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pension or lump sum?

Dod101
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pension or lump sum?

#355918

Postby Dod101 » November 12th, 2020, 4:12 pm

This will be simple for some of you. My knowledge is well out of date now but my daughter seems to think I will know, which I do not.

My daughter is approaching 55 when she will be paid a pension by one of the Lloyds Bank final salary pension schemes. She worked for them for 10/15 years when she was very much younger and it has just been sitting there. Obviously she has the option of taking it as a pension or she could take the lump sum.

First, what sort of multiple of the pension could be expected? If she takes the lump sum can she put it into a SIPP? She has no need for the lump sum at the moment, nor for the pension for that matter. Can she defer the whole thing? ie either taking the pension or deciding whether she wants the lump sum? She is aware that she will need to get advice from what the literature calls a non biased IFA. (So you can get biased IFAs? Thought the 'I' meant independent?)

I am slightly hampered because I have not seen any of the paperwork because of travel restrictions at the moment so any help wold be much appreciated.

Dod

dealtn
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Re: pension or lump sum?

#355922

Postby dealtn » November 12th, 2020, 4:25 pm

Dod101 wrote:This will be simple for some of you. My knowledge is well out of date now but my daughter seems to think I will know, which I do not.

My daughter is approaching 55 when she will be paid a pension by one of the Lloyds Bank final salary pension schemes. She worked for them for 10/15 years when she was very much younger and it has just been sitting there. Obviously she has the option of taking it as a pension or she could take the lump sum.

First, what sort of multiple of the pension could be expected? If she takes the lump sum can she put it into a SIPP? She has no need for the lump sum at the moment, nor for the pension for that matter. Can she defer the whole thing? ie either taking the pension or deciding whether she wants the lump sum? She is aware that she will need to get advice from what the literature calls a non biased IFA. (So you can get biased IFAs? Thought the 'I' meant independent?)

I am slightly hampered because I have not seen any of the paperwork because of travel restrictions at the moment so any help wold be much appreciated.

Dod


There are multiple final salary schemes within the Lloyds Banking Group, but most are covered on the Pensions website. I fear you will need more information to answer her questions. She also has the option of transferring it as well as the options you describe. Depending on the scheme there are plenty of "multiples" at what her pension is likely to be worth.

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Re: pension or lump sum?

#355934

Postby mc2fool » November 12th, 2020, 5:02 pm

As dealtn says, you really need to get the details of the scheme she's in, as the answer to a lot of those questions is going to be scheme dependent.

Now, you say "Obviously she has the option of taking it as a pension or she could take the lump sum", but usually the "standard" option is to take a full pension (and no lump sum) or a reduced pension plus a (tax free) lump sum of up to 25% of the value of the "pot".

If she wants to get all of the value of the pot (the cash equivalent transfer value) out, e.g. into a SIPP, or anywhere else, and the CETV is £30,000 or over, then she has to take professional advice from an IFA, and IFAs are increasingly unwilling to approve transfers out of final salary schemes, and schemes and SIPPs are increasingly unwilling to allow transfers against the IFAs recommendation (i.e. it's becoming increasingly difficult to be an "insistent client"). Of course, the IFA will still charge an arm and a leg for their advice not to do it.... be warned!

On multiples, some eye watering figures have been reported recently, but the only way to find out is for her to get a transfer value from the scheme, but be warned, usually schemes will only give one valuation per year for free, and will charge for any further ones (£300 seems a common fee), and any valuation is only good for three months.

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Re: pension or lump sum?

#355938

Postby Watis » November 12th, 2020, 5:11 pm

mc2fool wrote:
<snip>

On multiples, some eye watering figures have been reported recently, but the only way to find out is for her to get a transfer value from the scheme, but be warned, usually schemes will only give one valuation per year for free, and will charge for any further ones (£300 seems a common fee), and any valuation is only good for three months.



I'm surprised to hear that getting a valuation is so time consuming and expensive.

Given that a defined benefit pension is governed by a set of clearly defined rules, surely an algorithm could be developed to calculate the pension payable dependent on how far into the future it is deferred?

Or at least an indicative figure which would be in the ballpark of an actual quote. Or am I missing something?

Watis

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Re: pension or lump sum?

#355948

Postby mc2fool » November 12th, 2020, 5:42 pm

Watis wrote:
mc2fool wrote:On multiples, some eye watering figures have been reported recently, but the only way to find out is for her to get a transfer value from the scheme, but be warned, usually schemes will only give one valuation per year for free, and will charge for any further ones (£300 seems a common fee), and any valuation is only good for three months.

I'm surprised to hear that getting a valuation is so time consuming and expensive.

Given that a defined benefit pension is governed by a set of clearly defined rules, surely an algorithm could be developed to calculate the pension payable dependent on how far into the future it is deferred?

Or at least an indicative figure which would be in the ballpark of an actual quote. Or am I missing something?

We're not talking just about the pension payable, we've talking about the transfer value out of the scheme.

For most DB schemes (in deferment) the pension payable at a future date will depend on factors that may include (depending on the particulars of the scheme) the future change in national average earnings and future inflation, and the transfer value will additionally depend on future gilt yields.

As it happens the DB scheme I transferred out of a few years back did have a pension and CETV estimator on their website ... and I ended up getting a CETV some 10% higher than the figure their estimator gave me.....

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Re: pension or lump sum?

