public sector pension release
public sector pension release
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mrpurple

Original Poster:

2,624 posts

218 months

Friday 2nd May 2014
quotequote all
Having trouble finding the answer to this so perhaps a kindly PH'er can answer. Do the recently announced changes to full release of pensions relate to public sector pensions as well as private?

Many thanks in advance.


timbo999

1,547 posts

285 months

Friday 2nd May 2014
quotequote all
Assuming you are talking about being able to drawdown the whole fund subject to tax, as I understand it, it applies to defined contribution schemes (or money purchase) but not defined benefit schemes.

I suppose you could transfer a DB fund into a SIPP and then take the whole drawdown, but given that most public DB funds are very generous and you would pay 40% tax on the drawdown you'd be a moron to do it!

I also seem to remember that part of the discussion was that transfers out of DB schemes would be disallowed to prevent public funds being used in this way.

mrpurple

Original Poster:

2,624 posts

218 months

Friday 2nd May 2014
quotequote all
timbo999 said:
Assuming you are talking about being able to drawdown the whole fund subject to tax, as I understand it, it applies to defined contribution schemes (or money purchase) but not defined benefit schemes.

I suppose you could transfer a DB fund into a SIPP and then take the whole drawdown, but given that most public DB funds are very generous and you would pay 40% tax on the drawdown you'd be a moron to do it!

I also seem to remember that part of the discussion was that transfers out of DB schemes would be disallowed to prevent public funds being used in this way.
many thanks.......no offence but that was about as clear as mud to me.

Existing - retired having released 25% of pension lump sum and receiving annual pension...can the remaining 75% be released? But think I understand your point about 40% tax if you did.

rossub

6,036 posts

220 months

Friday 2nd May 2014
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The country couldn't afford it if a substantial amount of public sector retirees decided to do that. Annual pensions are paid out of annual government income, so there is no magic pot of money invested that you could draw it from.

We're already overspending by c£120bn a year. The above would add to that.

timbo999

1,547 posts

285 months

Friday 2nd May 2014
quotequote all
If the pension is in payment (crystallised in the vernacular...) no you can't...

PurpleMoonlight

22,362 posts

187 months

Friday 2nd May 2014
quotequote all
No.

The proposal is that public sector defined benefit schemes will prohibit members from transferring to achieve unlimited drawdown via another arrangement.

mrpurple

Original Poster:

2,624 posts

218 months

Friday 2nd May 2014
quotequote all
Many thanks gents...as I thought it would be. Won't be buying a supercar then wink

timbo999

1,547 posts

285 months

Friday 2nd May 2014
quotequote all
Actually that's not quite true - if its a DC scheme in drawdown you may be able to...

I'm assuming though its a DB scheme, or you've bought an annuity... so it is a no, I'm afraid.

If you don't understand the difference between defined contribution and defined benefit, I would pay for some advice before I did anything...

mrpurple

Original Poster:

2,624 posts

218 months

Friday 2nd May 2014
quotequote all
timbo999 said:
Actually that's not quite true - if its a DC scheme in drawdown you may be able to...

I'm assuming though its a DB scheme, or you've bought an annuity... so it is a no, I'm afraid.

If you don't understand the difference between defined contribution and defined benefit, I would pay for some advice before I did anything...
NHS pension....original version pre 95...does that help?

Revisitph

983 posts

217 months

Sunday 4th May 2014
quotequote all
mrpurple said:
timbo999 said:
Actually that's not quite true - if its a DC scheme in drawdown you may be able to...

I'm assuming though its a DB scheme, or you've bought an annuity... so it is a no, I'm afraid.

If you don't understand the difference between defined contribution and defined benefit, I would pay for some advice before I did anything...
NHS pension....original version pre 95...does that help?
Presumably your pension was calculated as = final salary x (how many years you worked for the NHS divided by a number) [80ths for many groups pre-1995]. For example £35,000 x (36[years]/80) = £15,313 p.a.

If you had bought added years the number of years "worked" would be higher and if you were in one of the special groups with higher accrual rates then the 80ths would be smaller.

Regardless, if it was calculated like that then it was defined benefits (DB) and the NHS....pre-95 makes me think it was the standard NHS DB scheme.

There is no way that the state can allow NHS pensions to be released. The amount would be enormous and there is no pension fund; it is a Ponzi scheme with the current employees paying their contributions to the Treasury to be paid out to current retirees. With the recent hikes in contributions in the name of "fairness" some of the increase pays pensions to the retirees and a large surplus of contributions goes to the exchequer to try to reduce the huge increase in national debt run up over the last decade. Some have seen their monthly contributions go up by 30%+ over the last couple of years - and the lifetime allowance shrinking towards them from the other end.