Deferred Pension help please.

xylophone

I have heard talk that transfer values are good at the moment am I right in thinking that one pound of pension buys a certain amount of transfer and does that flow through to the Tax free lump sum. It may be worth me taking a bit of this.

I assume that by transfer value you mean transferring this DB pension into another qualifying pension scheme.

It may be that as you are within a year of Scheme Pension Age, you would have no statutory right to transfer see

https://www.pruadviser.co.uk/knowledge-literature/knowledge-library/transfer-pension-scheme/

Even if a transfer on non statutory right were permissible, this is still a DB Scheme (and virtually certainly the benefits are valued at over £30,000 so that you would be required to take  properly qualified advice before the Trustees could permit a transfer  ( to a QROPS presumably) - see link above.

With regard to commutation of part of your pension to a lump sum, you will need to ask WTW for the Scheme Rules/a quotation - as far as I know, you would not be permitted to reduce your pension below GMP.

hyubh

JAG61NZ said:

Yes its all turned out a bit different to my expectations.

I ran the Report for Deferred Benefits yearly for an up to date revaluation of my excess and anticipated the figure I receive this May 2021 to be added to my GMP revaluation figure - which I have know for many years as it is fixed rate 7% accumulative.

The scheme reverting to the law - Stat requirements instead of the scheme rules was a surprise.

Is it not more likely that WTW's on-demand automated quotations are just hardcoded to use statutory for excess revaluation...? Not using statutory revaluation for excess is very rare, outside of banks.

xylophone

Is it not more likely that WTW's on-demand automated quotations are just hardcoded to use statutory for excess revaluation...? Not using statutory revaluation for excess is very rare, outside of banks.

See https://forums.moneysavingexpert.com/discussion/6275266/deferred-pension-help-please/p1

https://forums.moneysavingexpert.com/discussion/6275266/deferred-pension-help-please/p2

https://forums.moneysavingexpert.com/discussion/6275266/deferred-pension-help-please/p3

The problem lies in the two figures for the revalued excess.

It could be that she has received an automated quotation rather than one tailored to her specific circumstances and Scheme.

Getting information from WTW does seem to be like getting the proverbial blood from a stone...

https://forums.moneysavingexpert.com/discussion/4736856/barclays-final-salary-pension-gmp-excess-revaluation-anti-franking/p17

JAG61NZ

Hi Xylophone

Many thanks for Mike F page 17 link. The same rules have been applied except that I went from NRD processing straight into the GMP processing.

With my final quotation from WTW I get three options
1, to take the whole pension
2, to take 25% tax free and remaining pension (I have read somewhere I can reduce this to a lower figure)
3, There is a transfer value.

Option 3 would be the QROPS which seems not likely as due to the new changes I would not be allowed to return home for an extended period of time within five years from transfer date without incurring the 25% transfer charge plus due to other changes the qrops still stays under HMRC tax rules for I believe four years so withdrawals are possibly classed as 25/75 taxation in UK. I believe I could claim it back by requesting a tax allowance. I would need to pay the tax on this the year after it moved over. The other pension had to come out on the qrops as my options had run out.

Option 2 the lump sum, I would ask to take possibly 5 to 6K, I would then see how much the Bankcharges are going to be and if too expensive switch of the monthly payment and see what the one annual payment charges are. I had wanted to do the monthly as it spreads the exchange rate fluctuations over the year. By having the one payment I could then use this for sorting out my uk tax request of setting my tax code as a no tax for this pension. I have not got my figures with me at the moment but I think I received 43k for a loss of 1K excess. Just wondered if it likely that the same ratios would apply. I dont want to waste WTW time requesting a figure on this if it is not feasible.

I had planned to use some of this pension to return home for a visit but with the current situation of covid it has put all plans on hold so I would keep it until travel was safe. 

xylophone

You would have to obtain a quotation from WTW in respect of commutation of pension to lump sum.

It may be that your scheme permits you to adjust the lump sum up/down within certain limits.

