Offer from Morrisons Pension

JoeCrystal

Actually considering that it will keep it's real term value if left alone, that might be potentially better although capped at 2.5%. Especially that taking it out would be subject to income taxes!

greatkingrat

I'm surprised it is legal for someone under 55 to withdraw their entire pension in this situation?

FIREDreamer

BungalowBel said:

My son works at Morrisons (Supermarket).  He has received  letter to take a 'One-Time Winding -Up Sum Offer to Take your RSP  (Retirement saver Plan) Section benefits as an Immediate One-Off cash Sum'.  (Italics bit inserted by me).

He doesn't understand the letter.  Neither do I.

My main question is:  Will he still be in any sort of Pension Scheme if he takes the money? 
I have watched the video they provided; it seems to be encouraging people to take it (pointing out all the nice things they could do with the money).  Surely they can't leave him without a Pension?

I'm not convinced.

Does anyone know anything about this?

My son is 45 and has worked there for 15 years.  The lump sum is around £6.5k minus tax.

Thanks in advance.

ETA: Thanks, I have found the answer myself.  The Morrisons Pension Scheme has been bought out by AVIVA and those who were in the RSP can take their money if they wish.

I think I will advise him to leave it where it is.

Surprised this cashing in can be taken before age 55. Which legislation allows this? Also if over £10k (admittedly not in this case) would it invoke MPAA?

Exodi

JoeCrystal said:

Actually considering that it will keep it's real term value if left alone, that might be potentially better although capped at 2.5%. Especially that taking it out would be subject to income taxes!

Sorry, how will it keep real term value tracking CPI capped at 2.5%? Just look at the last 5 years.

It will be subject to income tax whether you take it out now or at NRA, I don't understand your point. If you then put it back into a different pension scheme you'd get the tax back in tax relief.

You are able to beat their offer if you took it out, put it into another pension scheme and achieved at least a 5.5% investment return (my current long-term XIRR is double this on my investments).

BungalowBel

Sorry I don't know the legislation that allows this.

My son would not be able to cope with a Pension that he had to manage himself, so I think it might be better in his case if he just leaves it in the AVIVA scheme.

Thank you all for your advice, and if there is any more I would be glad to hear it.

This is information about the AVIVA pension :  https://static.aviva.io/content/dam/document-library/corporate-pensions/ib40751a.pdf

and here is some information about the offer:https://rsp.morrisonspensions.co.uk/wuls/offer/the-offer/

JoeCrystal

Exodi said:

JoeCrystal said:

Actually considering that it will keep it's real term value if left alone, that might be potentially better although capped at 2.5%. Especially that taking it out would be subject to income taxes!

Sorry, how will it keep real term value tracking CPI capped at 2.5%? Just look at the last 5 years.

It will be subject to income tax whether you take it out now or at NRA, I don't understand your point. If you then put it back into a different pension scheme you'd get the tax back in tax relief.

You are able to beat their offer if you took it out, put it into another pension scheme and achieved at least a 5.5% investment return (my current long-term XIRR is double this on my investments).

I missed the point about the tax relief, good point.

xylophone

Sorry I don't know the legislation that allows this.

I'm surprised it is legal for someone under 55 to withdraw their entire pension in this situation?

https://www.gov.uk/hmrc-internal-manuals/pensions-tax-manual/ptm063600

Payment of a winding-up lump sum

Paragraph 10 and 12A schedule 29 Finance Act 2004

Where an occupational pension scheme is being wound up and the member’s benefit rights are commuted to a lump sum that payment may qualify for tax treatment as a winding-up lump sum provided the conditions set out below are satisfied. There is no lower age limit for payment of a winding-up lump sum. 

Exodi

xylophone said:

Sorry I don't know the legislation that allows this.

I'm surprised it is legal for someone under 55 to withdraw their entire pension in this situation?

https://www.gov.uk/hmrc-internal-manuals/pensions-tax-manual/ptm063600

Payment of a winding-up lump sum

Paragraph 10 and 12A schedule 29 Finance Act 2004

Where an occupational pension scheme is being wound up and the member’s benefit rights are commuted to a lump sum that payment may qualify for tax treatment as a winding-up lump sum provided the conditions set out below are satisfied. There is no lower age limit for payment of a winding-up lump sum. 

A useful read.

The two questions I'm still unsure of are 1.) Is there any situation this could trigger the MPAA (this could be particularly catastrophic for a young person) and 2.) Would NI be payable on this amount (I believe so as it mentions that it'll be treated as taxable income through PAYE).

DRS1

Exodi said:

xylophone said:

Sorry I don't know the legislation that allows this.

I'm surprised it is legal for someone under 55 to withdraw their entire pension in this situation?

https://www.gov.uk/hmrc-internal-manuals/pensions-tax-manual/ptm063600

Payment of a winding-up lump sum

Paragraph 10 and 12A schedule 29 Finance Act 2004

Where an occupational pension scheme is being wound up and the member’s benefit rights are commuted to a lump sum that payment may qualify for tax treatment as a winding-up lump sum provided the conditions set out below are satisfied. There is no lower age limit for payment of a winding-up lump sum. 

A useful read.

The two questions I'm still unsure of are 1.) Is there any situation this could trigger the MPAA (this could be particularly catastrophic for a young person) and 2.) Would NI be payable on this amount (I believe so as it mentions that it'll be treated as taxable income through PAYE).

Not sure about MPAA but just because something goes through PAYE doesn't mean NICs apply - virtually all pension payments go through PAYE without NICs applying.  I imagine this would be a pension payment and so outside NICs 

Albermarle

BungalowBel said:

Sorry I don't know the legislation that allows this.

My son would not be able to cope with a Pension that he had to manage himself, so I think it might be better in his case if he just leaves it in the AVIVA scheme.

Thank you all for your advice, and if there is any more I would be glad to hear it.

This is information about the AVIVA pension :  https://static.aviva.io/content/dam/document-library/corporate-pensions/ib40751a.pdf

and here is some information about the offer:https://rsp.morrisonspensions.co.uk/wuls/offer/the-offer/

I think you have probably come to the right conclusion.