# serious cash flow problems..need pension suggestions



## beekeeper (4 Jan 2010)

I am writing on behalf of a friend who is in a serious cash flow situation as a self employed person and has asked if he can do anything with his pension.  I list below the main points;

Age - will be 65 in summer 2010

- Has defined contribution funds of c. 140k

- Had a 10 year with profit contract valued at c. 140k which expired 31/12/09.  I am assuming this is treated the same as a standard DC pension fund ?

- Has a defined benefit pension of c. 25k .

Is there anything that can be done to free up some cash... or has anyone any suggestions ?

Thanks in advance.


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## GSheehy (4 Jan 2010)

beekeeper said:


> Had a 10 year with profit contract valued at c. 140k which expired 31/12/09. I am assuming this is treated the same as a standard DC pension fund ?


 
If this policy matured/expired on 31/12/2009, he should have access to the full amount, unless it's assigned as security for a previous credit transaction (?). 

It does not sound like a 'pension' policy as its expiry/maturity date does not seem to correspond with a birth date ("will be 65 in summer 2010") 

I assume that the DC 140K is a personal pension (RAC)/ PRSA type product and the DB pension is from a previous job where he was employed(?)

GS


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## beekeeper (4 Jan 2010)

Both the DC ad DB pensions are from previous employment ... I am hoping that the with profit policy is accessible as it would solve most problems.  If its a standard with profit policy that expired 31/12/09 what would the tax implications be  ?


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## beekeeper (4 Jan 2010)

Apologies.. i have just been told the with profit fund is part of the pension fund and must be treated in the same manner.


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## GSheehy (4 Jan 2010)

It might be worthwhile to sit down with a pensions advisor with a view to determining what his best options are with regard to taking his tax-free cash entitlement from the cumulative policies.

He should also take into consideration if there are any 'penalties' (ie market value adjustment on the WP Fund) by retiring 'early' (ie before the normal retirement age on the pensions) or whether the trustees of the DB Scheme will allow him to take the benefits now.

Without having full details on each of the policies, here, it will be difficult to ascertain the best course of action for him. 

Do you know if he is restricted to buying an annuity with the balance of the funds (after tax-free cash)? Would a guaranteed income from an annuity solve any debt payments that he is currently obliged to make? Is he eligible to transfer any of the existing pension funds to a another product ie. PRSA? 

Sorry I can't be of more help but it probably one of those situations where he needs to sit down with someone, tell them what he wants done and then see if it is possible; without adversely effecting his pension entitlements. He may solve a short-term problem now but he should be made aware of any negative impact on the remaining funds.

GS


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## Aerohog (4 Jan 2010)

If the DB pension is 25K a year, this is worth quite a lot. Your friend should ask about taking the pension early and converting some of it to a tax-free lump sum.


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## LDFerguson (5 Jan 2010)

If his cash-flow problem at the moment means that he has a requirement for cash but doesn't necessarily want to retire and therefore doesn't want the ongoing pension income, he might be able to transfer some or all of the funds into a PRSA, withdraw 25% as a tax-free lump sum and leave the remaining 75% in the PRSA until such time as he actually wants to retire.  

However, as GSheehy mentions above, he really does need professional advice on this to establish (a) if he can do it as there are rules governing such transfers which must be investigated in respect of each transferring policy, (b) if it would be in his best interests to do it, by comparison with his alternative options and (c) if a transfer out would cost him by way of penalties, loss of guarantees etc.


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