Pension options when in poor health before retirement age

BooJewels

xylophone wrote: »

From what has been said on the benefits board, it is not so much about long term disability as how whatever conditions your husband has affect his ability to carry out certain tasks.

Thanks for the link - it reads similarly to the Attendance Allowance assessment that I did for my father in care. My husband is poorly and is likely to feel pretty horrible - enough so to not be able to look for work and will be attending hospital for whole days at a time for treatment, but I can't see him getting enough of the right scores to get close to qualifying. But we will talk about it with relevant pros at the suitable time. Thanks for the link, it was interesting to skim through it.

Skibunny40

To go off on a slight tangent, do you have Power of Attorney for your husband? If not, it might be something to consider in case his illness is ongoing and it would allow you to deal with his finances on his behalf.

BooJewels

Skibunny40 wrote: »

To go off on a slight tangent, do you have Power of Attorney for your husband? If not, it might be something to consider in case his illness is ongoing and it would allow you to deal with his finances on his behalf.

Not yet, but we only discussed it about 3 weeks ago when he was down with the flu and it set him thinking and he'd decided the time was right to do it, so we said we would sort it out after the holiday period. Ironically, we didn't realise then that his health was about to nosedive (he was in remission, now he's not). He thought he was taking a decision at the right time to do it, when he was relatively well.

We do have LPAs for all the older generation family members, so we're well aware of their purpose and value. But it's a timely reminder for others reading to address these things too. We shall deal with it when he's back home (for both of us). We already did wills a bit ago.

Malthusian

Malthusian wrote: »

All defined contribution pensions pay out the full fund value on death.

For reference - this statement was wrong. Some old-school DC pensions only pay return of contributions on death and not the full fund value. It is almost certianly not the case for the OP (as there is an element of added life cover) but to say "all" was wrong.

BooJewels

Malthusian wrote: »

For reference - this statement was wrong. Some old-school DC pensions only pay return of contributions on death and not the full fund value. It is almost certianly not the case for the OP (as there is an element of added life cover) but to say "all" was wrong.

How can I ascertain what sort of pension it is - are there different types and are they named as such. This just refers to 'your pension policy'.

It would actually make sense (numerically) if it were contributions, plus the life insurance bonus, rather than the full pot. I'll get the paperwork out and hit the calculator - I'm not near it just now.

I also need to see if there's a policy document filed to check through.

ETA: I've dug out one of the leaflets and it does sate, in respect of dying before taking pension benefits: "If you die before you take your pension benefits, we will return the value of your pension pot to your beneficiaries" and that if you took additional life cover, they will also pay this additional lump sum benefit. It also expands on the choice of a lump sum or regular income to a dependent - we'd need to check this, but it reads like if you specify a beneficiary they get a regular income, but if none is specified, it's paid as a lump sum. I know he specified me some time ago, when he first became ill and underwent a risky procedure. So I've answered some questions and uncovered more.

Albermarle

"If you die before you take your pension benefits, we will return the value of your pension pot to your beneficiaries"

I think the legalities are that you do not own your pension , in the way that you own your home or money in a bank account . The pension is held in trust and the trustees have the power to decide who the beneficiaries are after a death . Normally you fill out an 'Expression of Wish' form naming your preferred beneficiary and 99.9% of the time the Trustees just go along with that .
For the same reason you can not leave a pension to someone in your will as it is not legally yours to leave.
I think that is how it works anyway !

BooJewels

Albermarle wrote: »

[...]The pension is held in trust and the trustees have the power to decide who the beneficiaries are after a death . Normally you fill out an 'Expression of Wish' form naming your preferred beneficiary and 99.9% of the time the Trustees just go along with that .[...]

That would be my understanding too. It talks about trustees and decisions of that nature. It sounds sensible really, it gives them a process of protection - a buffer or pause between the pension and the beneficiaries in case of any discrepancy, such as missed payments or will disputes. There must be quite a bit of potential for things getting complicated. In our case, I don't see there being any issue, as it should be straightforward. That doesn't mean that it will be.

What I'm now a bit confused about is what exactly constitutes your 'pot' how you could put a number on it? Is it even possible or are you in the lap of the pension gods at the appropriate time?

There are transfer figures and 'what we would have paid if you died' and GARs and then also smaller numbers of 'guaranteed minimum pension pot' (excluding any final bonus) etc. So I have no idea how you'd be able to establish what the value of your pension is. This is then complicated by his pension being in 3 parts and they're all slightly different.

The pension industry seems to have been set up to create lots of jobs for people in the know by bamboozling the rest of us by making it over-complicated.

