Getting the money!

CarrieMJ

I currently have a DB pension with £22,895 in it, retirement June 2026. I was asked how I wanted to take it. I elected for the trivial commutation lump sum because I have urgent roof repairs to fund but because I closed a different pension for £8,158 some years back I’ve been told that I can’t because:

 “The capital value of this pension you are currently receiving together with the trivial option you have chosen will exceed the £30,000 threshold that HMRC allows you to have. Therefore you are unable to cash in any of your benefits for a one-off  lump sum under triviality.”

I understand that because this is a defined benefit pension that I’m stuck here. I want to access this money. Can I transfer this defined benefit pension to a defined contribution one and take the full amount out almost immediately, or will my money be stuck somewhere else?

MallyGirl

when you say it has £22k in it, is this a CETV (transfer value). DB pensions don't have a value as such.

If the transfer value is below £30k then you can transfer it to a DC pension without any to pay for transfer advice. Once in a DC pension you can drawdown as you see fit. It won't be instant. There will be significant tax to pay.

CarrieMJ

Thanks for replying. Yes, it's a defined benefit pension and they state:

Your transfer value is £22,895.03

MallyGirl

https://forums.moneysavingexpert.com/discussion/comment/81930433#Comment_81930433

in which case you can transfer it to one of the SIPP providers and then draw it down. If you draw anything beyond the 25% tax free you will trigger the MPAA which will limit your future pension contributions to £10k. You will pay tax on 75% of what you drawdown - do you need it all? Depending on your earnings you could pay 20%, 40% or more.

If it really isn't staying in the SIPP for long then you are probably better off choosing a provider that charges based on value held eg Hargreaves Lansdown

daveyjp

A DB pension is a guaranteed income for life.

If you need a lump sum consider borrowing against that DB pension income, rather than the nuclear option of cashing it all in and paying a huge amount in tax.

dunstonh

Whilst you are not required to seek advice for a CETV that low, it will almost certainly be the wrong decision to transfer it and one that could cost you dearly.

CarrieMJ

I am in desperate need of that money right now, my roof needs some serious repair and the cost will grow if not remedied before Winter. The small annual income that it will generate if I leave it is of no use to me. I can't borrow against it because I can't get a loan. That money will solve every problem and future proof my house.

I realise that I'll have to pay tax above the 25% tax free sum, but that's fine.

I am scared of transferring it out because everyone seems to tell me not to do it, but I don't want that annual pension, I need that money now.

CarrieMJ

https://forums.moneysavingexpert.com/discussion/comment/81930543#Comment_81930543

This is scary. Can something go wrong with the transfer process? What can it cost me apart from a future annual income of approx. £1k?

MallyGirl

https://forums.moneysavingexpert.com/discussion/comment/81930594#Comment_81930594

they are referring to the fact that the majority of people would be better staying in a DB pension than transferring out, especially if the transfer is to support the ability to draw it all out. Basically raiding your retirement for money now.

If the need now is that urgent, and you have exhausted other avenues for funding the repair, and hopefully you are making other pension contributions then you can do what you originally asked.

It will take time - weeks/months before you get the money depending on who you are transferring from and to.

Aylesbury_Duck

https://forums.moneysavingexpert.com/discussion/comment/81930594#Comment_81930594

It's more that the DB pension will generate £1k a year at the start, but that will (probably) be uplifted by an inflationary amount and paid every single year until you die. That sort of inflation-protected, guaranteed income is valuable.

Plus, as advised above, you'll lose a chunk of its value if you transfer it to a DC scheme and cash it in.

It's your choice, of course, and it might be that you have significant other DB pensions that would make doing this inconsequential. I presume you don't have significant savings or DC pensions to rely upon, or you'd be using them to fund the roof repairs.

The other thing I'll ask is this, and please don't be offended: Does your roof really need extensive repairs? Roofing scams are commonplace, particularly targeting older homeowners. This isn't a case of someone knocking on your door to tell you you have some tiles that are missing, loose or similar, and after that small work is done, being told the whole roof needs work?

LHW99

When you choose a new provider, HL or whoever, check they understand that the CETV is under £30k and that they will action the transfer. Some platforms may not be willing to, even though it is allowed in law.