type (inc; survivor pension) or are they DC/money purchase pensions where you put money in, get tax relief and the investments grow according to the investments you choose?

This will tel all in her choices. But even DB pensions pay a benefit to those who have survivors rights if the die before taking them. According to the scheme rules of course. And if the pension bothered filling out the forms?

atush

Oh god, it is him again?

Shoot me now?

agarnett

atush wrote: »

... But even DB pensions pay a benefit to those who have survivors rights if the die before taking them. According to the scheme rules of course. And if the pension bothered filling out the forms?

The forms are a misleading start point.

The rules are more important - some DB schemes may pay a (much) reduced pension to an actual spouse but perhaps pay nothing to a common law partner. Children if below a certain age may come into the frame for a reduced benefit if not self-supporting, but if all the death benefits are discretionary upon Trustees whims it would be foolish to simply rely upon filling out an Expression of Wish form. First you do need to know if there is a firm rule that can be relied upon to be executed upon your death exactly as you would wish it, and not at some whim of the Trustees, for example. I think that at age 71, if the pension has been in payment for more than 5 years, then it is unlikely that any significant ongoing benefit will accrue to any survivor from a DB scheme or an annuity.


If a 71 year old woman's pension is truly "significant" from a main employer then I would guess it is most likely not a DC scheme but a DB scheme pension, unless she was a senior employee able to influence large contributions into her plan.

Yes it's me atush. Is it not a little late for you to be still up? Haven't you a busy day with clients tomorrow? But before you go bubbeyes, what did you mean by "This would tel all in her choices"?

AlanP_2

How did we get to Survivor / Dependants pensions?

jamesd

There is a small chance that she might get a lump sum but only if she has one of the two work pensions in "capped income drawdown". This is not likely. It's most likely that one or both work pensions is defined benefit like final salary or that she bought an annuity with any pension pot. If so, no lump sum remains available.

Depending on her income there are options like credit cards, personal loans or if those are unavailable, an equity release mortgage. Or perhaps a loan or gift from family members.