Public Sector Pension Actuarial Buyout

RubyBluez080888

I possibly have the opportunity to use my voluntary early exit compensation to pay for part of an actuarial buyout of my pension thus allowing me to take my full pension benefits. I need to find the balance of the actuarial buyout. I can’t raise all of this from savings but have a property than I could use to secure a short term loan/additional mortgage borrowing against. I would then use part of pension lump sum to repay loan. Apart from the costs of borrowing are there any downsides/ tax issues with this plan? Any better way?

Marcon

RubyBluez080888 said:

I possibly have the opportunity to use my voluntary early exit compensation to pay for part of an actuarial buyout of my pension thus allowing me to take my full pension benefits. I need to find the balance of the actuarial buyout. I can’t raise all of this from savings but have a property than I could use to secure a short term loan/additional mortgage borrowing against. I would then use part of pension lump sum to repay loan. Apart from the costs of borrowing are there any downsides/ tax issues with this plan? Any better way?

Normally you can only pay contributions to a pension scheme (whether regular or to secure 'extra' benefits, such as your proposed buyout) if you have the earnings to cover it - and from what you say, that isn't the case here?

Kynthia

Marcon said:

RubyBluez080888 said:

I possibly have the opportunity to use my voluntary early exit compensation to pay for part of an actuarial buyout of my pension thus allowing me to take my full pension benefits. I need to find the balance of the actuarial buyout. I can’t raise all of this from savings but have a property than I could use to secure a short term loan/additional mortgage borrowing against. I would then use part of pension lump sum to repay loan. Apart from the costs of borrowing are there any downsides/ tax issues with this plan? Any better way?

Normally you can only pay contributions to a pension scheme (whether regular or to secure 'extra' benefits, such as your proposed buyout) if you have the earnings to cover it - and from what you say, that isn't the case here?

As part of a voluntary redundancy process I believe some DB schemes allow you to use your redundancy payment to instead buy out the reduction in taking your pension early. It's only for people in a certain age range, and if their redundancy payment isn't enough they can pay a lump sum to make up the difference. I don't recall the specifics as I was too young to qualify and it was 7 years ago I encountered this.

xylophone

https://www.civilservicepensionscheme.org.uk/media/x5qftlq2/voluntary-redundancy-guidance-for-staff-2010-terms-v-october-2017-nr-v3.pdf

Is the Guide that applies?

Purplelady65

It applies in some schemes to compulsory redundancy processes as well where the redundancy payment can be used to offset against the reduction in pension.