Delay pension? Just cant make my mind up

twiglet98

DairyQueen said:

You would however be taxed on the pension which reduces the benefit. One way to circumvent this would be to redirect the gross value of the pension into another pension plan. Defined Benefit schemes are exempt from the MPAA restriction once crystallised and recycling rules would not apply in this instance. Thus you would effectively be delaying paying tax on the pension until you drawdown. You would also be building a 25% tax free lump sum on the contributions made to the recipient scheme.

You foresee that you may be forced to retire before state pension age and you are concerned that the pension-in-payment would reduce your benefit entitlement in the interim. I am not clear on the rules regarding means-tested benefits if a pension is accessible (DnC will know). If you have reached the pension's NRA (normal retirement age) as apparently will be the case, you may be assessed as if you are receiving the pension regardless of whether it's in payment. If so, this adds weight to the argument to take the pension. If however the pension will be excluded in a means-tested benefit assessment then there is a possibility that you could be worse off. It would depend on the amount of support you would receive excluding and including the pension.

One option would be to take the pension and 'recycle' as suggested above. If you then retire and benefits are impacted because the pension is in payment you would be able to supplement your income with these extra funds. If OTOH you continued to work until state pension age then the proceeds of the recycled plan would be an additional source of income.

I am 64 in June, SPA will be 66. Since redundancy and a few weeks claiming Contribution Based JSA I secured part-time shop work and as a single (divorced) person over 60 my job coach suggested I apply for Working Tax Credits and Council Tax Support, both were awarded.

I moved the DC pension from my last job into a SIPP with HL with some of the redundancy payment, it's held in cash and worth about £38k.  I have a small DB pension from a job in my 20s and the normal retirement age for this was 60.  I have not yet asked to take it and the (small) projected lump sum and regular payments increase each year, I guess by about 3%, and will look it up as I need the lump sum (will ask some questions in a separate thread).  My point here is that I visited my local council offices to go through my application for Council Tax Support in person as I was in such a tizz about it, though I did the Working Tax Credit one online, and there was no requirement  to give details of the pensions as they were not yet paying anything.  I don't know if that is the case for sickness or disability claims.

ffacoffipawb

twiglet98 said:

DairyQueen said:

You would however be taxed on the pension which reduces the benefit. One way to circumvent this would be to redirect the gross value of the pension into another pension plan. Defined Benefit schemes are exempt from the MPAA restriction once crystallised and recycling rules would not apply in this instance. Thus you would effectively be delaying paying tax on the pension until you drawdown. You would also be building a 25% tax free lump sum on the contributions made to the recipient scheme.

You foresee that you may be forced to retire before state pension age and you are concerned that the pension-in-payment would reduce your benefit entitlement in the interim. I am not clear on the rules regarding means-tested benefits if a pension is accessible (DnC will know). If you have reached the pension's NRA (normal retirement age) as apparently will be the case, you may be assessed as if you are receiving the pension regardless of whether it's in payment. If so, this adds weight to the argument to take the pension. If however the pension will be excluded in a means-tested benefit assessment then there is a possibility that you could be worse off. It would depend on the amount of support you would receive excluding and including the pension.

One option would be to take the pension and 'recycle' as suggested above. If you then retire and benefits are impacted because the pension is in payment you would be able to supplement your income with these extra funds. If OTOH you continued to work until state pension age then the proceeds of the recycled plan would be an additional source of income.

I am 64 in June, SPA will be 66. Since redundancy and a few weeks claiming Contribution Based JSA I secured part-time shop work and as a single (divorced) person over 60 my job coach suggested I apply for Working Tax Credits and Council Tax Support, both were awarded.

I moved the DC pension from my last job into a SIPP with HL with some of the redundancy payment, it's held in cash and worth about £38k.  I have a small DB pension from a job in my 20s and the normal retirement age for this was 60.  I have not yet asked to take it and the (small) projected lump sum and regular payments increase each year, I guess by about 3%, and will look it up as I need the lump sum (will ask some questions in a separate thread).  My point here is that I visited my local council offices to go through my application for Council Tax Support in person as I was in such a tizz about it, though I did the Working Tax Credit one online, and there was no requirement  to give details of the pensions as they were not yet paying anything.  I don't know if that is the case for sickness or disability claims.

