Access to Defined Benefits Pension

Sheba42

Dazed_and_C0nfused said:

Sheba42 said:

Sorry Marcon, I'm 59.  I'm happy just to live on state pension when I'm entitled to it as I'm assuming such a small pension like this wouldn't give me much as income per year, would it ? 

So I'd rather just take it all now as we really need a new kitchen and bathroom,  current ones are 25 years old.   

I just haven't a clue how to access it and just don't know where to start. Thanks for replying 😊

Isn't that the first thing to consider when thinking about this?

If you are giving up say £200/year and no survivor pension in return for £28k it might be a sensible move, albeit taking the funds out over 2 tax years rather all in one go.

But if the pension you have accrued is say £2,000/year with a survivor pension then it makes the £28k a lot less attractive, especially when you get that card from the King on your 100th birthday 🎂

Yeah but I'd need to survive another 14 years to break even if I was to get 2k per year.  So that's why I'm thinking, I'd rather have a nice kitchen and bathroom now and throw in a nice holiday 😊😊

Marcon

Sheba42 said:

Marcon said:

Sheba42 said:

Marcon said:

Sheba42 said:

Hi Folks,  I have an old pension with my local council called a defined benefits and I recently asked for a CETV which is 28k.  I don't work so I have no income whatsoever, my husband works. 
Can someone tell me how I can access this money please ? 

 Can I just ask for this whole amount to be paid into my bank account or do I need to open something Google said,  called a SIPP ? 

Can I then take my 12.5k personal allowance tax free, plus the 25% I'm allowed tax free ? 
Therefore 19.5k will be tax free and I will then pay standard tax on the remaining 8.5k ? 

Have I got this right ? 

I know nothing about pensions and have just been using Google for advice.
I would really appreciate your help here folks as I've no idea what I'm doing here and if I've got this completely wrong. 

Many thanks in advance to anyone who can help. 

How old are you? Unless you are aged at least 55, you can't access your pension unless you qualify for early retirement on the grounds of medically certified ill health.

Rather than relying on Google, have you thought of using the website for your pension scheme, or talking to the administrators? It's unlikely you can take the lot as cash, but might be possible if you have no other pension provision (other than any state pension); you'd need to check with the scheme**. Otherwise you would have to transfer to a personal pension and you could access your cash that way. Just because you can doesn't mean it's a good idea to do so...what will you live on in retirement?

Edit - just seen that you posted the same question in 2021. Might be worth having a look at the answers to that, many of which are still valid and helpful now, including an explanation from SilverTabby as to why you've apparently been told** that you can't take the lot as cash: https://forums.moneysavingexpert.com/discussion/6302113/pension-advice-please#latest

No point repeating it all again here!

Thank you ! I  knew I had asked this here but couldn't even get into the forum without saying forgot password, then I couldn't find how to access previous posts either.  I done nothing last time after advice,  as life and deaths happened and it was put on the back burner.  I will now go and reread that thread so I can work out what to do. 

The first time you asked you got some genuinely helpful replies and they're still good now...especially LGPS expert SilverTabby! You can access previous posts by clicking on the little silhouette in dark green inside a white circle (top right of this webpage), and then clicking on 'my discussions'.

Yes I've just been reading those, thanks for that link 👍 We are now googling Trivial Commutation but can't make head nor tail of what it means.  

Why is this all so complicated !

Doesn't apply - see SilverTabby's answer in your previous thread for reasons why that might be so, or ask your scheme.

Silvertabby

When did you leave the LGPS?  If you left before April 1997, then that complicates things as you will have a GMP.

If you left after April 1997, however, and as long as this really is your only pension (apart from the State pension) then you MAY be able to take these benefits under trivial commutation rules.  ie, a one-off lump sum of which 25% is tax free.  But I say MAY with caution, as a trivial commutation is only possible if the notional value of your benefits is under £30K.  Note that this is a different calculation to the CETV, and you are going to be very close if not over.  You will have to ask your LGPS if you meet the criteria.

