Scottish widows and new pension

[surreypost]

Understand the Scottish widows money 4 life plan will cease with the new pension starting oct,would I be able to draw the whole pot in the Scottish widows without affecting the new plan ie would there be any restrictions in future contributions into the new plan thank you for any advice.

[heapsy]

The money in the old scheme is completely separate from the new scheme, so you would be starting new contributions if that is what you wanted to do. As regard taking the old money, I think I'm right in saying you can only take it with the pension it is connected to. You cannot take a lump sum on its own.

[Wullie10]

I can't see how you can't take it as a stand alone pension especially as you are no longer paying into it. So much for pension flexibility. I was told that it can be transferred into another fund. I'll have to look into it more.

[RobertT]

Understand the Scottish widows money 4 life plan will cease with the new pension starting oct,would I be able to draw the whole pot in the Scottish widows without affecting the new plan ie would there be any restrictions in future contributions into the new plan thank you for any advice.

Members of the RMDCP and anyone in the RMPP and paying AVC's into Bonusplan or Flexiplan, will be paying into Scottish Widows and will have online access via the Money4Life website.
It's not 100% clear which one applies to you.

If it's the RMDCP, you can withdraw the whole pot if you want to as long as you're aged 55+, with the first 25% being tax free and the rest being classed as income and taxed accordingly.
There are other options too, such as drawdown or annuity.
See the plan guide for more info: https://adviser.scottishwidows.co.uk/as ... 0353sw.pdf

If it's AVC's, you'll have to transfer to a personal pension first and then you have the same options as above. Otherwise they're designed to fund the tax free lump sum with NRA60/65 benefits.

By accessing the taxable element of your pot, you will be triggering the Money Purchase Annual Allowance, which means only £10,000 per year can then be invested into other defined contribution pensions and that includes payments from your employer.
As far as I'm aware that will apply to RM's new scheme(the RMCPP), so will include Booster & AVC's aswell as standard contributions. Plus any other DC pension contributions you might make into other schemes.

More MPAA info: https://www.moneyhelper.org.uk/en/pensi ... wance-mpaa

*The MPAA allowance is determined by the government and has got the potential to change in the future.

[mr hil.]

Understand the Scottish widows money 4 life plan will cease with the new pension starting oct,would I be able to draw the whole pot in the Scottish widows without affecting the new plan ie would there be any restrictions in future contributions into the new plan thank you for any advice.

Members of the RMDCP and anyone in the RMPP and paying AVC's into Bonusplan or Flexiplan, will be paying into Scottish Widows and will have online access via the Money4Life website.
It's not 100% clear which one applies to you.

If it's the RMDCP, you can withdraw the whole pot if you want to as long as you're aged 55+, with the first 25% being tax free and the rest being classed as income and taxed accordingly.
There are other options too, such as drawdown or annuity.
See the plan guide for more info: https://adviser.scottishwidows.co.uk/as ... 0353sw.pdf

If it's AVC's, you'll have to transfer to a personal pension first and then you have the same options as above. Otherwise they're designed to fund the tax free lump sum with NRA60/65 benefits.

By accessing the taxable element of your pot, you will be triggering the Money Purchase Annual Allowance, which means only £10,000 per year can then be invested into other defined contribution pensions and that includes payments from your employer.
As far as I'm aware that will apply to RM's new scheme(the RMCPP), so will include Booster & AVC's aswell as standard contributions. Plus any other DC pension contributions you might make into other schemes.

More MPAA info: https://www.moneyhelper.org.uk/en/pensi ... wance-mpaa

*The MPAA allowance is determined by the government and has got the potential to change in the future.

So by my reckoning a pensionable salary of £50K per year would be the maximum you could earn before exceeding the MPAA which then triggers all sorts of complicated calculations regarding other allowances etc. Less than £50K (with RM and you paying almost 20% of your salary) would allow you to invest in the booster and AVCs without crossing the threshold. It couldn't get any more complicated if they tried aaargh

[RobertT]

So by my reckoning a pensionable salary of £50K per year would be the maximum you could earn before exceeding the MPAA which then triggers all sorts of complicated calculations regarding other allowances etc. Less than £50K (with RM and you paying almost 20% of your salary) would allow you to invest in the booster and AVCs without crossing the threshold. It couldn't get any more complicated if they tried aaargh

The first thing to remember, as I stated, is the MPAA only applies to those people who've accessed a DC pension over and above the 25% tax free amount.

