Pension

[Victoriaschool]

If I have a final salary pension pension can they stop me from taking my 25 percent out

You will need to give more detail. A final salary pension gives a guaranteed monthly amount for life. There can also be a lump sum element.

It depends on the scheme and what its governing rules say, and your circumstances. In some schemes the tax-free cash option is technically offered on a discretionary basis but it would be very unusual for a request to be refused assuming there were no tax issues. What makes you concerned you might not be allowed it?

Also, remember there are time limits around taking the lump sum, so you can't just take the cash now if you're not planning to take the pension any time soon.

There is a lump some amount offer and also a smaller amount offer with a monthly payment but I have to speak to a financial advisor and they send the report back to the pension company with recommendations on what I shud and shudnt do but feel like they don’t want me to have my money was wondering if they can stop you from taking your 25 percent if they won’t let you take all the amount that’s in there

Is the first lump sum a "full commutation" lump sum instead of getting any monthly pension installments? Not clear from your message but if your pension is tiny and can be converted into a lump sum of up to £10k then this option is sometimes offered. Or Alternatively you may have the option of taking a transfer value of the whole pension and putting it into a personal pension scheme do you can access it more flexibly. These potential options are separate from the 25% cash sum. Your financial adviser should be able to take you through your options. You can also take a look at the Money and Pensions Service (aka "Pension Wise") website. You may find answers to some of your questions on there (it's difficult to give information in general terms without knowing more about the scheme you are in and your individual benefits).

My pension full lump sum is 90 grand if I take the full amount or a monthly amount when I retire but my pension company are saying I can’t take the full amount of 90 grand so I was thinking maybe taking a 25 percent tax free lump sum but they don’t seem to want to let me have that aswell

You can't just take the 25% now in isolation. It has to be linked to you taking the pension. Are you over age 55 and planning to retire imminently?

I am. 55 but not retiring yet

Can I take 25 percent and a draw down

If you're not retiring yet then you can't take the cash lump sum. You may have the option to transfer, though, which I assume is what your appointment with your financial adviser is about. It's not usually recommended to transfer out a defined benefit pension because you'd be giving up such a generous benefit, but only you know your circumstances. I suggest you discuss with your IFA so you are clear on your options.

No, not from a defined benefit scheme. If you wanted to explore drawdown you would need to transfer to a personal pension first.

You don't drawdown with a DB pension. You are guaranteed a monthly amount. If there is the option to take a lump sum then you can only take it when you take the whole pension. If you are only 55 you would need to check what the Normal retirement age (NRA) the pension has. Taking it earlier than NRA will usually cost you 5% for each year you take it early.
The only other option is to try and transfer it to a defined contribution scheme, however you would need advice from an IFA and the chances of them recommending such transfer are vanishingly small. Even if they do you may still struggle to get someone to take the transfer.

You can covert your final salary ( defined benefit ) into a ‘cash pot’ but to do so requires you to have independent financial advice. At that advice you’d be told about the pitfalls of doing the conversion.
If you still wanted to proceed with the conversion the Pension fund managing the final salary pension for you needs the IFA ‘sign off’ that you’ve been told about the pitfalls and still want to proceed.
The strong advice is to never convert a final salary pension but there could be some circumstances where you migh5 still want to proceed.

I think you’re allowed to take upto 25% tax free, and drawdown the rest in a number of ways. Monthly payments being one way. I believe once you take the tax free amount ( up to 25%) you have to start a drawdown within a number of months, 6 comes to mind.

It is virtually impossible to transfer a final salary pension into a defined contribution scheme. You need to get an IFA to sign off and due to all the litigation over “mis-selling” they simply will not do so. It’s a direct result of people not wanting to take personal responsibility for their own financial decisions I’m afraid. There are only a very small number of situations where it is clearly financially advantageous long term, mainly involving terminal illness.

So I’m afraid availability of the 25% lump sum will be determined by the scheme rules. You are likely to have to start taking the whole pension, which will mean reduced monthly amounts.

Nobody can answer most of these questions because each scheme has its own rules. You need to read those.

Some allow you to take it 55 (usually with reductions), some don't. Different schemes allow different sizes of lump sum, it may not be 25%. The monthly payment doesn't work the same way as drawdown in a DC pension. Without knowing what pension you are in, nobody here can tell you what your particular schemes rules are - and therefore what you can and can't do.

It is hugely expensive to get IFA advice on transferring out, and they are almost guaranteed to say no. In which case you don't get a refund of the fee. Some schemes don't allow it even with IFA approval.

It would also be useful to know if you still work for the same employer the pension is with. I have a FS one but haven't worked there for twenty five years so they don't care if I'm "retiring" or not.

With a defined benefit pension you get paid an amount per year for the rest of your life from when you start taking it.
There is also often the option of taking a smaller annual amount and an up front tax free lump sum. Whether that is worth doing depends on how much pension you give up for your lump sum, which will depend on the rules of the scheme.

You also have the option to transfer the whole pension out into a DC pot which you can take more flexibly. But this has to be signed off by a financial advisor, will cost a lot, and they may not advise you to anyway - as most people would be better off with an annual amount that increases with inflation throughout their retirement.

With a DB scheme, if you take the lump sum, you also have to start taking the pension immediately. Very few pension schemes have a Normal Pension Age of 55 so in all likelihood if you take the lump sum and pension now it will be further reduced. And if you’re still working you’ll be taxed much more on your pension.

What do you need the lump sum for? Unless in very extreme circumstances taking the lump sum and pension now is likely to be a poor long term financial decision.

As long as you are taking it out in accordance with scheme rules ... for me that was taking it at sane time as taking retirement and monthly pension

Correct response to original post!