Cashing in my wife's LGPS pension

jerrysimon

My wife currently has am LGPS pension worth around £3K lump sum and £3K/year. or 10K lump sum 1.5K/year even if we take it now. More if we leave it till 60K.

I am 58 and she is 57. We have effectively retired early (2 years ago) and have almost full state pensions payable at 66.5 and 67 years old when we will get around 15K addition/year between us both.

I have a DB pension which I drew early at 56.5 which pays out 20k/year and my wife still does six hours a week and gets around £250/month (no tax) hence why we have not drawn her pension. We are comfortable with no mortgage and around 30K capital. Not been on any large holidays not sure if we want to. We are loving retirement even though it took about a year to settle in. New grandchildren, voluntary work, and exploring the UK on short breaks fills the gaps, not to mention completely redecorating/refurbing the house, gardening etc

Anyway we have been thinking about cashing in her LGPS pension/ moving it to a SIP. Last quote I had it was worth 52K. We have used some of our capital getting the house fully up to scratch spending about 20K in the last couple of years. Our state pensions will more than provide for the future but I like the idea of increasing our income now. Drawing the pension down into a SIP means we could empty it in the next 8 years and boost our capital/income. Want to help one of our children buy a house i.e. give her money towards the deposit.

So whats the procedure, now that I have a quote do I need to get independant advice and what sort of money will that cost us ?

Looking forward before we get outr state pensions I would have more than enough if my wife was to die and she would get half my pension, would use some capital before she would sell our house (550K) downsize and buy a smaller modern house on a new estate near my daughter and her children. So I think we are covered there.

We have been doing the SIP trick a couple of years getting an extra £720/year using my wifes untaxed allowance. Great adice from here to do that!

Thanks in advance for your replies

dunstonh

Anyway we have been thinking about cashing in her LGPS pension/ moving it to a SIP.

You dont cash it in. You transfer it.

So whats the procedure, now that I have a quote do I need to get independant advice and what sort of money will that cost us ?

Advice is required as it is a transaction that is unsuitable for the majority of people. Cost is likely to be around £5k as it is an extremely high risk advice transaction.

jerrysimon

dunstonh wrote: »

You dont cash it in. You transfer it.


Advice is required as it is a transaction that is unsuitable for the majority of people. Cost is likely to be around £5k as it is an extremely high risk advice transaction.

Yes I meant transfer. 5K gosh:eek:

Marcon

dunstonh wrote: »

Advice is required as it is a transaction that is unsuitable for the majority of people.

I agree entirely with the sentiment, but advice is required because the transfer value is over £30,000. From the LGPS's perspective, you are only required to show you have received advice, not that you have actually followed that advice. That said, do a bit of homework before you start any balls rolling and check if your proposed SIPP provider will accept a transfer in from a DB scheme without a positive recommendation from your adviser.

xylophone

and have almost full state pensions

Voluntary contributions?

https://www.royallondon.com/siteassets/site-docs/media-centre/good-with-your-money-guides/topping-up-your-state-pension-guide.pdf

https://www.pruadviser.co.uk/knowledge-literature/knowledge-library/pension-transfers-conversions/

https://www.royallondon.com/media/press-releases/2018/may/five-good-reasons-to-transfer-and-five-good-reasons-not-to-royal-london/

jerrysimon

Thanks we use H&L

jerrysimon

xylophone wrote: »

Voluntary contributions?

https://www.royallondon.com/siteassets/site-docs/media-centre/good-with-your-money-guides/topping-up-your-state-pension-guide.pdf

https://www.pruadviser.co.uk/knowledge-literature/knowledge-library/pension-transfers-conversions/

https://www.royallondon.com/media/press-releases/2018/may/five-good-reasons-to-transfer-and-five-good-reasons-not-to-royal-london/

Yes thanks. I think we need to do these before April when it might go up. I know I only need two years for my wife and I may not bother with mine.

xylophone

I may not bother with mine.

What it is to be wealthy........:)

jerrysimon

Well I guess it might be worth it, I think I need 4 years and I will of course pay tax on it. My aim of this post is to move money forward to now. I am still undecided. Def worth it for my wife.

enthusiasticsaver

I am in a similar position although my pension is a DB one with Barclays and I am considering transferring that to my sipp and have to get advice from an IFA before they will agree to it. To be honest though I am leaning towards not transferring it as I have been quoted £4500 from a pension transfer specialist on a transactional basis only. The transfer value of my DB pension is £67k approx. but the pension transfer specialist told me the work is the same for a small pension as it is for a larger one.

I have an appointment with another IFA in a few weeks time but he will only advise clients he has a relationship with so I am not sure you will get any IFA who will just essentially sign the form agreeing the best thing for you is to transfer a protected pension to a pension with no protection which is what your wife's sipp is and certainly not without paying around the £5k mark. Some people have been quoted £10k because of the danger of them being sued afterwards should it be agreed transferring out is not what is best for your wife.

It is generally understood it is not a good idea to relinquish the protected rights pensions like the LGPS as they give some certainty of income whereas of course if you transfer it out there is no certainty, it is likely to be expensive and if your wife only has that pension and not quite a full state pension that sounds like she may be in a tricky position if she gives it up. I know if anything happened to you she presumably would get half of your £20k pension but would that be enough to run the house etc if she did not want to be forced into selling straight away?


Whether or not it is the right thing for her to do my experience has been that few IFAs are willing to sign the form advising this is the best course of action and those who do demand a fairly substantial fee for it.

jerrysimon

enthusiasticsaver wrote: »

Whether or not it is the right thing for her to do my experience has been that few IFAs are willing to sign the form advising this is the best course of action and those who do demand a fairly substantial fee for it.

Really appreciate the detailed reply. All makes sense and forgoing 5-10K for the privilge even if they agree seems steep.


I guess our easiest option is to max the lump sum to 10K and reduce the monthly pension. At least that will be indexed linked and payable for the rest of her life.


Thanks again.