transferring from L&G workplace pension - lose additional tax free cash?

Unohu

Hi,

I have tried to search the forum, but can't see this covered. Please point me in the right direction if I have missed something.

I have an old L&G workplace pension with around £150,000 in it, which I contributed to between 2004 and 2016.

I was planning to transfer to a Vanguard SIPP to lower fees and to add extra cash when able.

Before transferring, I phoned L&G to see if there would be any benefits that would be lost if I transferred. They advised me that I would lose additional tax free cash, but said they could not tell me what the additional benefit would be.

Is there any way of working the tax free cash entitlement out, or do I need to call again and push for them to give me the information?

Thanks in advance.

gm0

The value of your pension varies with your investments daily.  They don't know the value on the day you sell your investments until the trade is placed which is not known until you instruct it.  Therefore they don't know exactly what 25% of that is or indeed a higher % of it would be. (I don't know the rules of your scheme and how the additional >25% TFC arises but they could be complex and service dates and age related not just "27%" for all members so when it all happens can influence the answer.  They are not in the helpful speculation business.  It would be worked out if you actually took TFC by taking benefits from this pension.  If you transfer away they will simply sell up the investments and give you the settled balance out as a cash transfer and the calculation will never be done.  You will then be limited at the new place to 25%.

Your will not find them helpful with calculations of values based on "assumptions" about the DC balance.  They really don't like doing that.  Promising you value x, a correction happens, it's less, then you say - but you promised this. (Even if you have no intention of doing anything like that).  The rules and their compliance reaction to the rules will make them extremely unhelpful beyond the absolute basics.  You could ask them for the detailed t&c and the trust legals as well as any applicable booklets if you don't already have them and try to work out what it is for yourself.  If you say what scheme it is - someone here may know.

But the whole thing may be moot anyway.  There was a recent complaint/warning thread about the IBM scheme (L&G admin) with a scheme with this feature.  If you want drawdown (and a simple life) you are likely transferring and losing this benefit anyway.  As you either transfer to an IFA scheme, a DIY SIPP or use the L&G master trust (PAS) which is how they do drawdown for some old occupational schemes that don't have it.  All of these destinations are an individual transfer most likely via cash which all reset 25% TFC.  

There are a couple of ways to preserve the benefit.  @dunstonh indicated on the other thread that a "bulk transfer" (multiple members together) to somewhere that supports the feature was a possible route as one example and if that scheme has drawdown features then you may be able to have both.  So it's not impossible but you may find it not worth the trouble for the amount extra and the constraints then applied on where you go to.  Look at the IBM thread for more.

Clearly if you can take benefits from the scheme it is in by one of its existing methods then the TFC is preserved.  But if this is whole value UFPLS or an annuity then you may not find that desirable. 

dunstonh

Before transferring, I phoned L&G to see if there would be any benefits that would be lost if I transferred. They advised me that I would lose additional tax free cash, but said they could not tell me what the additional benefit would be.

Protected tax free cash is an transitional relief obtained in 2006 when the 25% tax free cash figure was standardised.  Certain plans with pre 2006 benefits that could pay greater than 25% tax free cash could retain the higher percentage on pre April 2006 funds.  Post April 2006 funds would get 25%.

Is there any way of working the tax free cash entitlement out, or do I need to call again and push for them to give me the information?

It usually involves you completing a questionnaire giving your income from pre 2006 (as much as you can remember). Based on what you supply and what they hold about you, they will calculate the figure.

There are a couple of ways to preserve the benefit.  @dunstonh indicated on the other thread that a "bulk transfer" (multiple members together) to somewhere that supports the feature was a possible route as one example and if that scheme has drawdown features then you may be able to have both.  So it's not impossible but you may find it not worth the trouble for the amount extra and the constraints then applied on where you go to.  Look at the IBM thread for more.

We did a transfer on a Zurich plan recently where the member was retiring. They take the enhanced tax free cash from the existing Zurich plan (equated to 37% TFC) and Zurich supported the transfer of the residual fund as flexible benefits.  Allowing it to be transferred into a drawdown plan on a platform.   I haven't tried it with an L&G plan (which could well be a ReAssure plan now)

HappyHarry

As per dunstonh above, I successfully completed a similar move from an L&G plan, though this was pre-Reassure.

Unohu

thank you for the detailed responses.

I am 39 so will not be retiring for some time. I am in the NHS pension scheme currently.

I seem to recall the fees aren't terrible, but I feel that transferring now and evenuuially benefiting from capped fees would be better in the long run? Does this sound reasonable?

thanks

Albermarle

Unohu said:

thank you for the detailed responses.

I am 39 so will not be retiring for some time. I am in the NHS pension scheme currently.

I seem to recall the fees aren't terrible, but I feel that transferring now and evenuuially benefiting from capped fees would be better in the long run? Does this sound reasonable?

thanks

Firstly actually find out exactly what the current fees are . Some ex workplace pensions are heavily discounted and you may have to phone L&G to be sure you have the right info.
The other issue is that older pensions are often restricted in their withdrawal options , so being in a more modern pension could be an advantage later .