Lump sum question (Nest)

Richardbajor

I am in the process of completing my transfer out of Nest Pensions to an annuity company and taking my cash free lump sum.  I am expecting to see the money come into my account on Monday, but I received a rather confusing confirmation letter from Nest, considering they must be using a template.  They talk about "we HAVE transferred your money to the annuity company" and in the next paragraph they talk about we're making a payment to you (5 working days) and at the same time are making a payment to the annuity company.  So confused already!

The bit I want to ask people on here about rather than direct with Nest (because I have an impending deadline on the annuity quote so do not want to put a spanner in the works to getting the money as scheduled) is that their tax free lump sum does not equal what is shown as the final value of my retirement pot and is about £800 less (= £160 extra tax sort of thing) compared to a straight 25% of the fund value. 

This is not big in the scheme of things, but I did wonder if it was a typo not updated from the time I applied for the transfer out when the retirement pot was lower and could have been 25% of the figure then.  If not then can someone explain why it might have not been an exact 25% of the final fund value?

If anyone has had experience of Nest then maybe you may know the exact answer to this, but maybe there is a general thing in pensions where, perhaps for admin purposes, you set a lump sum figure earlier than the very final fund value?

By the way anyone who saw my post just after New Year where I was querying what might happen to pension fund values this year, I am very grateful for the information that was given on annuities and I decided to take the plunge early and get my money out while annuities were at a current high.  I'm very pleased with the result and it gives us a comfortable retirement rather than fretting around for another 6 months wondering what may or may not happen in the markets and I was blissfully unaware of the huge movements in annuity rates over quite short periods of time.

Dazed_and_C0nfused

Richardbajor said:

I am in the process of completing my transfer out of Nest Pensions to an annuity company and taking my cash free lump sum.  I am expecting to see the money come into my account on Monday, but I received a rather confusing confirmation letter from Nest, considering they must be using a template.  They talk about "we HAVE transferred your money to the annuity company" and in the next paragraph they talk about we're making a payment to you (5 working days) and at the same time are making a payment to the annuity company.  So confused already!

The bit I want to ask people on here about rather than direct with Nest (because I have an impending deadline on the annuity quote so do not want to put a spanner in the works to getting the money as scheduled) is that their tax free lump sum does not equal what is shown as the final value of my retirement pot and is about £800 less (= £160 extra tax sort of thing) compared to a straight 25% of the fund value. 

This is not big in the scheme of things, but I did wonder if it was a typo not updated from the time I applied for the transfer out when the retirement pot was lower and could have been 25% of the figure then.  If not then can someone explain why it might have not been an exact 25% of the final fund value?

If anyone has had experience of Nest then maybe you may know the exact answer to this, but maybe there is a general thing in pensions where, perhaps for admin purposes, you set a lump sum figure earlier than the very final fund value?

By the way anyone who saw my post just after New Year where I was querying what might happen to pension fund values this year, I am very grateful for the information that was given on annuities and I decided to take the plunge early and get my money out while annuities were at a current high.  I'm very pleased with the result and it gives us a comfortable retirement rather than fretting around for another 6 months wondering what may or may not happen in the markets and I was blissfully unaware of the huge movements in annuity rates over quite short periods of time.

A tax free lump sum is not taxed.

Is it possible that whatever you were invested in dropped in value just before you actually sold the investments and turned your pension into 100% cash?

Richardbajor

Dazed_and_C0nfused said:

A tax free lump sum is not taxed.

Is it possible that whatever you were invested in dropped in value just before you actually sold the investments and turned your pension into 100% cash?

Possible, but I don't think so depending on how they work. It's standard fund value with a workplace pension so they are saying my final value of the pot was a certain figure.  Maybe when they "cashed out" this changed and that might relate to my query, but I did assume that the value they gave me on the final pot was the figure that would be available for distribution. It would be strange to tell me this figure but then not tell me what the figure for distribution had reduced by.  However given the letter was confusing you may have a point and what the annuity company gets will also be less- ie 4 x my lump sum.

My point on the tax is that they give me a lower figure than I would expect on the value from the pot, so I'm getting less tax free than I am entitled to and the rest (sort of) becomes taxable via my annuity income.

DRS1

After the payment has been made you should get a letter confirming how much they paid you and how much they paid the annuity company.

kevinhampshire

I have been trying to take the remainder of my pot out of NEST since December. I filled in the online form , it confirmed the tax and net amount. Said it was processing. Checked back a week later still processing. Went on chat they said there is an issue we need to cancel and you can re submit. On Friday was told I need to re-submit for 5th time. Now they want me to fill in paper forms. I am not sure if this is incompetence a really bad IT system or something more sinister. NEST is not fit for purpose and needs investigating 

dunstonh

They talk about "we HAVE transferred your money to the annuity company" and in the next paragraph they talk about we're making a payment to you (5 working days) and at the same time are making a payment to the annuity company.  So confused already!

If you are buying the annuity using the OMO transfer method rather than the IVPPP transfer method then Nest pay the 25% TFC and send the 75% to the receiving scheme.      

The bit I want to ask people on here about rather than direct with Nest (because I have an impending deadline on the annuity quote so do not want to put a spanner in the works to getting the money as scheduled) is that their tax free lump sum does not equal what is shown as the final value of my retirement pot and is about £800 less (= £160 extra tax sort of thing) compared to a straight 25% of the fund value. 

