Final salary pension

Molliemoo2014

Hi there
Desperately need someone’s help here
After years of paying too much rent I have recently found out that I have a pension that I had forgotten about from a previous employer .
I have asked for a transfer value and the figures have come back at around £120000 . I am 57 and my birthday is May .Its saying the benefits can be taken from June 2020 .
We have spoken to a mortgage adviser who has said we can have a mortgage for £200000 which now means if we can raise a deposit from the pension funds we can buy a property of our own but yesterday we saw a pensions adviser who very unhelpfully said she would not agree to release the funds as we can’t prove that we can pay for the mortgage after we retire !
I am an only child and am eventually due to inherit my Mums house who is 93 which is probably worth around £400000 but she wouldn’t take that into account .She also wouldn’t take into account that my husbands or my pension from his current job only our state pensions as they were the only guarantee They obviously wouldn’t cover the mortgage on their own
I then phoned her again to say what if we did the mortgage over 12 years which would then coincide with my husbands retirement age to which she said you’re not gonna leave yourself enough money now when I could clearly show on paper that we had For some reason she just did not seem to want to help us
We aren’t even wanting to take the whole pension pot as we would want a deposit of about £70000 We would invest the rest anyway
So at the moment I have money in a pension pot that I can’t have !
She did say that I could try other companies as others might be willing to do it but where do you start ?
I didn’t even know it was possible to be refused your own money
Sorry it’s a long post but as you can imagine disappointment doesn’t even begin to cover the feeling when we thought we had a life changing amount of money and then to be told we can’t have it !
Has anyone got any advice or ideas as to where we go from here ?
Thanks for reading
Sue

hyubh

Molliemoo2014 wrote: »

After years of paying too much rent I have recently found out that I have a pension that I had forgotten about from a previous employer .
I have asked for a transfer value and the figures have come back at around £120000 . I am 57 and my birthday is May .Its saying the benefits can be taken from June 2020.

What is the pension you would be forgoing for that CETV...? And what are the lump sum options...?

I am an only child and am eventually due to inherit my Mums house who is 93 which is probably worth around £400000 but she wouldn’t take that into account .

Nothing to do with your question, but having a child (your first) aged 36 in 1960... quite old for that back then, I would have thought.

We aren’t even wanting to take the whole pension pot

But to make it a 'pot', you need to transfer out of the DB scheme completely. That's the thing the pension advisor is being cautious about, and what advice is legally required for.

I didn’t even know it was possible to be refused your own money

Well, strictly speaking, it isn't your money until you transfer out - at the moment you have a promised income on retirement.

When what you could do with a pure money purchase pension was liberalised in 2015, a requirement was put in to get advice when transferring out of a DB scheme in order to access the value 'flexibly' (i.e. under the new liberalised rules for money purchase pensions). The advice doesn't have to be positive to proceed, though it will be harder to have your choice of destination without that.

Dazed_and_confused

Final salary pension

How much is the final salary pension (and lump sum?) you would be giving up in return for the one off £120,000?

The general consensus is that in most cases transferring out of a final salary pension scheme is a poor option.

There can be situations where it is an acceptable option but you need to take advice before doing this. The advice is mandatory and only a relatively small number of IFA's now do this type of work as there is a stronger than normal chance you will subsequently make a complaint about the advisor and claim you were given bad advice i.e. after the £120,000 has been spent and you realise you are not going to get the (say) £6k/year pension you had worked many years for.

What fee do you think you might have to pay for this advice? Advice you can ignore and go ahead with the transfer if it isn't what you want to hear. And you can find a company willing to accept the transfer even if it goes against the advice.

Linton

I do not think a lender would be prepared to risk giving you a mortgage on the basis of possible future income such as a DB pension that has not been transferred or an inheritance some unknown time in the future which possibly may not happen. If it does happen will you need a mortgage?

So what can you do?
1) Make a financial plan to show how your income in retirement will pay your living expenses and what repayments you will be able to afford.
2) Only consider a pension transfer if you will have more than enough other guaranteed income to meet your needs.
3) Consider delaying doing anything until your finances are more certain and you are ready to retire.
4) At that point you may want to discuss a lifetime mortgage with a specialist mortgage advisor. At the moment you are possibly too young but, for example, by your mid 60s you should be able to get an up to 50% interest only mortgage that will be finally paid off when the property is sold after your death. Of course this option would prevent the house being fully available to your beneficiaries.

Molliemoo2014

Hi there
They are only giving me a £13400 lump sum and £1800 a year guaranteed for life.With the best will in the world that wont be any good in our situation We need the lump sum now.
How can we go against the pension advisers advice and get the money if she said she wouldn’t help us ?

Molliemoo2014

We both work at the moment and my husband will do for another twelve years
We only need the part of the pension pot for the deposit If we take the twelve year mortgage option which we can afford the mortgage will be finished before he retires

Molliemoo2014

They are quoting £13400 lump sum plus £1800 which in our situation would not help us at all with a property purchase We need that lump sum now for a deposit How can we go against their advice and get the money if a financial adviser has to sign it off ?

shinytop

Molliemoo2014 wrote: »

Hi there
They are only giving me a £13400 lump sum and £1800 a year guaranteed for life.With the best will in the world that wont be any good in our situation We need the lump sum now.
How can we go against the pension advisers advice and get the money if she said she wouldn’t help us ?

Even if you did transfer, if you wanted to take out £70k in one financial year, you could end up paying a lot of it in tax. Assuming you're already a basic rate taxpayer, that, along with the fees you'd have to pay to transfer out of your final salary scheme, could add up to £20k or so. That's a big chunk of your money that you'll never get back.
It sounds like you may have a big positive change in your finances in the next few years (hopefully later rather than sooner). Maybe it would be better to wait until the inevitable happens and re-assess your situation then?

mark55man

I can see how frustrating this must be. But largely the whole point of the advice system is to make sure people consider the long term benefits they are giving up. Especially if it means you may need other benefits to replace the lost income

A common confusion is that you don't have currently a pot of money that your scheme is looking after esrmarked for you. You have a promise of a guaranteed income until you die and possible some ongoing benefits to your partner. That promise is way more valuable than you think which is why they are prepared to buy you out, but why it is often a poor idea to do it. Especially if it's your main income in retirement.

There are lots of threads on it to weigh up pros and cons. Good luck with your decision. But don't get angry frustrated as that won't help its all procedural

Molliemoo2014

Yeah we realise about the tax implications Our mortgage adviser said take it in two lump sums one this tax year and one next which she lower the amount

daveyjp

Molliemoo2014 wrote: »

Yeah we realise about the tax implications Our mortgage adviser said take it in two lump sums one this tax year and one next which she lower the amount

That may not be an option with the type of pension you have.