I thought no new tax credits claims were allowed, only Universal Credit which is capital means tested?

twiglet98

ffacoffipawb said:

twiglet98 said:

DairyQueen said:

You would however be taxed on the pension which reduces the benefit. One way to circumvent this would be to redirect the gross value of the pension into another pension plan. Defined Benefit schemes are exempt from the MPAA restriction once crystallised and recycling rules would not apply in this instance. Thus you would effectively be delaying paying tax on the pension until you drawdown. You would also be building a 25% tax free lump sum on the contributions made to the recipient scheme.

You foresee that you may be forced to retire before state pension age and you are concerned that the pension-in-payment would reduce your benefit entitlement in the interim. I am not clear on the rules regarding means-tested benefits if a pension is accessible (DnC will know). If you have reached the pension's NRA (normal retirement age) as apparently will be the case, you may be assessed as if you are receiving the pension regardless of whether it's in payment. If so, this adds weight to the argument to take the pension. If however the pension will be excluded in a means-tested benefit assessment then there is a possibility that you could be worse off. It would depend on the amount of support you would receive excluding and including the pension.

One option would be to take the pension and 'recycle' as suggested above. If you then retire and benefits are impacted because the pension is in payment you would be able to supplement your income with these extra funds. If OTOH you continued to work until state pension age then the proceeds of the recycled plan would be an additional source of income.

I am 64 in June, SPA will be 66. Since redundancy and a few weeks claiming Contribution Based JSA I secured part-time shop work and as a single (divorced) person over 60 my job coach suggested I apply for Working Tax Credits and Council Tax Support, both were awarded.

I moved the DC pension from my last job into a SIPP with HL with some of the redundancy payment, it's held in cash and worth about £38k.  I have a small DB pension from a job in my 20s and the normal retirement age for this was 60.  I have not yet asked to take it and the (small) projected lump sum and regular payments increase each year, I guess by about 3%, and will look it up as I need the lump sum (will ask some questions in a separate thread).  My point here is that I visited my local council offices to go through my application for Council Tax Support in person as I was in such a tizz about it, though I did the Working Tax Credit one online, and there was no requirement  to give details of the pensions as they were not yet paying anything.  I don't know if that is the case for sickness or disability claims.

I thought no new tax credits claims were allowed, only Universal Credit which is capital means tested?

I think you are right, my application for WTC was before this area moved to UC, though I'm sure WTC was means tested

xylophone

It is all very well deferring the payment of your DB pension beyond Scheme Normal Retirement age if you are not claiming  means tested benefits.
However, if you wanted to claim benefits, then you would be expected to draw the pension (because due payable without actuarial reduction)  or have your benefits calculated as though you were drawing it?
Re DC pensions and means tested benefits
https://www.gov.uk/government/publications/pension-freedoms-and-dwp-benefits/pension-freedoms-and-dwp-benefits
With regard to accessing your deferred DB pension, you mention that you wish to access the lump sum  - it is almost certain that to do so, you will have to bring the pension into payment - DB pensions do not normally allow you to take the lump sum and not take the monthly income.

twiglet98

Thank you xylophone.  I have re-read the link you provided and I'm sure my Working Tax Credits claim is not affected by having a DB pension which I have not yet brought into payment, neither was Contribution Based JSA before I secured part time work.  When I do activate either pension, that income will be declared on my WTC renewal.

Sorry OP for derailing your thread, but I appreciated the opportunity to draw on the collective wisdom here!

xylophone

is not affected by having a DB pension which I have not yet brought into payment, 

But  had you declared that you had reached  Scheme Normal Retirement Age  (if you had) when your pension was due payable without actuarial reduction?

DairyQueen

xylophone said:

is not affected by having a DB pension which I have not yet brought into payment, 

But  had you declared that you had reached  Scheme Normal Retirement Age  (if you had) when your pension was due payable without actuarial reduction?

Exactly so. I believe that you need to declare that you are entitled to receive the pension regardless of whether you are claiming it.