#355980

Postby Alaric » November 12th, 2020, 7:58 pm

Dod101 wrote:My daughter is approaching 55 when she will be paid a pension by one of the Lloyds Bank final salary pension schemes.


As early as age 55?

It may be that she has the right to take benefits at age 55 as that's the now standard legal position, but there may well be no compulsion and the "normal" retirement age is somewhere between age 55 and age 67.

Whatever documents she was given when leaving Lloyds employment would be worth seeking out and reviewing.

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Re: pension or lump sum?

#355992

Postby vrdiver » November 12th, 2020, 8:36 pm

I'd second getting hold of the scheme documents as apply to her - i.e. the ones that were in force when she joined, and any subsequent updates. Mrs VRD had a DB scheme from a previous job in the early '90s and the scheme administrators (JLT) were able to provide a copy on request. What they didn't seem able to do was to use the clearly documented calculations when they provided an annual valuation! I used to cross-check their valuation and most years found errors, which were normally then corrected when pointed out, even if it took a couple of letters quoting their own document before they agreed.

In the end, she transferred it to her SIPP, partly because the valuation fiascos had eroded trust in the administrators and partly because controlling the capital was more important than having a regular (very small) pension.

We used Better Retirement Group Ltd to handle the transfer advice. They were easy to deal with and efficient, as well as being able to turn documents around pretty fast (we'd sat on the last JLT valuation for a month before contacting them, so needed to get everything done in two months, not the three that the valuation was good for).

VRD

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Re: pension or lump sum?

#356077

Postby dealtn » November 13th, 2020, 8:55 am

Alaric wrote:Whatever documents she was given when leaving Lloyds employment would be worth seeking out and reviewing.


I doubt that would be sufficient, you would need the documents on joining the scheme, and any subsequent revisions. The documents on leaving employment would likely be generic and lacking in personalised information. (If anything like my experience). At best they would be a start point on what she would need and where to look, not the whole picture.

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Re: pension or lump sum?

#356125

Postby Alaric » November 13th, 2020, 11:05 am

dealtn wrote:
I doubt that would be sufficient, you would need the documents on joining the scheme, and any subsequent revisions..


At its simplest level there should be a statement of benefits on leaving service. Crucially this would state the expected date at which the stated benefits became payable. Defined Benefit schemes in the financial sector could be generous, but a normal retirement age of 55 for a bank scheme seems excessively generous, so I''m wondering if there isn't some confusion on the terms of the scheme.

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Re: pension or lump sum?

#356134

Postby dealtn » November 13th, 2020, 11:31 am

Alaric wrote:
dealtn wrote:
I doubt that would be sufficient, you would need the documents on joining the scheme, and any subsequent revisions..


At its simplest level there should be a statement of benefits on leaving service. Crucially this would state the expected date at which the stated benefits became payable. Defined Benefit schemes in the financial sector could be generous, but a normal retirement age of 55 for a bank scheme seems excessively generous, so I''m wondering if there isn't some confusion on the terms of the scheme.


Nope I am aware of some bank schemes that you can draw at 55, and some after 40 years service, which could also be at 55 in the bank I worked at.

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Re: pension or lump sum?

#356151

Postby ursaminortaur » November 13th, 2020, 11:54 am

Alaric wrote:
dealtn wrote:
I doubt that would be sufficient, you would need the documents on joining the scheme, and any subsequent revisions..


At its simplest level there should be a statement of benefits on leaving service. Crucially this would state the expected date at which the stated benefits became payable. Defined Benefit schemes in the financial sector could be generous, but a normal retirement age of 55 for a bank scheme seems excessively generous, so I''m wondering if there isn't some confusion on the terms of the scheme.



Looking at https://www.lloydsbankinggrouppensions.com/scheme_benefits/retirement_benefits# there is a pull down menu which lets you choose the final salary scheme (and for that matter other DC schemes) and look up the details of retirement from the scheme. It looks like all the DB schemes have a normal retirement age of 60 and you would receive an actuarially reduced pension at 55 - however if you are female and joined the Lloyds Bank Pension Scheme No. 1 Defined Benefit Section before 1st July 1974 then your normal retirement age would be 55.

eg for Lloyds Bank Pension Scheme No. 1 Defined Benefit Section (deferred)

Normal retirement age in the Scheme is 60. However, in most cases you can take your deferred pension from age 55.

If you joined the Scheme before 1 July 1974 and are female, your normal retirement age is 55.


However it seems unlikely that she would qualify for that as to only be approaching 55 now she would have had to start working at around age 9.

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Re: pension or lump sum?

#356172

Postby dealtn » November 13th, 2020, 12:15 pm

ursaminortaur wrote:
Looking at https://www.lloydsbankinggrouppensions.com/scheme_benefits/retirement_benefits# there is a pull down menu which lets you choose the final salary scheme (and for that matter other DC schemes) and look up the details of retirement from the scheme.


I don't think that list is exhaustive by the way. Former employees on the HBOS side of the group weren't all in the HBOS scheme. There would have been schemes for British Linen Bank, Bank Of Wales, NWS, and I am sure others on the Bank of Scotland side, not all of whom would have been merged into any of the BoS schemes, let alone HBOS, let alone LLoyds.

Within BoS there were proposals at various stages to increase the age of retirement form 55 to 60, for example, and what the consequences were if you did or didn't. There were schemes where your salary wasn't the same as your pensionable salary. It's complicated.

As I have said to know for sure you would need to know more details.


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