Presumably you are already familiar with the tax rules relating to your residence in NZ.

And you will know that as things stand at the moment,  if you remain in in New Zealand, once you take  your UK State Pension, there will be no increases paid on it.

https://commonslibrary.parliament.uk/research-briefings/sn01457/

JAG61NZ

Thanks Xylophone

I will have a look at my current liabilities for NZ tax this year and see how much would allow me to remain in the same tax bracket.

Yes I am very familiar with my tax rules and have to declare overseas income and complete a tax return each year.
To receive any income back from HMRC I first need to get NZ IRD involved passing my claim form through them and they send it to HMRC. They will declare I am a NZ tax resident. Hopefully my UK code will then be set to NT (???). I do have a Gateway Account which will hopefully help with any problems.

I understand that my state Pension will be frozen and will only increase if I returned back home to the UK.
To obtain an NZ pension I have to hand over any UK pension. My NZ pension date currently is 65 and UK67.
I have recently found out that my UK Pensions tax will be deducted from my Barclays Pension, so will probably
have to go through all the forms etc. again for both me and my husband.

I will document everything for my son (20) to help me with this nearer the time. Both my sons are still dependants as they are fulltime students under 23.

The tax rules for Pension saving currently differ over here we pay tax on what they earn each year and then no tax on withdrawals. The reason we have huge tax bills when we QROPS is because we need to bring our Pension in line with the NZ Pensions. There are two methods for working out your tax liability. DB can only use the schedule method where you declare a percentage that is shown against a chart for your years of residency minus a grace period. DC can use this method and another which works out your actual gains over the period and then the interest those gains should have paid over each year as well. (I have simplified it). My percentage on the Barclays would be huge and the tax needs to be paid by the next year. 

With the QROPS I am not sure about inheritance tax for my husband if I die, with the QROPS he would get the whole pot and there again I am unsure of inheritance tax. With the Barclays my sons will get nothing but with the QROPS they will inherit the full pot.

WTW have not returned any answers I have asked regarding future payments but they have helped by saying I can scan my documents into a PDF and they will check that all is correct before me sending the originals. This will be a huge help.

JAG61NZ

I have calculated some rough figures for a QROPS transfer using todays exchange rate and would probably keep over two thirds of the Transfer Value. I have worked out a rough annual Pension after tax using the same exchange rate. If the QROPS and Pension (Minus the tax), increased at the same rate annually I think it equates to the QROPS equalling 32 years of Pension.  

Both options have pros and cons. 


 

JAG61NZ

Thank you for the Pru link Xylophone just having a read. I used the pru literature last year but it was not as in depth as this. I created a life time allowance transaction of some sort on transferring out of the Pru on the QROPS and I know nothing about it so this should help. Would you happen to know if this Barclays Pension will create anything or the UK State Pension? I know that the QROPS would but do not know what the impact would be.

xylophone

Some general information on Lifetime Allowance here

https://www.moneyadviceservice.org.uk/en/articles/the-lifetime-allowance-for-pension-savings#:~:text=Fixed Protection 2016-,How much is the lifetime allowance?,but excluding your State Pension.

The lifetime allowance for most people is £1,073,100 in the tax year 2021-22.

It applies to the total of all the pensions you have, including the value of pensions promised through any defined benefit schemes you belong to, but excluding your State Pension.

I imagine that given the number of UK expats in NZ , there will be financial advisers there expert in  pension and tax as it relates to both jurisdictions?

You may well need to take professional advice?

JAG61NZ

Ah ha well that has helped no statutory right to transfer if within 12 months of retirement. I wonder why they provided the transfer option. I also managed to produce a transfer quote last week  oh well that has certainly helped with the decision. :)I will have to treat the boys when I am alive and we can all enjoy our times together. Would love to bring them back home to see all my family again they havnt seen their Grandmas in over seven years.

So Annual Pension it is, I wont complicate things with lump sums.

Many thanks for all the help. I will post if I hear back from WTW.