I am looking to transfer an old workplace pension to a drawdown pension. Any help would be appreciated.
12 January 2022
Question by John
I am looking to transfer an old work pension which stopped in 1993.
What I’d like is a drawdown pension which is not offered where my old pension is.
I will be 59 in April 2022. I want to take a tax-free lump sum then while I am still working draw down the difference from my wage to £50,000. Estimate would be £10,000 and paying 20% tax.
I plan to retire at 63 .
Currently the transfer value is £215,000.
I also have a current final salary which I’ll leave till I am 63.
Any help would be appreciated.
Answered by Boring Money
To transfer a pot of money worth more than £30,000 you'll need to get the assistance of a financial adviser who is qualified to complete pension transfers.
If you have a need for the tax-free cash, and your current plan does not facilitate drawdown then it is usually possible for the adviser to justify the reasons to be transferred to a new scheme (providing your old scheme has no protected benefits, like enhanced tax-free cash more than 25%, a guaranteed minimum pension or a guaranteed annuity rate.)
Taking money from your pension in form of a monthly payment can be used to top up your salaried income, but this would normally only be suggested IF you actually need to spend the money and not have it sat in savings being eroded by inflation (when you can leave it to grow in the pension at a rate of 5-12% or so depending on your risk tolerance).
Financial advisers charge a fee for pension transfers based on the amount of work involved (it is the most time-consuming / FCA regulated part of what we do) and you should expect to pay a fee of 3-5% of the pot value - although this can be taken from the pot on transfer so you don't need to pay it from your savings.
Your final salary scheme will provide a guaranteed income when you retire and sometimes also a lump sum payment which is usually tax-free. You can then top this up with your drawdown pension if you wish depending on your spending needs on retirement.
Hope this helps