transferring pension from Scottish Widows to SIPP - losing 25% at 55?

takaczapka

Hello,

I would like to transfer my personal pension from Scottish Widows to SIPP (interactive investor). There's no guarantees nor benefits associated with the pension. Scottish Widows claim that by doing so I will lose 25% tax-free lump sum at 55 years old benefit while doing so. This doesn't sound right to me, as SIPP by definition give the same benefit, as this is guaranteed by the government. Am I missing something there?

Thanks,
Maciej

dunstonh

Are you sure they said 55 years? Normally on plans with transitional relief, the age is 50 as a protected age. 55 matches the general pension rules (although they are pencilled in to increase to 58).

This doesn't sound right to me, as SIPP by definition give the same benefit, as this is guaranteed by the government.

It doesn't sound right but there is no such guarantee from the Govt. The Govt could pull tax free cash at any time (it is unlikely as it helps the economy). In theory, only schemes with transitional relief would keep the tax free cash entitlement but even then, a new finance act could overrule it.

In theory, a protected scheme age of 55 could exist and that would not increase to 58 when all the others do in 2028.

drumtochty

[FONT=&quot]I took early retirement at 57 and phoned up Equitable Life as they had one of my AVC's (Additional Voluntary Contributions) pots which I paid into via my company payroll.[/FONT]
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[FONT=&quot]I cannot remember the numbers now but say the value of that AVC pot was £40k. It was advantageous to transfer it to the company scheme as I could take all my AVC pots tax free.[/FONT]
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[FONT=&quot]When I asked Equitable Life the value of the pot, they said if I was retiring it would be worth say £40k but if I was just transferring it to another provider and not retiring there would be a market value reduction of say £7k.[/FONT]
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[FONT=&quot]I advised that I would transfer it to take the money tax free as I was retiring. They advised when my employers pension department requested the funds they must advise Equitable Life in writing that I was that I was retiring.[/FONT]
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[FONT=&quot]I advised my employer to tell Equitable Life I was retiring in writing when they requested the transfer.[/FONT]
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[FONT=&quot]You will have guessed they did not do that and when they told me the value of the pot, I sent them back to rewrite the transfer request and all was well after telling them twice.[/FONT]
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[FONT=&quot]I wonder if you are getting the same problem as me and they are taking off a market value adjustment because you are transferring the money to another provider rather than retiring.[/FONT]