Pension payments swap for a lump sum payment - Q&As

Phoenix Life is the company that currently administers the policy that pays your pension. We are a life insurer that has consolidated a number of other companies into one larger group to administer life and pension policies written many years ago. These companies include Abbey Life and Hill Samuel, and it is possible that these names are ones that you recognise from previous correspondence on your policy.

You are under no obligation to accept our offer. If you would prefer to keep your policy, you do not need to do anything. No changes will be made to your policy and the benefits will remain payable as expected.

We recommend that you speak to MoneyHelper. MoneyHelper is here to make your money and pension choices clearer. MoneyHelper can help you think about your options and how any choice may affect your circumstances.

For more information on this free impartial service visit MoneyHelper.

You can contact MoneyHelper by:

• calling: 0800 011 3797. Lines are open 9am to 5pm Monday to Friday; or
• by using their online service that can be accessed via MoneyHelper.

Alternatively you may wish to speak to your financial adviser. If you do not have a financial adviser, and would like help in finding one, please visit MoneyHelper. An adviser may charge for their service.

Means-testing is a process by which eligibility for, and the amount of certain State benefits payable to people is determined. The process is supposed to give more to those who need it most, taking into account their existing assets and income.

You cannot accept this offer if:

• You bought your pension through an individual pension contract* and you have accepted three other offers of this type in the past.

Or

• This pension was bought from your employer’s money purchase (also known as a defined contribution) occupational pension scheme, and it does not represent all of your benefits from that scheme.

*Individual pension contracts include retirement annuities, personal pensions, free-standing additional voluntary contributions (FSAVCs) and buyouts of pension rights from a previous employer’s scheme.

If you are unsure of what policy you have please contact us by using the phone number on your letter.

HM Revenue & Customs (HMRC) regulations dictate the total number of pension swaps that you can do. These include any payment that has been classed as a ‘small pot’. This can include times where you have encashed the full value of your pension pot for a lump sum.

If you are in any doubt please call and provide us with the details of times when you have cashed in your pension funds since 2010; you can find our number on your letter.

As described in the offer letter, not everyone and not every payment is impacted by this limit. If you are receiving this as a spouse’s or dependant’s pension, there are no restrictions on the number of pension swaps you can do.

No. This particular offer only applies to the policy/policies detailed in your letter as we don’t normally allow pensions in payment to be swapped for a lump sum in this way.

This offer is only valid if you return your form within six weeks of the date of the original offer letter.

The one-off lump sum payment would be added to your other income and the whole amount would be subject to tax in the normal way. By taking this lump sum it is possible that it may also move your total income into a higher tax bracket. This could mean that you start paying tax when previously you didn’t or that you are subject to tax at a higher rate.

We have deducted tax equal to the difference between the gross and net amounts shown in your offer letter. You may need to pay more than this or be entitled to a refund of some or all of the deduction depending on your circumstances and any other income you have.

We have estimated the amount of tax due to be deducted from the offer amount based on your latest tax code, the pension payments made in the current tax year and the amounts of tax deducted. It is only when you combine this payment with other income that the exact amount due can be calculated.

HM Revenue & Customs (HMRC) normally check at the end of each tax year that you have paid the right amount of tax and they may contact you to correct any over or under payment.

If you think you have paid too much tax or you have any questions about tax then you can call HMRC on 0300 200 3300 or you can go online at HMRC. You may need the P45 form that we will provide with your payment.

The gross amount that we are offering has not changed but we have to treat this as taxable income in much the same way as we do for the pension that you have swapped for the lump sum.

The tax that we have deducted is based on a number of factors:

• The gross offer amount;
• The other pension income you have been paid in this tax-year;
• The amount of tax you have already paid this tax-year; and
• Your tax code and the date at which we make the payment.

If you think you have paid too much tax or you have any questions about tax then you can call HMRC on 0300 200 3300 or you can go online at HMRC. You may need the P45 form that we will provide with your payment.

No, you can’t change your decision.

If you accept the offer then Phoenix Life will make no further payments under this policy. You should bear in mind whether you need the income provided by your policy later in life. You should also consider whether the lump sum you receive now affects any benefits you receive or could be called upon by creditors if you have any outstanding debts.

If your policy includes future payments to a spouse or dependant then you should speak to them before deciding what action you should take as no further payments under this policy will be made if they outlive you.

Any payments or entitlements under other policies you have with us are unaffected by what you decide to do with this policy.

You can keep your pension payment and we will still pay the ‘gross’ amount quoted in our offer letter. However, the net amount you receive may change due to the tax that we have to deduct. For further information regarding tax please see the questions and answers for If I accept this offer, how may my tax be affected? and If I accept this offer, how much tax will I pay? within this section.

The payment will be made as per your current method of payment.

• If your pension payments are paid into a bank, we will pay the offer amount into this same bank account. We cannot make payment to a different bank account.
• If your pension payments are paid by cheque, we will also pay the offer amount by cheque.

We will make the payment within 15 business days of receiving your form. If you are paid by cheque then this will be the date we post the cheque to you and you should allow a further three business days for this to arrive. If you are paid into your bank then this will be the date we credit your account. We will send a confirmation letter, and a P45 form, once payment has been made.

Yes, we have set a £100 minimum amount. Where this applies, this is the amount that has then been used to estimate the tax due.

No you will not be charged for accepting our offer. Simply complete the claim form and return it in the pre-paid envelope which was enclosed with your offer letter.

Yes, you can find an online application form to accept this offer.