Confusion on pension options

enthusiasticsaver

My husband is retiring from his full time job at the end of October 2016 and we got an estimate of benefits from his company benefits scheme and took them to an IFA who is in the process of gathering more information as he thought the information sketchy at best and inaccurate at worst. For instance the company pension scheme offered what we expected a lump sum £137k and an annual pension £22,455 in one of the options say Option 4 and just the annual pension (same figure as Option 4) in Option 1. Why would anyone take just Option 1? Also no further information as to how it affects his overall pot for each option or even an indication as to how much is in the total pot except the DC pot stands at almost exactly the amount offered as a lump sum. I would have expected the annual pension figure to be higher if he does not take the lump sum.

He has protected benefits from an old DB scheme which finished in 2008 and his current DC scheme. Also an AVC pot and a protected rights pot due to the fact the scheme at some point in his 33 year career with the company was contracted out. They have also offered him a temporary pension until his state pension age in 2024 with no further information as to why this is or how this will affect his state pension. He will be 58 when he retires this October.

His company have sent him a variety of forms to complete and offered the use of a service called TOMAS (The Open Market Annuity Service) which as we are using an IFA I do not think we will need. The only option they have given which is applicable if we don't use the service is: I wish to take a Cash Lump Sum Option. The rest of the options are do we want to use the Advice Service or the Guided Annuity Service?

If we have already engaged an IFA is it recommended we also use the TOMAS service suggested by his company? They have said they will pay fees up to £325 so there will be no cost to us unless the cost exceeds this.

We are both totally confused as to the best way to proceed from here. Any advice?

dunstonh

If we have already engaged an IFA is it recommended we also use the TOMAS service suggested by his company?

No. TOMAS is just a cut down service of what an IFA would do.

zagfles

enthusiasticsaver wrote: »

My husband is retiring from his full time job at the end of October 2016 and we got an estimate of benefits from his company benefits scheme and took them to an IFA who is in the process of gathering more information as he thought the information sketchy at best and inaccurate at worst. For instance the company pension scheme offered what we expected a lump sum £137k and an annual pension £22,455 in one of the options say Option 4 and just the annual pension (same figure as Option 4) in Option 1. Why would anyone take just Option 1? Also no further information as to how it affects his overall pot for each option or even an indication as to how much is in the total pot except the DC pot stands at almost exactly the amount offered as a lump sum. I would have expected the annual pension figure to be higher if he does not take the lump sum.

Just guessing but options could be DB pension + DC as a lump sump, or DB pension while leaving DC pot uncrystallised for now? But as you've engaged an IFA they should investigate and explain it to you, also the tax implications which could be significant - for instance some schemes allow the DC element to be taken as the tax free cash of the entire pot, if you leave it you might have to pay tax on it when you drawdown/get an annuity with it. Ask your IFA.

He has protected benefits from an old DB scheme which finished in 2008 and his current DC scheme. Also an AVC pot and a protected rights pot due to the fact the scheme at some point in his 33 year career with the company was contracted out. They have also offered him a temporary pension until his state pension age in 2024 with no further information as to why this is or how this will affect his state pension. He will be 58 when he retires this October.

This might be what is sometimes referred to as a "GMP bridge". https://ompensions.co.uk/media/255923/kb-gmp-bridge.pdf Again, the IFA should investigate and explain.

His company have sent him a variety of forms to complete and offered the use of a service called TOMAS (The Open Market Annuity Service) which as we are using an IFA I do not think we will need. The only option they have given which is applicable if we don't use the service is: I wish to take a Cash Lump Sum Option. The rest of the options are do we want to use the Advice Service or the Guided Annuity Service?

If we have already engaged an IFA is it recommended we also use the TOMAS service suggested by his company? They have said they will pay fees up to £325 so there will be no cost to us unless the cost exceeds this.

See if they'll pay this towards the IFA's fees? If not may as well use it to see how it compares to the IFA, no harm shopping around.

We are both totally confused as to the best way to proceed from here. Any advice?

You're paying for an IFA so they should explain everything to you in language you can understand.

But if you want more opinions you could also try pensionwise or the TPAS:

http://www.pensionwise.gov.uk
http://www.pensionsadvisoryservice.org.uk

xylophone

Has your husband requested a new state pension statement?

He seems to have been extensively contracted out - his foundation (starting ) amount is likely to be lower than full NSP - will he be making voluntary contributions?

http://www.pensionstalk.co.uk/benefit-changes/bridging-pensions-bridging-the-gap-to-an-increasing-state-pension-age/

enthusiasticsaver

xylophone wrote: »

Has your husband requested a new state pension statement?

He seems to have been extensively contracted out - his foundation (starting ) amount is likely to be lower than full NSP - will he be making voluntary contributions?

http://www.pensionstalk.co.uk/benefit-changes/bridging-pensions-bridging-the-gap-to-an-increasing-state-pension-age/

I don't think the scheme was contracted out for very long as the protected rights pot only gives him around £1000 per year (including widows provision) from this October. We both did the check your state pension online forecast a few weeks ago and his came up with £165.03 per week from October 2024 when he will be 66 so this does not seem to be reduced from full pension. His employer have offered him what appears to be a GMP bridge of about half his state pension from this October until his SRA but luckily his company pension will be sufficient to cover our expenses anyway. Reading the link you put above the bridge should go once he gets to SRA but the SP will then kick in. He does not need to make additional contributions.

xylophone

What was your husband's starting amount?

https://www.gov.uk/new-state-pension/how-its-calculated

enthusiasticsaver

xylophone wrote: »

What was your husband's starting amount?

https://www.gov.uk/new-state-pension/how-its-calculated

£162.16 per week was the starting amount.

xylophone

£162.16 per week was the starting amount.

I would imagine then that the extra couple of pounds shown in the forecast (£165.03)relates to S2P for 2015-16.

He is one of those people whose starting amount is more than a full new state pension so that he has a "protected payment" - see

https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/181237/single-tier-pension-fact-sheet.pdf

The figures in the above are outdated - the full NSP is £155.65 so that your husband's PP is around £10.00.

The NSP increases in payment under the triple link formula (at the moment) but the PP by CPI.