Pension being wound up by PIC

A question about : Pension being wound up by PIC

Received a letter saying hubbys pension has a value of 140k. Its in a scheme that is due to be wound up but we want to wait until April and take the money to pay off the mortgage.

After asking for an upto date valuation and telling Mercers that we dont want them to buy an annuity with it on our behalf, they have sent it back to the Pension Insurance Corporation. They in turn have sent us a valuation and the transfer forms for us to transfer the fund to our own choice of provider.

There is no mention of the 25% drawdown that is currently available so not entirely sure what the options are from them.

What we dont want to do is transfer to another scheme and then not be able to take the full amount out come April.

Anyone know what the procedure is?

Hubby is 61

Best answers:

• I realise that only the first 25% is tax free.
  Is the transfer value (which is what they quoted) the same as the CETV that seems to be mentioned frequently?
• really? I was told he would be taxed at his current level of 20%.
• Maybe you can tell us more about your and his whole situation? The people here are pretty good at coming up with the most efficient ways to get things done, to maximise value for money.
• Its extremely confusing
  Ive had a look at drawdown calculations on h-l.co.uk . It says he can take 35k cash and will give him 7400 income.
  Would we be allowed to transfer his sole pension pot into two separate pots for both of us? (I am 50 this year)
• It's confusing when you get to deal with it all at once alright. We at least have had more time to absorb the various options.
  That Ј7400 income would be the maximum allowed under capped income drawdown, which amounts to 7.05% of the 75%. That's the correct rate for February and doesn't involve buying an annuity. It's what I think is likely to be the best option to use given what I know at the moment.
  This capped drawdown 7.05% rate does not change after 6 April. Rather, what happens then is the new option to use flexi-access drawdown, with that cut in his annual pension contribution limit from 40k to 10k as the consequence. It's probably better for him to make new pension contributions and take just the 7.05% as long as possible to maximise his pension tax relief, if you have the money to afford this.
  He can't transfer a sole pension pot into some for you and some for him. He could use income from his pension to give to you so you could pay contributions into a pension pot of your own. I'm assuming that you don't want to divorce, which would allow that sort of splitting as part of a divorce settlement. Your own pension contribution limit is your earned income or up to 3600 gross if you aren't working, subject to a cap of no more than Ј40,000 a year. Better to delay doing this until after his state pension starts, though.
  Provided he doesn't buy an annuity, the whole of his pension pot would be available to be inherited by you tax free, so there's no reason to worry about your own income future if he chooses this option. If he defers the state pension the portion spent on living while deferring wouldn't be inheritable and the extra state pension also wouldn't be inheritable, but the income level is high enough to allow just giving you some of the higher income level (assuming that the 7.05% annuity rate is a mistake).
  It's worth knowing that long term the withdrawing rate from a lump sum that is widely quoted as not having an excessively high chance of having to reduce income later is 4% increasing with inflation, not 7.05%. However 7.05% is OK for your current situation because later he'll have his state pension, so it makes a lot of sense to draw as much as the capped income drawdown limit allows until then. that's also the better time to do extra mortgage paying off, once all of his final income level is available. Before then it tends to just increase financial pressure.
  So at the moment my though is that the best route is to take the 25% tax free lump sum and take the maximum from capped income drawdown, possibly, if desired, using some of that for mortgage overpaying (not a great idea) or to make use of the annual 3600 cap for pension contributions to a person not working if that applies to you.
• Thank you for your replies. I already use HL for my monthly savings plan so think its probably best to go with them as its a company Im familiar with.
  I presume we complete the transfer first then take the 25% drawdown from HL?
• But is this not a DB scheme that is being wound up!
  The annuity being offered may well be way above what would be available it bought with a DC scheme.
  What is the scheme that is being wound up, what is the benefits being given up and how much way the annuity that you turned down?
  It may have been immensely valuable - it sounds as if the scheme is trying to offload it's responsibilities?
• I cant see anything that says what sort of scheme it is. Originally the trustees wanted to purchase an annuity that would give 7000 a year income at normal retirement age. It didnt state who the annuity was with or any other options available.
  PIC have sent a transfer out quotation which states a total transfer value of 140,663.00 valid for 3 months. The only think I can see is that its stated as the value of non GMP arising from pensionable service up to 1997.
  It was originally SR Technics I think from an old airline pension
• yes it does say there should have been about 190k in but there is only 140k
• So is the Ј7000 per year index linked? Is there a guaranteed period, are there survivor benefits?
  Why did you not want a guaranteed Ј7000 a year?