New pension rules ( April 2015)
Discussion
Ginge R said:
It depends. If your friend is touching 55, she won't be going onto AFPS15 - is she on AFPS 05 or 75? With a pension like that, and on a salary of £25,000 I'm assuming she's now long been a civvy and that the £50,000 is a CETV. If she is a civvy, she'll be a deferred pensioner on either AFPS 75 or 05. From that point, it all depends on how long she served, and when.
AFPS 75 deferred pensioners whose service ended before 6 April 2006 claim a pension at 60. AFPS 75 deferred pension members whose service ended after 6 April 2006, but who had at least two years service before 6 April 2006, should claim the proportion of their pension which relates to their pre 6 April 2006, service at 60 with the remainder becoming payable at 65.m AFPS 05 deferred pension members can claim their pensions at age 65.
Can she take it out in one go? No. Can she transfer it out? In theory, yes, although she'd have to be quick - that option ends in about 5 weeks. The income is treated as taxable, unless it's one based on war disability.
Thanks for the detailed reply.AFPS 75 deferred pensioners whose service ended before 6 April 2006 claim a pension at 60. AFPS 75 deferred pension members whose service ended after 6 April 2006, but who had at least two years service before 6 April 2006, should claim the proportion of their pension which relates to their pre 6 April 2006, service at 60 with the remainder becoming payable at 65.m AFPS 05 deferred pension members can claim their pensions at age 65.
Can she take it out in one go? No. Can she transfer it out? In theory, yes, although she'd have to be quick - that option ends in about 5 weeks. The income is treated as taxable, unless it's one based on war disability.
Some more info. She does have a AFPS of her own, it is small(ish) and she cannot touch it until 65/67 as I understand it (and I have not included it in this discussion). The £50K figure above is her ex-husband's pension. He served approx 1976 - 1994. He has been a civvy since. He is over 55.
She has been offered/awarded half his pension pot (£110K approx) and half the smaller one (approx £20K), giving her £50K and 10K as a final financial settlement in the divorce.
What happens in five weeks?
Thanks again.
Ok, if she is becoming what is known as a 'pension credit member' she can't transfer it out anyway. If she was a deferred member, the law is changing in April to prevent unfunded public sector pensions from being transferred out. If I was advising her (have her speak to her solicitor) have her ask for an illustration of the benefit if she wanted to take it at aged 55. As a Pension Credit Member, she can now (wef last year) but with what's known as an acttuarial reduction - to compensate for the earlier withdrawl from her ex husband's notional fund, take benfits at agd 55 and not 60/65. If her ex husband can take benefits at aged 55, and if she has to wait until 60/65, her solicitor might form the opinion that she gave up her career to support him and that further waiting (the extra 5 years) is a further 'punishment' given that her ex can take the pension at 55 (assuming her did long enough to get that tick). I don't know the full facts and not a punchy divorce solicitor mind!
Thanks.
Are you talking about this?
http://www.telegraph.co.uk/finance/personalfinance...
Everything is done and dusted, he made the offer of 50% which has been accepted by my friend. Just awaiting the ex to sign his side of the paperwork which is taking forever.
Even if he signs tomorrow, how difficult would it be for her to move this thing along within the five week time scale? And if he delays it beyond five weeks, is she screwed to take it out?
Thanks.
Are you talking about this?
http://www.telegraph.co.uk/finance/personalfinance...
Everything is done and dusted, he made the offer of 50% which has been accepted by my friend. Just awaiting the ex to sign his side of the paperwork which is taking forever.
Even if he signs tomorrow, how difficult would it be for her to move this thing along within the five week time scale? And if he delays it beyond five weeks, is she screwed to take it out?
Thanks.
If your friend was the pension member (ie the serviceman or woman), if the pension was deferred (ie they weren't yet taking a pension from it) then that piece would apply. But as your friend is a 'pension credit member', they can't take it out anyway. Her ex becomes a 'pension debit member'.
It's being reported today that this week's Budget will introduce further pension relaxations from 2016 - allowing an annuity holder to be bought out for a cash lump sum.
In other words someone who has already retired, and bought an annuity with their accumulated savings, will be able to be "bought out" of their annuity. Essentially this is like letting people drive the other way down what used to be a one-way street.
In other words someone who has already retired, and bought an annuity with their accumulated savings, will be able to be "bought out" of their annuity. Essentially this is like letting people drive the other way down what used to be a one-way street.
