Lump sum from Deferred Annuity ... "pension freedom" ?

mwhit

I require to access the tax-free lump sum from my pension, but the scheme holder (Prudential) says that I cannot do this due to it being a deferred annuity.


The cash transfer value is over £30k.



Which would be the most cost-effective way of doing this in a reasonably short time ?


Thanks.

JoeCrystal

I never heard of Deferred Annuity before. Is it section 32 buyout policy? Does it have any safeguarded benefits like Guaranteed Annuity Rates?

Marcon

A deferred annuity is just what it sounds: an annuity payable at some future point. It's the usual way in which pensions are bought out for deferred pensioners when a defined benefit scheme is wound up.

OP, were you a member of a pension scheme which has been wound up? If so, it is likely that you can only access tax free cash if you draw your pension at the same time - could that be what the Pru have told you?

mwhit

Not sure how it ended up that way, but they implied I would have to transfer it out to another pension scheme in order to make the lump sum payment



Looks like fees all the way, one for the transfer, one for the lump sum !

xylophone

Is it a S32 after a buy out from a DB Scheme with a former employer?

https://www.pruadviser.co.uk/knowledge-literature/knowledge-library/section-32/

Does the policy have any "safeguarded benefits" (GMP/GAR)?

sandsy

This is a safeguarded benefit. It can't be transferred out without taking regulated advice but doesn't need a pension transfer specialist ( see the section on retirement annuity contracts in the FCA's latest consultation, CP19/25).

However, it is still often possible to take tax free cash with these contracts. Are you trying to take tax free cash early, before taking the guaranteed benefits? It may be that a lump sum is only available if income starts at the same time.

mwhit

A tiny lump sum is available (£3k) if the pension is started but to access the "Transfer equivalent" it seems I need to transfer it out of the Pru.


"from membership of a defined benefit occupational pension scheme which has now closed and completed winding up. the scheme has secured benefits ... and OMO is not available"

xylophone

See page 4 here

https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/495377/pension-benefits-with-a-guarantee-factsheet-jan-2016.pdf

JoeCrystal

mwhit wrote: »

A tiny lump sum is available (£3k) if the pension is started but to access the "Transfer equivalent" it seems I need to transfer it out of the Pru.


"from membership of a defined benefit occupational pension scheme which has now closed and completed winding up. the scheme has secured benefits ... and OMO is not available"

What is the annuity expected from it by the way? It might be actually at a reasonable rate. Frankly, it may not be cost-effective enough to get an IFA to look at it, considering how small the transfer value is.

SonOf

Not sure how it ended up that way, but they implied I would have to transfer it out to another pension scheme in order to make the lump sum payment

Even on legacy personal pensions and stakeholder pensions, that is often the case. Most legacy plans do not support drawdown.

Looks like fees all the way, one for the transfer, one for the lump sum !

A modern pension could be cheaper.

However, there is often safeguarded benefits on this type of plan that are highly valuable.

DaveMcG

sandsy wrote: »

This is a safeguarded benefit. It can't be transferred out without taking regulated advice but doesn't need a pension transfer specialist ( see the section on retirement annuity contracts in the FCA's latest consultation, CP19/25).

However, it is still often possible to take tax free cash with these contracts. Are you trying to take tax free cash early, before taking the guaranteed benefits? It may be that a lump sum is only available if income starts at the same time.

This will not be a "retirement annuity" (S226) contract. It will almost definitely originate from a wound up defined benefit scheme, as posted above, and will be a safeguarded benefit, as you say.