The value changes daily and it will be the transfer value on the date of the closure of the Nest plan.    Any figures given previously will not apply.

Richardbajor

kevinhampshire said:

I have been trying to take the remainder of my pot out of NEST since December. I filled in the online form , it confirmed the tax and net amount. Said it was processing. Checked back a week later still processing. Went on chat they said there is an issue we need to cancel and you can re submit. On Friday was told I need to re-submit for 5th time. Now they want me to fill in paper forms. I am not sure if this is incompetence a really bad IT system or something more sinister. NEST is not fit for purpose and needs investigating 

Hope you have finally got it sorted- yes I think mostly incompetent or not caring about things when it comes to money being taken out.  Their trustpilot ratings have really dived recently and are all related to taking money out.  Such a shame as they have been pretty easy to deal with over the years and seem to have cheap charges and decent fund return, but it needed daily phone calls for me to get them to action the transfer, and they missed my annuity deadline- fortunately the annuity rates had not changed much.  They definitely messed up the calculation of my tax free lump sum as well but I'm happy enough now I have the annuity and the slightly reduced tax free lump sum (it just means I get more annuity instead).

JustOneVolvo

Richardbajor said:

kevinhampshire said:

I have been trying to take the remainder of my pot out of NEST since December. I filled in the online form , it confirmed the tax and net amount. Said it was processing. Checked back a week later still processing. Went on chat they said there is an issue we need to cancel and you can re submit. On Friday was told I need to re-submit for 5th time. Now they want me to fill in paper forms. I am not sure if this is incompetence a really bad IT system or something more sinister. NEST is not fit for purpose and needs investigating 

Hope you have finally got it sorted- yes I think mostly incompetent or not caring about things when it comes to money being taken out.  Their trustpilot ratings have really dived recently and are all related to taking money out.  Such a shame as they have been pretty easy to deal with over the years and seem to have cheap charges and decent fund return, but it needed daily phone calls for me to get them to action the transfer, and they missed my annuity deadline- fortunately the annuity rates had not changed much.  They definitely messed up the calculation of my tax free lump sum as well but I'm happy enough now I have the annuity and the slightly reduced tax free lump sum (it just means I get more annuity instead).

I tried to get 25% Tax Free sum and they sent 20% tax on it to HMRC. 

Dazed_and_C0nfused

JustOneVolvo said:

Richardbajor said:

kevinhampshire said:

I have been trying to take the remainder of my pot out of NEST since December. I filled in the online form , it confirmed the tax and net amount. Said it was processing. Checked back a week later still processing. Went on chat they said there is an issue we need to cancel and you can re submit. On Friday was told I need to re-submit for 5th time. Now they want me to fill in paper forms. I am not sure if this is incompetence a really bad IT system or something more sinister. NEST is not fit for purpose and needs investigating 

Hope you have finally got it sorted- yes I think mostly incompetent or not caring about things when it comes to money being taken out.  Their trustpilot ratings have really dived recently and are all related to taking money out.  Such a shame as they have been pretty easy to deal with over the years and seem to have cheap charges and decent fund return, but it needed daily phone calls for me to get them to action the transfer, and they missed my annuity deadline- fortunately the annuity rates had not changed much.  They definitely messed up the calculation of my tax free lump sum as well but I'm happy enough now I have the annuity and the slightly reduced tax free lump sum (it just means I get more annuity instead).

I tried to get 25% Tax Free sum and they sent 20% tax on it to HMRC. 

That would extremely unlikely, I don't think we have ever had anyone posting on here where tax has been deducted from a TFLS.

I'm pretty sure you have misunderstood what has happened.

Marcon

JustOneVolvo said:

Richardbajor said:

kevinhampshire said:

I have been trying to take the remainder of my pot out of NEST since December. I filled in the online form , it confirmed the tax and net amount. Said it was processing. Checked back a week later still processing. Went on chat they said there is an issue we need to cancel and you can re submit. On Friday was told I need to re-submit for 5th time. Now they want me to fill in paper forms. I am not sure if this is incompetence a really bad IT system or something more sinister. NEST is not fit for purpose and needs investigating 

Hope you have finally got it sorted- yes I think mostly incompetent or not caring about things when it comes to money being taken out.  Their trustpilot ratings have really dived recently and are all related to taking money out.  Such a shame as they have been pretty easy to deal with over the years and seem to have cheap charges and decent fund return, but it needed daily phone calls for me to get them to action the transfer, and they missed my annuity deadline- fortunately the annuity rates had not changed much.  They definitely messed up the calculation of my tax free lump sum as well but I'm happy enough now I have the annuity and the slightly reduced tax free lump sum (it just means I get more annuity instead).

I tried to get 25% Tax Free sum and they sent 20% tax on it to HMRC. 

If you've already taken your 25% tax free cash, then any balance would be taxable on withdrawal.

If you've not taken any tax free cash, then 25% of the first withdrawal would be tax free and you'd only be taxed on remaining 75% of that withdrawal.

If you wanted to take the whole of your available tax free cash and hadn't previously taken any tax free cash from NEST, are you sure you completed the withdrawal application absolutely correctly? If so, go back and tell them to sort it out.