Malthusian

BooJewels wrote: »

It would actually make sense (numerically) if it were contributions, plus the life insurance bonus, rather than the full pot.

That would almost certainly be lower than the fund value so you would lose out considerably if that was the case.

It also expands on the choice of a lump sum or regular income to a dependent - we'd need to check this, but it reads like if you specify a beneficiary they get a regular income, but if none is specified, it's paid as a lump sum.

The rules are that if he dies before 75 the beneficiary can have the death benefits paid out either as a tax-free lump sum, as an annuity or a transfer to a drawdown pension plan, all of which are tax free. The pension company does not necessarily have to offer all those options. But they would usually offer you the option of a lump sum whether you were nominated or not. If the plan has Guaranteed Annuity Rates which would apply to a dependent's pension if he died, it may be better to take that option.

BooJewels wrote: »

That would be my understanding too. It talks about trustees and decisions of that nature. It sounds sensible really, it gives them a process of protection - a buffer or pause between the pension and the beneficiaries in case of any discrepancy, such as missed payments or will disputes.

Disputes over the Will would be irrelevant to the trustees as the pension is not part of the estate.

There are transfer figures and 'what we would have paid if you died' and GARs and then also smaller numbers of 'guaranteed minimum pension pot' (excluding any final bonus) etc.

If the guaranteed minimum pension pot is lower then the current value, it is moot (unless the investments fall in value enough for it to matter again).

So I have no idea how you'd be able to establish what the value of your pension is.

Depends which value you want to know. If what you want to know is how much it would pay out on your husband's death, it would be the one that says "what we would have paid if you died", which presumably includes the additional life cover. If it's not clear from the statement then it would be a good idea to ring them up and ask how much it would pay out on death.

BooJewels

Thank you Malthusian - I really appreciate your time in responding in detail.

Malthusian wrote: »

That would almost certainly be lower than the fund value so you would lose out considerably if that was the case.

I think I've got confused. We got a life insurance figure from them a couple of years ago when he was first diagnosed and it was a much lower figure than I've worked it out at - but I think they simply got it wrong.

The rules are that if he dies before 75 the beneficiary can have the death benefits paid out either as a tax-free lump sum, as an annuity or a transfer to a drawdown pension plan, all of which are tax free. The pension company does not necessarily have to offer all those options. But they would usually offer you the option of a lump sum whether you were nominated or not. If the plan has Guaranteed Annuity Rates which would apply to a dependent's pension if he died, it may be better to take that option.

Some very quick sums with paper and pencil suggest that the lump sum might be better for me - depending of course as to when it were to happen. With the proviso of course that he hasn't already drawn anything from his pension in the meantime.

If the guaranteed minimum pension pot is lower then the current value, it is moot (unless the investments fall in value enough for it to matter again).

Good, thank you. It's quite a lot lower, so it's good to know that I can probably/hopefully, discount that number for now.

Depends which value you want to know. If what you want to know is how much it would pay out on your husband's death, it would be the one that says "what we would have paid if you died", which presumably includes the additional life cover. If it's not clear from the statement then it would be a good idea to ring them up and ask how much it would pay out on death.

We will certainly need to ring them soon for clarification and would certainly take independent advice before any decisions too. But my reasons for starting the thread were largely selfish, when stuck here on my own and thinking about our dubious financial future - and how best to make this facility serve us - he asked me to try and find out. For what it's worth, the 'what we would have paid' numbers add up to a total and there's a life insurance bonus of £10k if claimed before his 65th birthday. He's seemingly bought that as an optional extra.

It will sound somewhat crass - but I suppose my own considerations are which would be better - taking his pension early on the grounds of ill-health - giving us a pretty modest sum each month from now - or leaving it alone to serve as a decent life insurance policy, until such time as he chooses to take the benefits after 65. A quick tot up suggests the lump sum is likely to be more beneficial unless I live to a very ripe old age.

I also have the unknown element in my near future of an inheritance - I'd hate for us to choose for him to take the pension and lose some of the potential benefits, to only find a month later that we perhaps didn't need to. Like I say, I know it sounds a bit tasteless, but a month ago I wasn't expecting life to get turned on its head and have to consider these things. Several factors have not read the script and our circumstances have changed in ways we hadn't envisioned - forcing me to think things that I'd rather not.

Thanks everyone for your patience and help. I think he's coming home sooner than expected, so we'll need to make some calls and get ourselves more organised financially, once he's well enough.

Albermarle

Like I say, I know it sounds a bit tasteless

Working out the best options for your future is not tasteless, just sensible .