British Steel Buy Out Option - Small Pots Rule

munchieblue

I have received an offer to buy out my old British Steel DB pension. The offer if under the £5k level so I assume this would be classed under the small pots rule. They transfer the payment directly into my bank account. I want to ensure that taking the offer does not affect my future tax relief on payments into my ongoing pension plan. I'm 52 so have never drawn a pension or used any of my small pots allowance.
Do I need any additional documentation to show it is been drawn under the small pots rule or is just the offer letter and proof of payment enough to ensure no future problems.

woolly_wombat

My scam alert detector is flashing red.

Marcon

munchieblue said:

I have received an offer to buy out my old British Steel DB pension. The offer if under the £5k level so I assume this would be classed under the small pots rule. They transfer the payment directly into my bank account. I want to ensure that taking the offer does not affect my future tax relief on payments into my ongoing pension plan. I'm 52 so have never drawn a pension or used any of my small pots allowance.
Do I need any additional documentation to show it is been drawn under the small pots rule or is just the offer letter and proof of payment enough to ensure no future problems.

An offer from whom?

Do you have a 'protected pension age' (i.e. a right to take your pension before the usual legal minimum age of 55)? Otherwise I'm with the Wombat!

HappyHarry

munchieblue said:

I have received an offer to buy out my old British Steel DB pension. 

You should be very wary. Who is making this offer?

munchieblue said:

 I'm 52 

That would be unlawful then. You cannot access your pension pot before age 55, unless you have a protected retirement age. It is extremely difficult to transfer a protected retirement age pension.

Again, please let us know who has made you this offer.

* Edit - Apologies to Marcon above who has already made the same points.

greatkingrat

It does seem genuine - see https://oldbritishsteelpension.co.uk/assets/downloads/2020/Final newsletter formatted 3.11.pdf

**
Cashing in small pensions is suspended until January 2021 Members with a pension worth less than a certain amount set by law can usually swap it for a one-off cash payment when they retire. We’ve had to suspend this option for now, but we are planning to give all eligible members with small benefits an opportunity to swap their benefits for a one-off cash payment early in 2021. We’ll write to you early in 2021 if you’re eligible for this option. 
**

xylophone

That would be unlawful then. You cannot access your pension pot before age 55, unless you have a protected retirement age. It is extremely difficult to transfer a protected retirement age pension.

https://petition.parliament.uk/petitions/304903
Members of the British Steel pension scheme had a protected pension age of 50 which was a benefit for shift workers to retire or seek less arduous work at an older age. Due to uncertainty surrounding the scheme many members transferred benefits to private funds and cannot claim until 55 or over.

xylophone

With regard to the above, I am wondering  whether OP's  pension can be taken as a small pot at the protected pension age.

https://www.litrg.org.uk/tax-guides/pensioners/how-do-i-cash-my-small-pension
If so, then the MPAA would not be triggered?

TVAS

What we have not discussed is how much is the pension you are giving up assuming this offer is genuine and I am also suspicious I would want to see if it represents good or bad value for money. So how much is you pension now and how much would it be at the scheme normal retirement age which you can get get from you leaving statement or a transfer statement. 

From British Steel Website:
If you joined the original British Steel Pension Scheme before 6 April 2006, you can start taking your pension at 50. The government plans to raise the minimum retirement age from 55 to 57, from 2028.

Link https://www.bspspensions.com/non-pensioners/retiring-early/

Go to google find the number of British Steel pension scheme and call them to discuss the offer do not call the number on the offer in case it is a scam.

munchieblue

Thanks for the responses . The letter is from Bardnett Waddingham - I don't believe it is a scam - I will call to check.
The estimate if I stay with the scheme is £128 / year before tax. The one-off cash payment is £3448 before tax.
I assume as it's approx. x 30 it was a decent offer for a small pot. I was more concerned that it would be classed as a draw down so I would not be able to claim the £40k tax relief on my current pension plan contributions.

xylophone

The letter is from Bardnett Waddingham -

Barnett Waddingham - mentioned here https://www.actuarialpost.co.uk/article/old-british-steel-pension-scheme-agrees-2bn-pound-buy-in-18899.htm

https://www.barnett-waddingham.co.uk/

You can check with them re the small pot status.

munchieblue

Checked with Bardnett Waddingham - this is not a scam.

• Is £3448 a good offer based on a future value of £128 / year if I stayed in the scheme?
• They stated that the buy/cash out should be under small pots status, I need to speak to a financial advisor for confirmation? Do I need to ask them to document this response for confirmation?

It feels right to cash out as its small part of my pension plans and the offer seems reasonable.