DEFINED BENEFIT 25% Tax free.

Gig1968

Hi

Quick question im a defined benefit member ( no longer working for the company) . My heatlh has now detoriated which means that I will never be able to work again. I claim benefits. The rules of the scheme allow me to apply for my pension to be taken early at reduced terms. I'm currently following this route right now. Doctors and consultants etc are all involved and the process is progressing. Without wishing to ask the company, I know my monthly pension and my lump sum will be reduced as my normal retirement date was 60. Am I allowed to take a 25 perecent tax free lump sum of my cash overall pot or does that not apply to DB.  I know you have to transfer it out into a private pension scheme if you want to take ou 25% when your 55 but not sure what happens if  I'll health is a factor.

NedS

Gig1968 said:

Hi

Quick question im a defined benefit member ( no longer working for the company) . My heatlh has now detoriated which means that I will never be able to work again. I claim benefits. The rules of the scheme allow me to apply for my pension to be taken early at reduced terms. I'm currently following this route right now. Doctors and consultants etc are all involved and the process is progressing. Without wishing to ask the company, I know my monthly pension and my lump sum will be reduced as my normal retirement date was 60. Am I allowed to take a 25 perecent tax free lump sum of my cash overall pot or does that not apply to DB.  I know you have to transfer it out into a private pension scheme if you want to take ou 25% when your 55 but not sure what happens if  I'll health is a factor.

That does not apply to DB schemes as you do not have a pot of money. What you have is a promise to pay you a monthly pension for the rest of your life, usually index-linked so that it rises with inflation. Some (but not all) DB schemes also offer a tax free lump sum payment, normally equivalent to 3 x annual pension. You will need to consult your scheme handbook for details.

Gig1968

I get a lump sum payment of three times of my annual pension. 
Last year i asked for a transfer value as I was thinking of moving it to a private pension scheme, but the cost of an IFA put me off.
I just wandered if the rules were different for I'll health. Is an IFA still required to move it. Can I still move it. 

TadleyBaggie

You would still need to get IFA advice. Are your health issues life limiting?

GrumpyDil

In order to move your pension you have to get a CETV (in essence a transfer value) from the scheme and if the value is over 30000 will also need to get advice from an IFA holding the correct authorisations.

Previously if that advice was not to transfer you could go ahead as an insistent client but most of those avenues seem to have been closed now making if far harder to complete a transfer out now. 

xylophone

Does your scheme not offer an unreduced pension if you are granted early retirement on grounds of ill health?

zagfles

See if you can get hold of the scheme booklet, that should tell you about ill health retirement. 

You should make sure you understand the effect of taking the pension on your benefits. Means tested benefits (eg UC, HB/LHA etc) would usually be reduced, perhaps to zero, but non means tested eg PIP/DLA wouldn't. 

hyubh

I know my monthly pension and my lump sum will be reduced as my normal retirement date was 60. Am I allowed to take a 25 percent tax free lump sum of my cash overall pot or does that not apply to DB.

I get a lump sum payment of three times of my annual pension. 

Sounds either like an old-style public sector scheme, or one that deliberately aped public sector schemes (e.g. USS)...? Either way, basically the standard lump sum is your scheme's 'tax free lump sum', however it might be possible to 'commute' pension into extra lump sum, up to a limit which will be a functional equivalent of '25% the pot' for a DC pension (though the basis won't be '25% the CETV').

Gig1968 said:

Last year i asked for a transfer value as I was thinking of moving it to a private pension scheme, but the cost of an IFA put me off.
I just wandered if the rules were different for ill health. Is an IFA still required to move it. Can I still move it. 

You will need professional advice if the CETV is over £30K regardless. (This is not the same thing has having an IFA to move it.)

The rules of the scheme allow me to apply for my pension to be taken early at reduced terms. I'm currently following this route right now. Doctors and consultants etc are all involved and the process is progressing.

You say 'doctors and consultants etc are all involved', yet also imply it will be reduced like any other pension drawn early? Possible, but it would be helpful to know the scheme. The USS, for example, does ill health retirements from deferred without reductions.

Without wishing to ask the company

Just ask whoever administers the pension scheme, it's part of their job to answer questions like yours.

SMcGill

If it’s USS, then 3 x annual pension is the default TFLS but on their online calculator you can opt to increase this.

Gig1968

The scheme is very old. I think it was created in the late sixties may be seventies. It is called the Electricity Supply Pension Scheme. It was for the nationalised used electricity industry. When priitasion took place each company created their own pension rules but existing employees were bound by the ESPS scheme.  
I need to get a copy of the scheme as it's impossible to find it on the internet as it's so bloody old.
Answering some questions from above.

My I'll health is not life threatening.
It will affect my ESA benefit.
But will not affect my PIP payment.
I have a CETV  value I asked for I got last year as I was curious.


This pension was with a company called Powergen who are now owned by EON. 
I have a similar one with a company called NPOWER who are now owned by RWE.

I have not yet applied for I'll health yet as I might just transfer this to a private pension pot.

RoadToRiches

I think you need to contact National Grid. Have a look here https://ngeg.nationalgridpensions.com/Uploads/Documents/00/00/11/26/DocumentDocument_FILE/Group-Privacy-Notice.pdf - They seem to acknowledge Electricity Supply Pension Scheme (ESPS) Try Tel: 01926 65 4655 Email: uk.pensions@nationalgrid.com