How did I close a Pension?

Theta101

In April 2010 I closed a pension with Cheshire County Council, I was 54 years old.
I was "refunded" my contributions.
It was worth £7,000.
I had contributed for less than 5 years.

Now I'm a bit more clued up on pensions and started to wonder how the option was given me to close the fund?

Was it possible to close a fund and take the money tax free, as I did.

A little (a lot) worried now as I want to put the maximum I can into current pensions, over £10,000 per year.

hyubh

Theta101 wrote: »

In April 2010 I closed a pension with Cheshire County Council, I was 54 years old.
I was "refunded" my contributions.
It was worth £7,000.
I had contributed for less than 5 years.

This doesn't make much sense - the vesting period for the LGPS was only 3 months in 2010. Why do you put the word 'refunded' in inverted commas, but not 'closed' or 'worth'? If you got a refund, you got a refund (but you wouldn't have contributed 7K in three months!).

Now I'm a bit more clued up on pensions and started to wonder how the option was given me to close the fund?

Are you sure this was a county council...? If so, you might have had an AVC 'fund' that was 'closed', but otherwise, the phrase 'close the fund' couldn't have applied.

Theta101

Sorry, I made contributions in 1980 to 1984.
Left the council and forgot about the pension.
My better half found out about the pension and the value.
I was shocked at how much it was worth.
One of the options was to be refunded the contributions, with interest I guess.

Theta101

So am I right in thinking that getting the refund does not effect my annual allowance of £40,000?

Many thanks.

hyubh

Theta101 wrote: »

Sorry, I made contributions in 1980 to 1984.

OK, the vesting period was five years back then, so given interest, £7K doesn't sound absurd any more: say a salary of just over £29K in today's money, times by 4 years, times by a contribution rate of 6% (as then was, unless you were a manual worker) = £7K.

I was shocked at how much it was worth.

Your refund isn't what the 'pension' is worth however, since an actual pension from that 4 years membership would be worth a hell of a lot more - the benefit structure back then was 1/80s pension, 3/80ths lump sum, NRA 65, so you would have been looking at a pension of £1,500 a year in today's money (increasing by CPI each year) + a tax free lump sum of £4,500 on retirement.

One of the options was to be refunded the contributions, with interest I guess.

What other options did you have...? If they suggested you could have a preserved benefit instead of the refund, then I'm not sure where they were coming from. However, if a CETV (cash equivalent transfer value) was possible, that would have been the better option, as the amount would have some reflection of the employer contribution (and not just your own + interest).

With respect to your original question, the refund doesn't affect what you might contribute since the effect was to cancel your membership in the scheme, not draw benefits from it.

Theta101

hyubh

Brilliant. Thanks very much for your time and answers.

atush

Oh dear, that may have been a huge mistake.

PensionTech

Your refund isn't what the 'pension' is worth however, since an actual pension from that 4 years membership would be worth a hell of a lot more - the benefit structure back then was 1/80s pension, 3/80ths lump sum, NRA 65, so you would have been looking at a pension of £1,500 a year in today's money (increasing by CPI each year) + a tax free lump sum of £4,500 on retirement.

Hyubh, just out of interest - did the LGPS provide for better than statutory revaluation back in the day? Otherwise, if the benefits had been preserved when the member left in 1984, the excess would have been frozen and the GMP increases would have been franked.

System

Hi

You would have been regarded as a type 'F' member. Left with less than the minimum membership, and gave no forwarding address.

So when you could be traced and contact re-established you were.

The options listed are for a refund of contributions, with NI and Tax possibly paid over in 1984, PROVIDING you do not have any other LGPS membership anywhere else. http://www.warwickshire.gov.uk/pensions leaver form.docx

"" It must be clearly understood that once a refund of your contributions is made there will be no future pension liability held with the LGPS. There is also no provision for the amount to be repaid should you subsequently re-enter the scheme and wish to reinstate your past service. ""

This means if you had half a Million pounds with another LGPS authority it is gone forever.

I am surprised it was so easy, too easy to just dump liability, and you did not consider other alternatives.


So the calculation is the amount with the Bank of England base rate plus 1% if I remember correctly. Which has been quite high historically.