Transfer DB pension

dunstonh

TransferDB said:

RedVulpine said:

TransferDB said:

RedVulpine said:

Yes, the stress even now without actually starting the process is a nuisance because no IFA's seem to want to commit to an unequivocal "you can transfer" or "you can't transfer" with any definite reasons either way. In my mind that was the advice I wanted initially. The IFA I am talking to says I have 4 good reasons to transfer or for wanting to do so. And as you say, the cost if it achieves nothing or ends in stalemate is very high. I intend to take 25% tax free from every pot just to get it away from the pensions.

If you are talking about taking 25% from EVERY pot it is necessarily the right decision!

If some of the pots are DC pensions - like personal pensions - the whole fund can be passed to your loved ones on death and before age 75 they get to take it tax free.

Yes that was the plan - Some are DC I think - but most of my others offer a designated named beneficiary on death. 

SORRY ...I meant to write NOT necessarily the right decision - I was saying it would be better to keep as much as possible in there.

The nominated beneficiaries could then use it as a tax free account

I am a bit confused now - If I took the 25% tax free cash it would release a quarter of the funds to either use or pass on and be less money locked in pensions.  

Assuming you get the DB transferred to DC, then you need to plan on what happens whilst you are alive and what happens after death.  Taking the 25% up front in one go is unlikely to be the best option unless you are spending it all in one go.

For example, if you die before 75, your spouse can draw from the pension as income, ad-hoc or full lump sum tax free.   If you plan to pass it to your sons after she has died, then using beneficiary drawdown could be better to avoid potential IHT.

Having money in the pension doesn't mean it is locked.  

xylophone

I am a bit confused now - If I took the 25% tax free cash it would release a quarter of the funds to either use or pass on and be less money locked in pensions.  

I think confusion may be creeping in because while the main thrust of your original question was around a transfer out of your DB pension and it is this that has been extensively discussed, you now seem to have brought in discussion of your other pension pots (mentioned in the original post 

https://forums.moneysavingexpert.com/discussion/6296775/transfer-db-pension

I have a DB pension (transfer value £172k) but the death benefits do not cover my needs to pass on the fund in full to my family so am looking at a transfer.
I have spoken to 2-3 IFA's but the cost is about 3% of all my 5 pension pots (about £7k) 

Is the situation that you have a DB pension and four DC pensions (with no safeguarded benefits)?

Or a DB pension and 5 DC pensions?

TransferDB

xylophone said:

I am a bit confused now - If I took the 25% tax free cash it would release a quarter of the funds to either use or pass on and be less money locked in pensions.  

I think confusion may be creeping in because while the main thrust of your original question was around a transfer out of your DB pension and it is this that has been extensively discussed, you now seem to have brought in discussion of your other pension pots (mentioned in the original post 

https://forums.moneysavingexpert.com/discussion/6296775/transfer-db-pension

I have a DB pension (transfer value £172k) but the death benefits do not cover my needs to pass on the fund in full to my family so am looking at a transfer.
I have spoken to 2-3 IFA's but the cost is about 3% of all my 5 pension pots (about £7k) 

Is the situation that you have a DB pension and four DC pensions (with no safeguarded benefits)?

Or a DB pension and 5 DC pensions?

TBH I haven't checked the other 4 but I do know they allow a named beneficiary some of them (3) only amount to a £7k value for all 3 combined the other is £53k S/Life

RedVulpine

TransferDB said:

RedVulpine said:

TransferDB said:

RedVulpine said:

Yes, the stress even now without actually starting the process is a nuisance because no IFA's seem to want to commit to an unequivocal "you can transfer" or "you can't transfer" with any definite reasons either way. In my mind that was the advice I wanted initially. The IFA I am talking to says I have 4 good reasons to transfer or for wanting to do so. And as you say, the cost if it achieves nothing or ends in stalemate is very high. I intend to take 25% tax free from every pot just to get it away from the pensions.

If you are talking about taking 25% from EVERY pot it is necessarily the right decision!

If some of the pots are DC pensions - like personal pensions - the whole fund can be passed to your loved ones on death and before age 75 they get to take it tax free.

Yes that was the plan - Some are DC I think - but most of my others offer a designated named beneficiary on death. 

SORRY ...I meant to write NOT necessarily the right decision - I was saying it would be better to keep as much as possible in there.

The nominated beneficiaries could then use it as a tax free account

I am a bit confused now - If I took the 25% tax free cash it would release a quarter of the funds to either use or pass on and be less money locked in pensions.  

It is NOT locked in the pension.
The 25% tax free cash continues to be invested and accessible
It is effectively like an ISA except it is outside of your estate on death (the pension is a trust)
Unless you are spending it immediately or there is some other solid reason, there is absolutely no point just to take it out of a pension and stick in another type of investment.
You have to take some of the tax free cash to withdraw money from the other part but you can plan regular withdrawals from both parts-  for example take £1,000 which is made up of £750 drawdown and £250 tax free cash.

