Need advice about pension I am about to start receiving

colinb12

Hi

I am writing this on behalf of my father who is due to start receiving his pension. He is 65 very shortly.

The basic information is this:-

This is a non-contributory pension scheme which was started in 1966. The pension is worth £1032.75 a year. His pension was increased but a tax free cash lump sump option was cancelled in 1993. My father did not agree to this and cannot see how they can legally do this? His old colleagues have been in receipt of a cash lump sum yet my father is not entitled? Is there anything he can do to appeal this? The pension was originally started with Eagle Star but was then transferred Zurich.

My father is currently in receipt of the following benefits due to illness:-
Long Term Incapacity
DLA Higher
Mobility Higher
Pension Credit
Council Tax Benefit due to receiving Pension Credit

My father's personnal allowance is £5434
His state pension is £6514
He has tax due on £1079

When his pension starts he will be no better off financially and will be worse by approximately £400 a year and he will be taxed.

Also, if my Father were to die, my Mother would only receive half the pension, surely this is not right?

Can I have some options to consider? Would this be worthwhile going to the Financial Ombudsman?

EdInvestor

colinbrealey wrote: »

Hi

I am writing this on behalf of my father who is due to start receiving his pension. He is 65 very shortly.

When he turns 65 his tax free allowance will go up to 9030 (from April).

This is a non-contributory pension scheme which was started in 1966. The pension is worth £1032.75 a year. His pension was increased but a tax free cash lump sump option was cancelled in 1993. My father did not agree to this and cannot see how they can legally do this?

The company providing a pension scheme is legally entitled to fund it as they see fit Especially if it is non-contributory, it's unlikely anything can be done.

When his pension starts he will be no better off financially and will be worse by approximately £400 a year and he will be taxed.

His higher personal allowance may change this equation though it looks as though he will lose pension credit/council tax benefit, but you should run the figures past the CAB to see if he will be due some savings credit.

Also, if my Father were to die, my Mother would only receive half the pension, surely this is not right?

A 50% spouse's pension is normal.

Can I have some options to consider? Would this be worthwhile going to the Financial Ombudsman?

What would you be complaining about? Receipt of free money?

colinb12

EdInvestor wrote: »

When he turns 65 his tax free allowance will go up to 9030 (from April).



The company providing a pension scheme is legally entitled to fund it as they see fit Especially if it is non-contributory, it's unlikely anything can be done.



His higher personal allowance may change this equation though it looks as though he will lose pension credit/council tax benefit, but you should run the figures past the CAB to see if he will be due some savings credit.



A 50% spouse's pension is normal.



What would you be complaining about? Receipt of free money?

Thanks for the advice, I did not realise that his tax limit would increase at age 65. Had a look at the HMRC site and it says at age 65 to 74 it is £7550

dunstonh

That is the current 07/08 allowance. As part of the budget reducing income tax to 20% for basic rate and abolition of the lower rate 10% band, the age allowance was increased.

Like Ed, I cannot see anything is wrong with what has been done. He could investigate a pension transfer but I suspect the transfer value would not be enough to make it worthwhile.

baldbaz

dunstonh wrote: »

That is the current 07/08 allowance. As part of the budget reducing income tax to 20% for basic rate and abolition of the lower rate 10% band, the age allowance was increased.

Like Ed, I cannot see anything is wrong with what has been done. He could investigate a pension transfer but I suspect the transfer value would not be enough to make it worthwhile.

Well I have told my Dad the information and he seems pleased, but the IR do not seem to have taken into consideration his age shortly when calculating his tax liability.

EdInvestor

Allowances for this year and next year (new year starts in March, when his state pension will also go up):

http://www.hmrc.gov.uk/rates/it.htm

Retired_I.F.A.

If your fathers health is dodgy then despite the costs involved in a transfer and a possible poor transfer value it could well be benificial as 25% of the transfer value can be had tax free now and should he die leaving your mom she could take the balance out as a lump sum less 35% tax or use the full remaining fund to provide an income for herself.

It's his money and he should be made aware of the options available to him I suggest he seeks out an IFA before taking what's offered as once he does there is no going back.