Pension Fund Transfer - Bombshell

tonto1962

I have worked for the same company for 37 years, I joined the final salary fund when I married at 21. The company had a management buy out and a new final salary pension scheme was setup. At that time the advice for someone of my young age was to transfer into the new fund which I did.

After a short time the company was bought out by another bigger company and I transferred my pensions funds to yet another final salary pension scheme. The transferred money was in Equitable Life Units Trusts and was kept separate from my new contributions to the final salary scheme.

With the recent changes in pension rules I anticipated taking 25% cash tax free from the pot of money (Equitable Life) I had accrued over many years, but recently I found out that this is not possible.
The problem seems to be that the Equitable Life section of my pension fund forms part of the Company's final salary fund. To take the cash lump sum I would have to take my final salary fund as a pension too. The two sections of the fund cannot be separated.

Does anyone know if this is correct, the current rules of the fund state that I cannot take my final salary pension until I am 60 without permission from the company. Leaving the company (which I do not want to do) is another option where I can access may fund early. It seems rather strange that the Equitable Life section of the fund it so restricted, it sits there as an investment I do not add to it and the company does not have any involvement in it. Why cant I access that section of the fund. Any ideas?????

redpete

I'm somewhat confused by you talking about final salary schemes but also about the money being invested in Unit Trusts. As far as you are concerned a final salary scheme guarantees you a certain amount of income when you decide to start drawing on the pension - where it is invested is irrelevant because the organisation providing the pension is taking all the risk. There will be rules saying how they assess the value of this scheme when working out what 25% would be and what effect on the regular income would be if you took out this lump sum; there isn't a real pot of 'your' money that you would be accessing.

xylophone

Can this Equitable Fund be an AVC connected to the FS Scheme?


Or is it possible that you transferred to a S32?

xylophone

Can this Equitable Fund be an AVC connected to the FS Scheme?

("Added Years") AVC?
http://www.pensionsadvisoryservice.org.uk/about-pensions/pensions-basics/workplace-pension-schemes/defined-contribution-avcs-and-fsavcs

greenglide

So the AVCs can be used to fund a tax free lump sum, up to 25% of the total value of DB pension and the AVC fund without reducing the benefits of the DB scheme? If so these schemes can be very useful as they can give the full amount of the AVCS tax free.

The rules over AVCs have changed and I believe that they have to allow you to take them separately if you wish. Whether this is a good idea is another matter.

tonto1962

The Equitable Fund was transferred into the company scheme using a group transfer plan. Due to this I think the whole fund is treated as one fund. The Equitable fund is not an AVC, it was the money available for transfer from the old companies pension fund, which ceased to exist after the buy out.

xylophone

I am finding this very confusing.

Thirty seven years ago you took employment with a certain employer and joined the Final Salary Pension Scheme.

There was a management buy out of the company and a new Scheme was set up into which you transferred the benefits from the old.

Are you sure that this was a Final Salary Scheme rather than a Group (DC) Pension Plan managed by Equitable Life? This would fit in with what you say about Equitable funds.

The EL plan was then group transferred into the Final Salary Scheme of a company which bought out the management buy out?

If it was cash, why was it not used to buy into benefits in the buying company's scheme?

Or was it used to buy added years in the new company scheme?

Or is it still in Equitable Life funds but earmarked to buy added years in the new company scheme at age 60?

What exactly have you been told by the administrators of the Scheme?

PensionTech

The rules over AVCs have changed and I believe that they have to allow you to take them separately if you wish. Whether this is a good idea is another matter.

The scheme does not have to allow you to take your AVCs (or any other attached DC fund that this may form) in partial retirement. What they do have to do is allow you to transfer them out to another scheme (e.g. a personal pension) where you can take them separately to your main pension.

The only reason why you wouldn't be allowed to do this is if the "pot of money" that you transferred from EL was converted into a different type of benefit - e.g. a defined benefit pension - upon transfer.

It does sound to me like the transfer has retained its DC form - since you said "it sits there as an investment" - in which case you would have a statutory right to transfer it to a personal pension and draw on it from there without affecting the rest of your benefits.

Ask the scheme whether you can transfer out your EL benefits in accordance with the new statutory right to transfer DC benefits independently of other benefits. If they don't allow this, ask them to give a reason - the only acceptable reason being that the EL benefits are in fact DB or "safeguarded rights" in some way.

tonto1962

Thanks for the response, I am seeing a IFA today and I now know what questions to ask

Brightspark87

tonto1962 wrote: »

Thanks for the response, I am seeing a IFA today and I now know what questions to ask

Really glad you are seeing an IFA - this is important in this case. Run through any other questions you may have when you get back from the meeting!

tonto1962

After being told by all my advisors that I can access this pension pot, Xifinty are still telling me I cannot split it from my final salary based pension. They offer no explanation why not, just that I cant.