Claudia Skies said:
It's being reported today that this week's Budget will introduce further pension relaxations from 2016 - allowing an annuity holder to be bought out for a cash lump sum.
In other words someone who has already retired, and bought an annuity with their accumulated savings, will be able to be "bought out" of their annuity. Essentially this is like letting people drive the other way down what used to be a one-way street.
One of the most stupid ideas ever to be foisted onto financial services...!In other words someone who has already retired, and bought an annuity with their accumulated savings, will be able to be "bought out" of their annuity. Essentially this is like letting people drive the other way down what used to be a one-way street.
Jockman.. great idea!
The annuity redemption plan was always going to happen. The buy back will be at 20% or so discount and I have just fired off an e-mail to a provider already pushing the idea, asking if people who sell their annuity can then claim (extra) pension credit in lieu. If they can, that implies a cost to the taxpayer of course. The provider won't know, this is going to be the next financial services disaster. The next in a long line that is.
It's a further divide too between those in an unfunded public sector pension who can do nothing of course, and those who have freedom to do practically anything. I have absolutely no doubt that far more savers will ultimately lose out, simply some centre left legislation can be seen to have done something.. anything. Added to that, watch this space for rafts of packaged pension 'solutions'.
It stinks.
The annuity redemption plan was always going to happen. The buy back will be at 20% or so discount and I have just fired off an e-mail to a provider already pushing the idea, asking if people who sell their annuity can then claim (extra) pension credit in lieu. If they can, that implies a cost to the taxpayer of course. The provider won't know, this is going to be the next financial services disaster. The next in a long line that is.
It's a further divide too between those in an unfunded public sector pension who can do nothing of course, and those who have freedom to do practically anything. I have absolutely no doubt that far more savers will ultimately lose out, simply some centre left legislation can be seen to have done something.. anything. Added to that, watch this space for rafts of packaged pension 'solutions'.
It stinks.
Ginge R said:
Jockman.. great idea!
The annuity redemption plan was always going to happen. The buy back will be at 20% or so discount and I have just fired off an e-mail to a provider already pushing the idea, asking if people who sell their annuity can then claim (extra) pension credit in lieu. If they can, that implies a cost to the taxpayer of course. The provider won't know, this is going to be the next financial services disaster. The next in a long line that is.
It's a further divide too between those in an unfunded public sector pension who can do nothing of course, and those who have freedom to do practically anything. I have absolutely no doubt that far more savers will ultimately lose out, simply some centre left legislation can be seen to have done something.. anything. Added to that, watch this space for rafts of packaged pension 'solutions'.
It stinks.
What do you mean by the buy back being at 20% discount?The annuity redemption plan was always going to happen. The buy back will be at 20% or so discount and I have just fired off an e-mail to a provider already pushing the idea, asking if people who sell their annuity can then claim (extra) pension credit in lieu. If they can, that implies a cost to the taxpayer of course. The provider won't know, this is going to be the next financial services disaster. The next in a long line that is.
It's a further divide too between those in an unfunded public sector pension who can do nothing of course, and those who have freedom to do practically anything. I have absolutely no doubt that far more savers will ultimately lose out, simply some centre left legislation can be seen to have done something.. anything. Added to that, watch this space for rafts of packaged pension 'solutions'.
It stinks.
And what do you mean by claiming (extra) pension credit in lieu?
Thanks.
sidicks said:
Claudia Skies said:
It's being reported today that this week's Budget will introduce further pension relaxations from 2016 - allowing an annuity holder to be bought out for a cash lump sum.
One of the most stupid ideas ever to be foisted onto financial services...!
Ginge R said:
Final Salary schemes = still as low risk as we want to think?
Keep a loose eye on the BHS sell off for any pension scheme developments. Maybe. Possibly, allegedly.
Last night. New BHS owners realised (gosh!) that the fund deficit was greater than it thought. Ho hum.Keep a loose eye on the BHS sell off for any pension scheme developments. Maybe. Possibly, allegedly.
http://www.theguardian.com/business/2015/mar/15/he...
The Guardian headline is absolute nonsense. Anyone associated with Pensions Boards knows that deficits are monitored on an annual basis with formal valuations every 3 years. The deficit is disclosed to the Sponsor every year and given the financial investment environment being difficult for pensions actuaries are always involved. So no surprises about the deficit to both the sponsor and the new buyer, don't forget the Pension Regulator has also been involved.
