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Rushed into retirement

My company has been put in receivership. With my 60th birthday in a few weeks, everyone seems to be rushing me with regards to my pension. Is it possible to slow things down a little?

I can understand the reasons for rushing you but I hope we will find that not only is it unnecessary but it actually works against your interests.

With your company in receivership, the normal assumption will be that your employment ceases. Also, because the normal retirement age of your pension scheme is your 60th birthday, you will be expected to take benefits at that time.

Various pension scheme rules follow old legislation in not allowing members to transfer benefits out of the scheme in the year before retirement and certainly not after normal retirement age.

I understand the benefits of income drawdown via a personal pension plan have already been explained to you by others and you would like to go down this route. It is merely the rush that is concerning you.

A further complication will be that the receiver will quite naturally want to look at your pension scheme to ensure that everything has been dealt with properly and, in particular, that there are no funds available to him. Essentially, he will be looking to see whether you have undertaken improper transactions with regard to your pension fund and whether there is overfunding.

From what you have said, neither of these situations applies to you but this will not stop the receiver from wanting to take a closer look.

The most important point, that I am surprised has not been raised with you, is the prospect of a demutualisation bonus. The insurance company providing your pension scheme, which is fully invested in its with-profits fund, has announced that it is to demutualise. It has said that it will not confirm how, and if, any demutualisation bonus will be payable in your situation. However, if it follows the trend of recent demutualisations, in particular, the Scottish Widows fund, then if you were to take your pension with the holding insurance company or defer taking your pension, there would the potential for a substantial bonus.

The starting point is to look at the rules of your pension fund. This I have done and they quite clearly state that benefits must be taken at the “specified retirement age” if all employment has ceased. If you are in other employment, then you are able to make a request to the trustees to alter you specified retirement age.

I understand that you have already set up another company. All we need to undertake now is to ensure that you are correctly registered on its payroll before your 60th birthday and undertake an exchange of letters between yourself and the trustees to alter your specified retirement age.

I can confirm that all the rules concerning transfer of benefits under your scheme relate to the specified retirement age. This includes such later specified retirement age as agreed with the exchange of letters.

I will write to the insurance company in question to see whether it is possible to move your benefits to a personal pension with it in the hope of retaining demutualisation rights. I have to say that I doubt whether we will obtain a satisfactory answer at this stage and even then I would doubt whether it would be possible.

My recommendations today are to ensure you have a contract of employment and have received taxed income with your new company before your 60th birthday.

Next, request a change in your specified retirement age under your existing arrangement, again before your birthday. Defer taking benefits until any demutualisation bonus is decided and then you have the freedom to set up a self-invested personal pension plan and undertake drawdown in your own time and leisure, having satisfied yourself that you fully understand the risk involved with such a transaction.

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