Wife's pension found - but what to do?

kaMelo

jibblyjabbly said:

We get Universal Credit. Would it be classed as depravation of wealth if we transfer it instead of taking it? So far it seems the least stressful thing to do is just take it now and have DWP take it back as unearned income. We can't use a lump sum for anything except to give to our son, which we cannot do because of the depravation rules.

As I said earlier, knowing whether it is a defined contribution or a defined benefit pension is a fundamental point to know before that can be fully answered.

 A defined contribution is a pot of money and the freedom to do as she wishes with it.

A defined benefit pension has scheme rules that dictate what can or will happen, transferring a DB pension will require obtaining A CETV, (cash equivalent transfer value) If this is greater than £30000, (which it will be to give a pension of £5000 per year) then regulated advice will be required before you can do anything. The advisor will probably advise against a transfer and charge a few thousand pounds for doing so.

Before anything can happen you need to know the type of pension scheme and if DB, what the scheme rules say.

DE_612183

kaMelo said:

jibblyjabbly said:

We get Universal Credit. Would it be classed as depravation of wealth if we transfer it instead of taking it? So far it seems the least stressful thing to do is just take it now and have DWP take it back as unearned income. We can't use a lump sum for anything except to give to our son, which we cannot do because of the depravation rules.

As I said earlier, knowing whether it is a defined contribution or a defined benefit pension is a fundamental point to know before that can be fully answered.

 A defined contribution is a pot of money and the freedom to do as she wishes with it.

A defined benefit pension has scheme rules that dictate what can or will happen, transferring a DB pension will require obtaining A CETV, (cash equivalent transfer value) If this is greater than £30000, (which it will be to give a pension of £5000 per year) then regulated advice will be required before you can do anything. The advisor will probably advise against a transfer and charge a few thousand pounds for doing so.

Before anything can happen you need to know the type of pension scheme and if DB, what the scheme rules say.

Is this the case if there Pension Provider is saying there is no option to leave where it is...

sammyjammy

DE_612183 said:

kaMelo said:

jibblyjabbly said:

We get Universal Credit. Would it be classed as depravation of wealth if we transfer it instead of taking it? So far it seems the least stressful thing to do is just take it now and have DWP take it back as unearned income. We can't use a lump sum for anything except to give to our son, which we cannot do because of the depravation rules.

As I said earlier, knowing whether it is a defined contribution or a defined benefit pension is a fundamental point to know before that can be fully answered.

 A defined contribution is a pot of money and the freedom to do as she wishes with it.

A defined benefit pension has scheme rules that dictate what can or will happen, transferring a DB pension will require obtaining A CETV, (cash equivalent transfer value) If this is greater than £30000, (which it will be to give a pension of £5000 per year) then regulated advice will be required before you can do anything. The advisor will probably advise against a transfer and charge a few thousand pounds for doing so.

Before anything can happen you need to know the type of pension scheme and if DB, what the scheme rules say.

Is this the case if there Pension Provider is saying there is no option to leave where it is...

Yes the rules don't change.

jibblyjabbly

A little update! I finally managed to speak to Lloyds and they told me that we did not need to choose an option (cash and reduced pension, pension now or transfer). The advisor said we could leave it where it was until my wife reaches state pension age. 

This made us happy as thats what we want to do, but now we are concerned that DWP will NOT be happy with this as he are deferring a private pension that we could have now. We would like to leave the pension to grow so it will (potentially) be worth more when my wife reaches state retirement age. Will DWP have an issue with this?

I am going to speak to DWP about this, but first i am waiting for a written response from Lloyds with regards to what happens to my wife's pension if we do not choose any of the three options. I don't know if they continue to invest it or whatever.

Any comments or thoughts welcome.

warm regards

R

Spoonie_Turtle

No DWP won't have problems with your wife not taking it now, it's a proper pension pot so will continue to be disregarded until she reaches state pension age.

(The rationale being, if people have means to support themselves at retirement age they'll qualify for less/no support from the state, so it's in the government's interests to let people have the pension pots without it affecting their benefits before they have to take the pension.)

Newcad

Deferring a private or workplace pension until your State Pension Age has no effect at all on Income Related benefits. A deferred pension is ignored for working age benefits.

I'm currently doing that myself, why take a pension before SPA if they are just going to reduce your UC £ for £?
Leave the pension in deferal where it should still be growing in value.

It's only if you take money from the pension before SPA that it will affect your working age IR benefits.