"John Ralfe – a former head of corporate finance at the chemist chain Boots, who made his name handling its £2.3bn pension fund – had already calculated that BHS’s pensions deficit was around 30% larger than previously thought, putting the total at £130m using public figures released up to August last year."
Ralfe was the idiot who started the trend of DB schemes investing in Gilts, thus brilliantly denying schemes the benefit of stock market growth. He should be filed with Gordon Brown (who "stole" the dividend tax credit) as joint destroyer of decent company pension schemes in UK.
Ralfe was the idiot who started the trend of DB schemes investing in Gilts, thus brilliantly denying schemes the benefit of stock market growth. He should be filed with Gordon Brown (who "stole" the dividend tax credit) as joint destroyer of decent company pension schemes in UK.
I should declare an interest at this point; I know John, we exchanged e-mails this morning on a couple of matters.
The decision certainly challenged convention, In gambling parlance, the Boots trustees quit while they were ahead. The issues about the 'denied' pensions is not so much a reflection on the investments; rather, the liability drag. John was prescient, he foresaw the way the DB pension market was going, and was the first to move the Boots scheme into fixed interest.
Since then, others have followed though and more DB schemes are now invested in bonds than they are equities by quite a significant margin. However, have others gone 100% into bonds, like John advocated? No. Well, there is one other pension scheme. That of the Bank of England. Draw your own conclusions!
The reason why the DB schemes are now dying daily it seems (Tata/British Steel this weekend) is not so much the fund underperformance. It's the unsustainability of the requirement versus the ability to match that requirement. To suggest that John and his kind killed DB is missing the point a little, life expectancy, longevity etc killed the DB pension. Scheme trustees had at that point, a decision to make.
Either raise the risk profile (madness, those who stayed in equities suffered incredibly in 2008), contribute more, ask the workers to contribute more or close the schemes. What John did was merely crystallise the problem by addressing it in a way that veered from the norm of sticking your head in the sand.
Does that mean that equities will never become the default option again? No, but that depends on the trustee strategy I think. If the scheme deficit is too big, then you're already playing catch up.
At that end of the spectrum, you have some notorious zombie pension funds; there are one or two examples of DB schemes that are horrifyingly run. They have no top cover from anyone; just some trustees who, for reasons best known to themselves, opted to try and redress the deficit by using expensive derivatives and high alpha strategies.
Gordon Brown is renowned for butchering pensions in the way that he did by retracting the dividend tax credit but many don't know it was Norman Lamont who was the one who initiated the process, a few years earlier. Brown simply decided to allow it to continue in a slightly different manner.
The decision certainly challenged convention, In gambling parlance, the Boots trustees quit while they were ahead. The issues about the 'denied' pensions is not so much a reflection on the investments; rather, the liability drag. John was prescient, he foresaw the way the DB pension market was going, and was the first to move the Boots scheme into fixed interest.
Since then, others have followed though and more DB schemes are now invested in bonds than they are equities by quite a significant margin. However, have others gone 100% into bonds, like John advocated? No. Well, there is one other pension scheme. That of the Bank of England. Draw your own conclusions!
The reason why the DB schemes are now dying daily it seems (Tata/British Steel this weekend) is not so much the fund underperformance. It's the unsustainability of the requirement versus the ability to match that requirement. To suggest that John and his kind killed DB is missing the point a little, life expectancy, longevity etc killed the DB pension. Scheme trustees had at that point, a decision to make.
Either raise the risk profile (madness, those who stayed in equities suffered incredibly in 2008), contribute more, ask the workers to contribute more or close the schemes. What John did was merely crystallise the problem by addressing it in a way that veered from the norm of sticking your head in the sand.
Does that mean that equities will never become the default option again? No, but that depends on the trustee strategy I think. If the scheme deficit is too big, then you're already playing catch up.
At that end of the spectrum, you have some notorious zombie pension funds; there are one or two examples of DB schemes that are horrifyingly run. They have no top cover from anyone; just some trustees who, for reasons best known to themselves, opted to try and redress the deficit by using expensive derivatives and high alpha strategies.
Gordon Brown is renowned for butchering pensions in the way that he did by retracting the dividend tax credit but many don't know it was Norman Lamont who was the one who initiated the process, a few years earlier. Brown simply decided to allow it to continue in a slightly different manner.
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