Query re transfer of pension

Nurse2047

Hello I have a small pot in an old employer of 10k with Aviva, I put in a transfer to my Vanguard SIPP as fees lower however Aviva have said that the plan includes an automatic protection which may allow me to take more than the standard 25% tax free cash at retirement. Aviva say if I keep it with them I will be entitled to the higher of the protected sum or 25% of my retirement value however, any tax free cash protection will be lost if the benefits are transferred. 

Am I better off keeping it with Aviva or continuing with the transfer? 

Thankyou 

tacpot12

Do you think you will want or need to take a tax-free lump sum? If not, I would move it if you can do so.

elouise01582

You will need to investigate if the enhanced tax-free cash amount is valuable or not.  Investigating this could result in Aviva finding that you are restricted to 25% or that you could take the entire plan tax-free or any amount in between.  For Aviva to calculate your tax-free cash entitlement Aviva are likely to ask you to complete a salary and service form showing at least the last 3 years' salary with the relevant old employer.  If you are unable to supply this information (and Aviva don't already have it) then you are likely to be restricted to a tax-free lump sum of 25%.  Please also bear in mind that if the fund value is under £10,000 you can release all the pension funds as a small lump sum/small pot from age 55 (57 from April 2028).

Nurse2047

Thank-you so much, I am confused as when I checked it was approx 10k but it says this ‘ The A-Day fund value is £4,180.32, and the A-Day tax free cash figure is £1,755.52. The figure of £1,755.52 will be re-valued when you retire in line with the changes to the standard lifetime allowance. You will be entitled to the higher of the protected sum or 25% of your retirement value’. 

Nurse2047

As it’s such a small amount I think transfer to Sipp where I can still contribute the better option, Thankyou for your help

Marcon

elouise01582 said:

For Aviva to calculate your tax-free cash entitlement Aviva are likely to ask you to complete a salary and service form showing at least the last 3 years' salary with the relevant old employer.  If you are unable to supply this information (and Aviva don't already have it) then you are likely to be restricted to a tax-free lump sum of 25%.  

This is the bit that normally trips up a lot of people, who quite simply don't have the necessary proof of earnings.

Given that the pot is around £10K, you can take £2.5K as tax free cash without needing to jump through this particular hoop and regardless of whether it stays put with Aviva or you transfer it. You could take the whole lot as cash if the value is under £10K (beware transferring it somewhere if that means it becomes irreversibly entwined with the funds in its new destination) and yes, 75% would be taxable - but given the amounts involved, would that be a total disaster if moving means lower charges and  a real potential for better returns? 

elouise01582

If Aviva already have the tax-free cash figure as at A Day you could ask them to revalue that to the current date - that should provide you with an idea of the tax-free cash entitlement that applies now - A day was 6/4/2006 so really quite a long time ago and the revalued tax-free cash figure is partly related to increases in something called the lifetime allowance and partly investment returns.  Aviva can just get their computer system to do it I would hope.  At least if you knew how much could be available tax-free you would know what you are 'giving up'.

elouise01582

Incidentally, if you were able to transfer the plan to another pension plan with Aviva that has the same pension scheme tax reference (PSTR) you may be able to both retain the protected tax-free cash amount and make further pension contributions.

TVAS

You have asked a question and not provided the facts and this is free advice how much is the Protected Tax Free Cash (PTFC) as a percentage of your current fund versus 25% of the new plan which could me more than the Aviva plan due to fund growth. At the end of the day it is a gamble on what will happen in the future. And as above see if there is another member who is transferring at the same time as you to the same provider so PTFC can be retained.