Tax free lump sum

Homer_71

Need help again I’ve previously asked a similar question but still confused. Especially after speaking to WTW. I’m 55 and want to release the 25% tax free lump sum from my WTW workplace DC pension I would like to use part of the funds to pay for home renovations before finally leaving my employment. But importantly want to continue paying into the pension until I do finally get out of my working hell I’m currently struggling mentally at work.

I’ve been informed by WTW that at that point the pension scheme moves somewhere else but want to continue working with the same company and continue paying into the pension scheme after taking the lump sum. To add to the complication of the situation in the next 12 months I’m going to be made redundant hopefully very much sooner I will receive a 2yrs redundancy payment and 20% uplift on my pension funds.I’ve recently spoke to a financial advisor regarding early retirement prior to being informed of the forthcoming redundancy and had decided on taking the fixed 10yr annuity. I would have already taken the early retirement but WTW ‘lost’ my pension so it took weeks and weeks at which time we were informed of departmental closure and redundancy.

I’m concerned about what happens to the 20% uplift if the pension is moved from the work place scheme with WTW. 
I currently have approximately £290,000 in pension + the uplift, Redundancy is approximately £90,000.

1 How do I release the 25% it’s baffling WTW are next to useless it’s taken 4 weeks to receive retirement statement paperwork.

2 Can I continue to pay into the scheme when the 25% is released as the 20% uplift is substantial.

3 When the 25% is released and the remainder is moved from WTW will my workplace payments start again with WTW or continue with new pension company.

Linton

https://forums.moneysavingexpert.com/discussion/6677411/tax-free-lump-sum

I think your confusion may be due to there being 3 very different considerations:

a - what the law allows

b - what your pension scheme allows

c - your redundancy Ts & Cs.

To go through each:

a) There is no legal reason why you should not do what you wish. But when you take a Tax Free Lump Sum the remaining 75% is "crystallised" and must be held separately from any subsequent contributions. You can take a TFLS from the subsequent contributions but you dont get a second bite at the Crystallised money. It is the responsibility of the pension scheme to manage this situation.

b) It is likely that your employer's pension scheme cannot handle the admin, especially if it is more than 10-15 years old. You would have to check this with WTW. Another option may be to first transfer the full amount to a suitable separate pension elsewhere and then take the 25% lump sum. You would have to ask WTW whether this can be done whilst still adding new money into the employer's pension. People here wont know as they dont know the details of your employers pension.

c) How anything you do will affect your redundancy conditions is something that you would have to ask your HR people. Neither we nor (probably) WTW know.

mrklaw

have you clarifed the pension part of the redundancy and are sure its a 20% uplift on total funds? That sounds unlikely but if you’ve checked thats ok. I’d expect more like perhaps 20% uplift in contributions for a period or similar. Anything they pay presumably has to be considered as the redundancy payment so may also be subject to tax.

I think thats the only wrinkle that’d stop me from doing a normal process

• if the scheme allows, do a partial transfer to a normal SIPP that you’re comfortable with - leaving the workplace pension in place and active for contributions while you’re working there and to receive eg redundancy payments as contributions for tax efficiency
• once transferred most of the funds, take teh 25% from the SIPP.

so my two main questions to the employer would be

• clarification on what teh 20% uplift means in reality. If its a simple payment based on previous contributions it may not be affected by any transfers you do. there is no obvious benefit to them to do that so it maybe simpler than that
• can the workplace scheme allows partial transfers. If not then you’re basically stuck until you leave and then likely do a full transfer to another scheme thats better suited for drawdown

GenX0212

If WTW dont allow you to access your pot and still keep contributing then maybe is there an option for you to do a partial transfer out to a SIPP provider whilst still continuing to pay in to your WTW scheme as an active member?

sandsy

You mentioned taking a fixed 10 year annuity. These fixed term annuities are written via drawdown rules and so you would be considered to be accessing your money flexibly. This limits how much you can continue to contribute to a pension each year to £10k gross.

wjr4

What is your financial adviser saying about this as they are the person who should be reducing your stress and worries?

Cobbler_tone

I see it is in the news again, which seems to be an annual event. Bound to be speculation with new leadership.

ali_bear

To the OP I would question what you really need. You mention buying a fixed term annuity but you also say you want to get your hands on a large amount of tax-free cash. Plus you seem to have a redundancy payment coming down the pipe.

If it was me I would forget about the annuity or accessing pensions cash, and simply hang on for the redundancy for now.

Homer_71

thanks for the responses I’ve spoken to 3 financial advisors prior to the redundancy info and was quite happy to take early retirement I wasn’t going to be rich but the stress and let’s say mental anguish of being with my employer for 29 years is taking its toll everyday is a battle of wills. As for the 25% lump some it is just for completing my home improvements before leaving.