One thing to note is that once you do reach State Pension Age any such deferred pension is no longer ignored for benefits.
(So if you have Pension Credits or Housing Benefits after reaching SPA then the income you could be getting from the pension is then counted)

jibblyjabbly

Thanks for this. I am just confused that Lloyds would send us what seemed to be an ultimatum "you must do one of these options before 23rd May" and no option was "leave it with us until state pension age". I don't understand why they didn't make that clear. The letter read like an ultimatum and it was a surprise to discover we didn't need to do anything and it could be left until state retirement age.

We are going to leave the pension in deferral. I was worried that we might get into hot water for deprivation of assets or notional income or something. Basiclally, money we COULD HAVE but decided NOT TO have. But we don't need the pension now and it would be better if it grew more for us. Surely we can';t get penalised for that?

best wishes

R

kaMelo

jibblyjabbly said:

A little update! I finally managed to speak to Lloyds and they told me that we did not need to choose an option (cash and reduced pension, pension now or transfer). The advisor said we could leave it where it was until my wife reaches state pension age. 

This made us happy as thats what we want to do, but now we are concerned that DWP will NOT be happy with this as he are deferring a private pension that we could have now. We would like to leave the pension to grow so it will (potentially) be worth more when my wife reaches state retirement age. Will DWP have an issue with this?

I am going to speak to DWP about this, but first i am waiting for a written response from Lloyds with regards to what happens to my wife's pension if we do not choose any of the three options. I don't know if they continue to invest it or whatever.

Any comments or thoughts welcome.

warm regards

R

So the pension can be deferred which is good.  Given it is an old Lloyds bank pension scheme I am going to assume it's a defined benefit pension scheme but clarifying that point would be good to know.
Assuming a DB pension a really important point to know is what happens to her pension in deferral. Two examples, one being an increase in the promised pension because it will be paid for shorter period of time. The second example was no increase to the annual pension but to pay a lump sum for any pension not taken when it was due. The first example of an increased pension should be okay. This second option, paying pension not taken as a lump sum, could be a problem if you are still claiming income related benefits when that happens.

I note that your wife will reach SPA before you so potentially still claiming UC at that point and any pension your wife is due will be counted as unearned income, affecting your UC claim from then on (whether she claims the pension or not) 
My only worry, if any deferred pension is paid as a lump sum, is how it would be treated under UC.

Clarifying whether the pension is DB or DC and, if DB, what happens in deferral is important.

jibblyjabbly

According to the documentation we have, its a DEFINED BENEFITS pension:

"The Lloyds Bank Pension Scheme No. 1 is a defined benefit scheme which has been registered

under Chapter 2 of Part 4 of the Finance Act 2004."

I am still trying to find out  what happens to it in deferrment.

warm regards

R

Newcad

As said a deferred pension is not classed as 'Notional Income' unless it's left deferred after you reach State Pension Age.
It only counts as 'Notional Income' for Pension Age IR benefits. (Oh, and for calculating any Council Tax Relief after SPA).

I believe that the rationale is that pensions were always expected to commence at 60 for women and 65 for men, nobody in the industry even considered that the government might change State Pension Ages.
(If they had done then they would have written in clauses to cover the possibility).

To force people to take their private or workplace pension before their new, government enforced, SPA by counting it as 'Notional Income' would be seen as grossly unfair to pensioners, who could get more pension by leaving it deferred until their new SPA, - and no government wants to be seen as unfair to pensioners.

As for why Lloyds didn't mention deferral at first, if the usual kind of deferment increases apply here then deferral will cost them more in the long run because once a pension is in payment the increases are usually not as generous as one that's in deferal.*

Do you have a copy of the policy document? If not then request one.
That will tell you how much the pension should grow when in deferral, as well as how much it will increase after it's in payment.

*My own pension is growing much more while in deferment than it would if in payment. It's currently growing at 1/7% simple a week in deferment which is equivalent to 7.5% a year. (It could actually be more than that as there is also a 3.5% annual increase on part of it if left for a full year or more - so it actually works out at around 10% a year if left longer than a year - however I think that 3.5% is for a full Tax year, April-April, and not simply 12-months of deferral, I need to clarify that with my provider).
Once I start taking payments then it increases yearly at RPI up to a maximum of 3%. (It's a bit more complicated than that because there are 2 components one which increases after commencement and the other not, but the majority of it will increase at that).