TransferDB

xylophone said:

I think confusion may be creeping in because while the main thrust of your original question was around a transfer out of your DB pension and it is this that has been extensively discussed, you now seem to have brought in discussion of your other pension pots (mentioned in the original post 

Yes, possibly because the IFA I am considering has suggested I ought to deal with the smaller pots as well as the main and biggest DB one. Apology's for that. 

ukdw

RedVulpine said:
....

It is NOT locked in the pension.
The 25% tax free cash continues to be invested and accessible
It is effectively like an ISA except it is outside of your estate on death (the pension is a trust)
Unless you are spending it immediately or there is some other solid reason, there is absolutely no point just to take it out of a pension and stick in another type of investment.
....

My only concern about leaving too much potential tax free investment in the pension is that there is a risk that a future government may well reduce the limit on the amount you can take again - they have already effectively done this several times - the limit is currently just over £250k, and any excess above that you don't just lose the tax free status - you lose the whole lot as part of the LTA charging process.

Unless IHT is likely to be an issue, personally I would at least look to get out enough extra 25% tax free cash to reinvest up to the full ISA allowances.

Malthusian

ukdw said:

My only concern about leaving too much potential tax free investment in the pension is that there is a risk that a future government may well reduce the limit on the amount you can take again - they have already effectively done this several times.

Every time they have done that there has been transitional protection in place, which meant that people with money already in pensions didn't have their tax free cash reduced. 

If the government cut the LTA such that your pension went from below the limit to above it, it might make sense to take your tax free cash at that point (after applying for transitional protection) to avoid further growth and income being taxed at the LTA charge rates. But there's no reason to cross that bridge before you come to it.

People have been saying for years "the tax free lump sum is doomed so you should get your tax free cash out now", and the Government has done the complete opposite. (LTA cuts don't count because of transitional protection - this is about people claiming the Government would increase tax to withdraw money already in pensions, not future contributions or growth.) Over the last decade and a half the Government has consistently made money already in pensions more privileged while making it more difficult to put new money into them.

Unless IHT is likely to be an issue, personally I would at least look to get out enough extra 25% tax free cash to reinvest up to the full ISA allowances.

If IHT is not an issue, and there are no unwrapped funds that could use the ISA allowance, then I wouldn't disagree with that. It's just moving money from one tax-free wrapper to another tax-free wrapper with more flexibility and no lifetime allowance.

ukdw

Malthusian said:

ukdw said:

My only concern about leaving too much potential tax free investment in the pension is that there is a risk that a future government may well reduce the limit on the amount you can take again - they have already effectively done this several times.

Every time they have done that there has been transitional protection in place, which meant that people with money already in pensions didn't have their tax free cash reduced. 

If the government cut the LTA such that your pension went from below the limit to above it, it might make sense to take your tax free cash at that point (after applying for transitional protection) to avoid further growth and income being taxed at the LTA charge rates. But there's no reason to cross that bridge before you come to it.

People have been saying for years "the tax free lump sum is doomed so you should get your tax free cash out now", and the Government has done the complete opposite. (LTA cuts don't count because of transitional protection - this is about people claiming the Government would increase tax to withdraw money already in pensions, not future contributions or growth.) Over the last decade and a half the Government has consistently made money already in pensions more privileged while making it more difficult to put new money into them.

An old thread I know - but it was certainly in my mind when I took my PCLS in 2019.
https://forums.moneysavingexpert.com/discussion/5943643/lib-dums-propose-capping-pcls-at-40k/p1

It seems fairly likely to me that the next Labour government will need the LibDems (and SNP) to give them a majority, and it might be quite politically wise of them to implement unpopular policies that can be blamed on the minority parties.

Malthusian

ukdw said:

An old thread I know - but it was certainly in my mind when I took my PCLS in 2019.
https://forums.moneysavingexpert.com/discussion/5943643/lib-dums-propose-capping-pcls-at-40k/p1

If you make tax planning decisions based on what obscure fringe parties think you might as well consult a magic 8 ball.

People are free to manage their pensions however they like, but if an adviser had advised you to take your PCLS in case the Lib Dems retrospectively capped the PCLS, you would have a slam-dunk complaint and redress for any additional tax incurred.

(I can't be bothered to sign up to Professional Adviser so I don't know if the Lib Dems intended any transitional protection - if they did their proposal is in the same bracket as cuts to the LTA.)

It seems fairly likely to me that the next Labour government will need the LibDems (and SNP) to give them a majority, and it might be quite politically wise of them to implement unpopular policies that can be blamed on the minority parties.

If a future LibLab coalition wanted to raise the tax take from pensions, it would be far more poltiically wise to follow the current direction of travel and slash the annual allowance or abolish higher rate relief.

Marcon

Pablo7474 said:

Also note that any advisers I have spoken to won’t do it within the 3 months of the quote. They will base it on the value you have been given and then you will need a requote should they advise to transfer. 

Sounds like advisers who are covering themselves against failing to deliver within the required timeframe. You need to find an adviser who will - not all schemes will give a second CETV quote within any 12 month period, and even if they do agree, you often have to pay around £500 for the second quote. 

If the CETV drops significantly between the first quote and the second, their advice might change and/or you could need to start the whole process again, so it's important to get an adviser who can deliver.