If you do have a GMP (left before April 1997) then you won't be able to trivial commute before GMP age ( still 60 for a woman), by which time a couple more years of cost of living increases will certainly tip you over the limit.

If trivial commutation is not possible, then transferring your LGPS benefits to a SIPP/personal pension would involve jumping through many hoops and paying a high fee for the necessary advice.  

Albermarle

Sheba42 said:

Dazed_and_C0nfused said:

Sheba42 said:

Sorry Marcon, I'm 59.  I'm happy just to live on state pension when I'm entitled to it as I'm assuming such a small pension like this wouldn't give me much as income per year, would it ? 

So I'd rather just take it all now as we really need a new kitchen and bathroom,  current ones are 25 years old.   

I just haven't a clue how to access it and just don't know where to start. Thanks for replying 😊

Isn't that the first thing to consider when thinking about this?

If you are giving up say £200/year and no survivor pension in return for £28k it might be a sensible move, albeit taking the funds out over 2 tax years rather all in one go.

But if the pension you have accrued is say £2,000/year with a survivor pension then it makes the £28k a lot less attractive, especially when you get that card from the King on your 100th birthday 🎂

Yeah but I'd need to survive another 14 years to break even if I was to get 2k per year.  So that's why I'm thinking, I'd rather have a nice kitchen and bathroom now and throw in a nice holiday 😊😊

At age 59 you should on average live another 25 to 30 years. That means 50% will live longer than that and many reach their Nineties nowadays. Plus any pension will most likely increase each year.

Sheba42

Silvertabby said:

When did you leave the LGPS?  If you left before April 1997, then that complicates things as you will have a GMP.

If you left after April 1997, however, and as long as this really is your only pension (apart from the State pension) then you MAY be able to take these benefits under trivial commutation rules.  ie, a one-off lump sum of which 25% is tax free.  But I say MAY with caution, as a trivial commutation is only possible if the notional value of your benefits is under £30K.  Note that this is a different calculation to the CETV, and you are going to be very close if not over.  You will have to ask your LGPS if you meet the criteria.

If you do have a GMP (left before April 1997) then you won't be able to trivial commute before GMP age ( still 60 for a woman), by which time a couple more years of cost of living increases will certainly tip you over the limit.

If trivial commutation is not possible, then transferring your LGPS benefits to a SIPP/personal pension would involve jumping through many hoops and paying a high fee for the necessary advice.  

Thanks for replying Tabby, I'm just rereading your previous reply about this Trivial thing.   I left my job in 2008 so no GMP then.  My husband has just said that if I got a TC then I'd need to pay tax on that, whereas if I just move the money to a SIPP I can take 19.5k right away and that will be tax free. 

Then he says I could take the remaining 8.5k next year and I wouldn't pay tax on that either as it's a new tax year. 

Why would moving it to a SIPP involve high fees and hoops though ?  Isn't it under 30k so I wouldn't need to pay to have financial advice ?
Or has that all changed now ? 
Appreciate your input, thanks. 

Brie

"To be a trivial commutation lump sum the value of the member’s pension rights under all registered pension schemes that they belong to must not be more than £30,000. "

PTM063500 - Member benefits: lump sums: trivial commutation lump sum - HMRC internal manual - GOV.UK (www.gov.uk)

So if you have any other pension then it's unlikely that you can use this route.  

But ask your scheme administrators they should be able to tell you more.

Sheba42

Albermarle said:

Sheba42 said:

Dazed_and_C0nfused said:

Sheba42 said:

Sorry Marcon, I'm 59.  I'm happy just to live on state pension when I'm entitled to it as I'm assuming such a small pension like this wouldn't give me much as income per year, would it ? 

So I'd rather just take it all now as we really need a new kitchen and bathroom,  current ones are 25 years old.   

I just haven't a clue how to access it and just don't know where to start. Thanks for replying 😊

Isn't that the first thing to consider when thinking about this?

