Pension Advice Please

[Paigntonian]

Finished a short-term contract with the DWP. They are happy to refund my pension contributions of £253. They won't give me the £1,800 that the DWP paid in employers' pension contributions. Are they in the right?

[bobbinwales]

Yes.

[Gizmonster]

The way I see it, the payments made by the DWP towards your pension would never have been yours anyway, so the short answer is yes.
Have a read here (although it doesn't really cover payments made by your employer, it's still worthwhile reading):
https://www.pensionsadvisoryservice.org.uk/about-pensions/when-things-change/leaving-your-pension-scheme/taking-a-refund

[Paigntonian]

Many thanks guys.

[ToraToraTora]

yes, why would you even ask?

[Paigntonian]

Tora. Calm down man. I wasn't certain and that's why I asked. I'm sorry if that offended you in any way.

[Peter Pedant]

er because under your fave legal system TTT
the european union that is!
pension conts are looked on in that system as delayed wages
and Paignton is just sayimg
delayed wages - no wages now please

however - the english have a rule for everything

altho in the general world - I think that point may get up and run

[Peter Pedant]

yeah - paign
he like rabid darg
and what do we do to rabid dogs?
bamma lammm bamma lamma

[Hymie]

If you elect to take the money (£253) you will miss out on the £1,800 paid to your personal pension pot by the DWP – which at the age of 55 you would be able to take 25% tax free (£513) and the rest at your normal tax rate. This is a very good return on investment for your £253.

The only down side to not taking the money now, is that there will be an annual administration charge on the pension investment, but the investment return should more than cover this.

[bobbinwales]

Youll also be taxed at 20% on your £253 to cover the initial tax relief. Its definately worth considering leaving it all in and then withdrawing at after age 55 either as lump sum (less some tax) or as tiny income or both

[Paigntonian]

Hymie: Thanks for your reply. Need to talk to them tomorrow. Sorry to be thick but are you saying that, as I'm over 55, I can retrieve my pension contributions and the £1,800 paid by my employer now albeit subject to tax?

[bobbinwales]

is it a defined benefit scheme (eg final salary/career average) or is it direct contribution one with someone like L&G?

[bobbinwales]

if its career average type which maybe the case with a goverment job then you may have to take income with optional lump sum (and the amounts will be told to you by the employer/scheme)- may work out more than the total contributions if your lucky

[bobbinwales]

if its career average the amount may bear little relation to the amounts paid in as its a defined benefit

[Hymie]

Bobbinwales – I believe that where the rules allow you to take back your pension contribution, you do not pay back the tax relief received on the money – that is one of the small advantages of taking the money.

[bobbinwales]

You do pay 20% on gross refunded contributions., think its been 20% for a long time, just coincidence its same as basic rate now. Will find a link

[bobbinwales]

https://www.pensionsadvisoryservice.org.uk/about-pensions/when-things-change/leaving-your-pension-scheme/taking-a-refund

[bobbinwales]

Either way any 20% deduction on the £253 is neither here not there compared to the potentialy bigger pot. SO ask for your options on either preserving the pot until a later date or ask for a benifit quote on drawing your pension now. As the income is likeley to be very small you may want to take the maximum lump sum tax free element. or ask if your allowed to treat the whole pot as a trivial lump sum (some tax due). Am confident the amounts will be much more than your £253

[Hymie]

I’m assuming that the DWP pension that you have is a money purchase scheme and not a defined benefit scheme. Very few companies now offer a defined benefit scheme due to the costs – but given that I am paying the money for the DWP pension scheme, they may very well be being generous with my money.

You should ask which the scheme is (money purchase or defined benefit) – even if it is a defined benefit scheme, you should be able to take 25% of the value tax free by the rules of the scheme, and then either receive a pension (reduced due to taking it earlier than your normal retirement age), or transfer the value to another approved scheme and access all the money as if it were a money purchase scheme. If it is a money purchase scheme, it will make it simpler for you to get hold of the £2,053.

So either way you should be able to get your hands on the £2,053. Bear in mind that all this takes time to arrange, I would not expect you to have the money in the bank for at least a couple of months.

You need to speak to the pensions department to get more information on the options open to you by the rules of the scheme. They should freely give this information, but they cannot give investment advice on what the ‘best’ option for your personal circumstances is.

[bobbinwales]

If it is a money purchase scheme they may not even give you a quote, they'll more likely tell you to go to the scheme provider. You may have an online account with a pension calculator tool.

[bobbinwales]

Am off to bed now Hymie so will leave you to it. My knowledge on this is in retail sector where have given support (cant call it advice) to colleagues, and wife and me have had a few diffrent schemes ourselves with small to medium pots and of the new workplace pensions, Am less familiar with DWP, maybe its a wrong assumption it'll be career average now (a know final salary is unlikely for newer people)