If you haven't, which I assume applies to most, the £10k limit is irrelevant and there's no need to worry. You'll actually be able to save as much as you earn, up to a maximum of £60k and earn tax relief.

But if you have accessed a DC pension over the 25% tax free amount, some people may have to be careful about how much they save from then on, as there are penalties. This is what unbiaised have say:

If you trigger the MPAA, then your scheme administrator will let you know.
However, it is your responsibility to provide relevant information about the situation to any other pension provider with whom you are saving into a pension pot, within 91 days.
If you fail to follow these rules, you could be liable for a £300 fine, followed by daily extra penalties of £60 if the situation remains unresolved.

The MPAA doesn't apply to any lump sum or pension you've taken from a DB pension such as the RM's NRA60/65.

[renrag40]

Hi Rob
I was under the impression that once you took the cash balance fund with your NRA65 you triggered the MPAA because you will be paying tax on part of the cash balance fund...... Is this not the case?

[RobertT]

Hi Rob
I was under the impression that once you took the cash balance fund with your NRA65 you triggered the MPAA because you will be paying tax on part of the cash balance fund...... Is this not the case?

The DBCBS is a strange one!
As it's name suggests, it provides a defined benefit. IFA approval is needed to transfer if it's worth over £30k and it comes under the wing of the Pension Protection Fund if RM were insolvent. Yet legally it's a sub class of DC/money purchase.

My understanding is if you take it with your NRA65 benefits, the MPAA isn't triggered as at that point it's a defined benefit, despite paying tax on some of it. But if you transfer it to a personal pension, it would be triggered when it's accessed from there.

But to be honest, I'm not 100% sure.

AVC's are DC schemes and as far as I know any excess amount taken over the 25% tax free figure with NRA60/65 benefits would trigger the MPAA.

Anyone else out there with knowledge or opinion on this?

[ihatedogs]

For anyone looking at accessing some, or all, of their pension from Scottish widows, I've just noticed that the website says if you activate the MPAA then you are limited to paying in a maximum of £4000 per year to any future pensions. This is out of date, the maximum is now £10000.
With such an important thing as pensions, you'd hope they'd get their facts right, don't be caught out.

[Wullie10]

If you transfer the AVC to another pension pot and have already triggered the MPAA the transfer is not counted as part of the £10,000 limit. I think most posties would not need to worry about a £10,000 limit per year. A train driver or a doctor on the other hand...

[RobertT]

Just to clarify.....

The maximum anybody can pay into pensions(including employer contributions) and receive tax relief is equal to how much they earn, up to a maximum of £60,000.
That could be via their company scheme and/or their own arrangements.

The Money Purchase Annual Allowance(MPAA) was first introduced in 2015 at the rate of £10,000, which then decreased to £4,000 in 2017 and then put back up to £10,000 in 2023.

It's usually triggered when you take more than the tax free amount from a DC pension, unless you're buying an annuity.
You can then only put a maximum of £10,000 per year into DC pensions.

Even if you do trigger it, and pay £10,000 into DC schemes, you can also pay up to another £50,000(inc employer contribs) into a DB scheme and receive tax relief, if you earn enough.

More info: https://www.moneyhelper.org.uk/en/pensi ... wance-mpaa

AVC's via the RMPP(Bonusplan& Flexiplan) are DC schemes but if you're using them to fund the tax free cash with NRA60/65 benefits, the MPAA won't be triggered.
If you have AVC's worth more than 25% of pot value and you're taking the excess as a UFPLS, I think it probably would be.
If you transfer AVC's, the MPAA would be triggered when you subsequently access any cash over the tax free amount(unless via an annuity).

The pension element of RMCPP is a collective money purchase scheme, and it does say on their website that if you've triggered the MPAA you need to contact them.