If you are giving up say £200/year and no survivor pension in return for £28k it might be a sensible move, albeit taking the funds out over 2 tax years rather all in one go.

But if the pension you have accrued is say £2,000/year with a survivor pension then it makes the £28k a lot less attractive, especially when you get that card from the King on your 100th birthday 🎂

Yeah but I'd need to survive another 14 years to break even if I was to get 2k per year.  So that's why I'm thinking, I'd rather have a nice kitchen and bathroom now and throw in a nice holiday 😊😊

At age 59 you should on average live another 25 to 30 years. That means 50% will live longer than that and many reach their Nineties nowadays. Plus any pension will most likely increase each year.

Yes I get that. However, both of my neighbours have just died within the last 3 weeks Albermarle. One was 58, had a heart attack, died instantly and the other neighbour died 18 days later, age 61.  Quite a shock,  so I guess that puts things in perspective for me,  as we just don't know what's around the corner.  

I guess there's quality of life too and even if you live to 90,  you don't what your health may be like. I just want to enjoy this money while I know I can but I guess some like yourself may think differently 😊

Sheba42

Brie said:

"To be a trivial commutation lump sum the value of the member’s pension rights under all registered pension schemes that they belong to must not be more than £30,000. "

PTM063500 - Member benefits: lump sums: trivial commutation lump sum - HMRC internal manual - GOV.UK (www.gov.uk)

So if you have any other pension then it's unlikely that you can use this route.  

But ask your scheme administrators they should be able to tell you more.

Thanks for that link Brie, appreciate it 👍

xylophone

If the value of the safeguarded benefits is under £30,000 then you are not required to take advice in respect of the transfer.

https://assets.publishing.service.gov.uk/media/5a80b577ed915d74e33fbf54/pension-benefits-with-a-guarantee-factsheet-jan-2016.pdf

Just make sure that your chosen provider is happy to accept the transfer as anecdotal evidence suggests that some may be unhappy about accepting such a transfer without advice.

https://www.ftadviser.com/pensions/2020/11/06/providers-still-demand-advice-on-sub-30k-db-transfers/#:~:text=AJBell requires advice on all,an execution-only service”.

The above is four years old but you might check in with AJ Bell? It may be inferred that their position is still as indicated?

https://www.ajbell.co.uk/transferring-to-us

Silvertabby

Sheba42 said:

Silvertabby said:

When did you leave the LGPS?  If you left before April 1997, then that complicates things as you will have a GMP.

If you left after April 1997, however, and as long as this really is your only pension (apart from the State pension) then you MAY be able to take these benefits under trivial commutation rules.  ie, a one-off lump sum of which 25% is tax free.  But I say MAY with caution, as a trivial commutation is only possible if the notional value of your benefits is under £30K.  Note that this is a different calculation to the CETV, and you are going to be very close if not over.  You will have to ask your LGPS if you meet the criteria.

If you do have a GMP (left before April 1997) then you won't be able to trivial commute before GMP age ( still 60 for a woman), by which time a couple more years of cost of living increases will certainly tip you over the limit.

If trivial commutation is not possible, then transferring your LGPS benefits to a SIPP/personal pension would involve jumping through many hoops and paying a high fee for the necessary advice.  

Thanks for replying Tabby, I'm just rereading your previous reply about this Trivial thing.   I left my job in 2008 so no GMP then.  My husband has just said that if I got a TC then I'd need to pay tax on that, whereas if I just move the money to a SIPP I can take 19.5k right away and that will be tax free. 

Then he says I could take the remaining 8.5k next year and I wouldn't pay tax on that either as it's a new tax year. 

Why would moving it to a SIPP involve high fees and hoops though ?  Isn't it under 30k so I wouldn't need to pay to have financial advice ?
Or has that all changed now ? 
Appreciate your input, thanks. 

If a trivial commutation isn't possible then it may be that your CETV creeps above the £30K limit before you can transfer.  Factors are age related amongst everything else.  

You are so close to the wire it's very difficult to say anything for sure.