pension

sammcg

Can someone advise? My husband used to work for first bus for a bout 5 years ,20 years ago, bascially they sent him a letter saying he can take the  cash sum now, 75% is taxed at emergency tax, its not a lot, is that the amount he paid in, company paid in? Is it worth it, as if he takes it now, we could put in a high interest account? Otherwise when he retires, (10 years time) I doubt it would gain any interest really.

molerat

What other options have been offered ?  Why does he want to take it now ?  What is the name of the actual pension ?

From your description it is either a DC pension or they are offering trivial commutation of a DB pension.

More information needed to give any sensible views.

LHW99

Is he still working? If so, and he takes any of the 75% taxable, he will be limited to contributing no more than £10k pa going forward (google MPAA).

If he has a current work pension, he could possibly transfer it there, or he could transfer to a another scheme of his choice

p00hsticks

From the sound of it it's a DC (direct contributions) pension, so what he paid in and what the employer paid in will have been invested in some sort of pension fund which hopefully will have increased in value over time, and continue to increase in value over the next ten years if left where it is. 

Funds generally increase more than cash savings over a long (ten years + ) period, so if you have no immediate need of the money you are probably better off leaving it where it is.

However he should familiarise himself with how the money is invested within the fund to  see if they are the most appropriate options for him (pension schemes often offer a range of options which can be high, medium or low risk and the most suitable choice will depend on both your attitude to risk and how far away from retirement you are). 

Sarahspangles

sammcg said:

Can someone advise? My husband used to work for first bus for a bout 5 years ,20 years ago, bascially they sent him a letter saying he can take the  cash sum now, 75% is taxed at emergency tax, its not a lot, is that the amount he paid in, company paid in? Is it worth it, as if he takes it now, we could put in a high interest account? Otherwise when he retires, (10 years time) I doubt it would gain any interest really.

You need to look at the letter to see if it says exactly what scheme he was in. Some First Bus employees previously had LGPS pensions, because buses in some areas were run by Councils. Even if his service was later, and he doesn’t have both kinds of pension, the early First Bus schemes had index linked benefits (this means they keep pace with inflation). So it may not be a good idea to take the pension until you need it.

https://www.firstgrouppensions.co.uk/


 

xylophone

Can someone advise? My husband used to work for first bus for a bout 5 years ,20 years ago, bascially they sent him a letter saying he can take the  cash sum now, 75% is taxed at emergency tax, its not a lot, is that the amount he paid in, company paid in? Is it worth it, as if he takes it now, we could put in a high interest account? Otherwise when he retires, (10 years time) I doubt it would gain any interest really.

Given the dates of employment it is  likely that he was in the Defined Benefit Section.

I wonder has the letter been triggered by this exercise?

https://exelerating.com/en/uk-market/alerts/the-firstgroup-pension-scheme-merger-of-the-first-uk-bus-pension-scheme-with-the-firstgroup-pension-scheme-on-31-may-2024/ 

Is the amount in question £10,000 or under (a "small pot")?

Or a "trivial commutation" lump sum? 

Have a look at this  https://techzone.abrdn.com/public/pensions/Guide-triviality-small-pots under 

Commuting a small pension fund for cash

sammcg

Yep its tiny, he no longer works for first bus.! its 2k he gets if he takes it now. if he doesn't take it, he will be able to take it Im assuming in 10 years when he retires... 

Marcon

sammcg said:

Yep its tiny, he no longer works for first bus.! its 2k he gets if he takes it now. if he doesn't take it, he will be able to take it Im assuming in 10 years when he retires... 

Don't assume - it can come back and bite you! Find out for certain, and then you and your husband can take a properly informed decision.

rjmachin

Is this the pension:
https://www.firstgrouppensions.co.uk/bus-pension-scheme

If he worked there prior to 2018, it may have been a Defined Benefit scheme.

Is it 2k per year?
Is he 55 now and the 2k reduced, or waiting 10 years to 65 for an unreduced pension?

xylophone

 My husband used to work for first bus for a bout 5 years ,20 years ago,

£2000?  Surely this is not what he is being offered as a small pot or triviality after five years service and twenty years in deferment?

Or do you mean that he is being offered the opportunity to draw a pension of £2000 per annum (actuarially reduced pension because it is being taken ten years early)?

Silvertabby

xylophone said:

 My husband used to work for first bus for a bout 5 years ,20 years ago,

£2000?  Surely this is not what he is being offered as a small pot or triviality after five years service and twenty years in deferment?

Or do you mean that he is being offered the opportunity to draw a pension of £2000 per annum (actuarially reduced pension because it is being taken ten years early)?

£2K per annum would be over the £30K trivial commutation limit (20 X £2K = £40K).

But you are right - £2K as a small pot can't possibly be right for 5 years service plus 20 years of cost of living increases.  Unless he only worked a few hours a week, or opted out after just a couple of years.