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anonguest

Legally Possible To 'sell' Rights To A Personal Pension?

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Background info:

49-year old former employee in large well known state sector business is in dire financial situation (i.e effectively destitute)

Said former employee accrued 20 years contribution into the 'gold plated' very generous final salary scheme of said corporation - and thus in due course, at age 55, can at least look forward to improvement in their living standards. The pension takes the form of 2/3 final salary plus a tax free lump sum. The amounts would of course be reduced if taken at the earliest possible age (55) rather than the scheme designated age of 65 - but the amounts will still be generous.

Said person is in dire need of cash now to help them get back on their feet and rebuild their life, etc.

Suggestion by mutual friends seeking to try and help:-

Said friends 'lend' said destitute friend lump sum of money and 'secure' the loan against the persons pension (i.e hard up person 'signs away' rights to their pension in exchange for cash now).

In order not to be seen to be taking advantage of said friend the lenders include, in the resulting legal contract, the right of the borrower to 'buy back' their pension as soon as it comes due - most likely by deducting the money borrowed from the lump sum payable at commencement of starting to take the pension. The friends (lenders) would then sign back, to the hard up person, the rights to their pension.

NOTE this scheme is NOT to be confused with much publicised 'pension liberation' schemes (that run risks of punitive tax payments due to HMRC) that claim to release pension funds before age 55. It is different in that the pension stays untouched in the original pension scheme and no transfer or liberation of pension funds before 55 occurs. It is very simply a secured personal loan. BUT because it is intended to be secured against a personal pension.....the question is IF this can legally be done???

And before anyone asks NO I am not said destitute person. This is a spur of the moment idea with one other friend, both of us keen to try and help said mutual friend in some way. The sums involved in said personal loan would be tens of thousands and hence inevitable 'need' for us to secure the loan against something - the pension being the only thing that person has.

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I'm pretty sure it's not possible legally. The member doesn't own the pension fund or pension benefits, they are instead held by trustees on behalf of the member, so the member can't sell them.

Even if you could find a way to do it legally or just do it as an informal agreement it's not very wise. The type of pension you're talking about (a defined benefit pension) often has very bad death benefits up until the point of retirement and once benefits commence they cease on the death of the member. If this guy dies unexpectadly your means of regaining your investment goes pop!

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Has your friend spoken to a pension advisor? Some of the classic gov pension schemes contain a clause which allows a proportion to be withdrawn at 55,under special circumstances. I would be surprised if the pension doesn't contain a clause disallowing any assignment. Worth checking out.

If you do go ahead with the plan you outlined, it would be prudent to get your friend (at his expense ) to take out a life policy, for the amount you are owed, 6 years or term and with you as the named beneficiary.

Sounds like the situation is as bad as it can get, bankruptcy advice could be useful.

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A pension lump sum can repay a loan.

It is, after all, one option for paying off a mortgage. I may well use it myself.

But regarding your 'friend', is (s)he not eligible for regular state benefits? I know the "safety net" is at least in part a myth (c.f myself in 2002/3 when I was destitute and without even a pension entitlement to my name), and I wonder if the current government's reforms leave a big No Change to what I faced.

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I'm pretty sure it's not possible legally. The member doesn't own the pension fund or pension benefits, they are instead held by trustees on behalf of the member, so the member can't sell them.

I think that's correct.

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I think that's correct.

Thanks to all for the replies. They seem to tally with what I had previously assumed and, subsequently from rapid internet surfing/reading, now seem to have 'confirmed'.

I cannot for reasons of both lack of time and confidentiality discuss in real detail the circumstances of the person seeking to make use of their pension.

At least the 'goodwill' was there to try and engineer soome sort of financial help.

What I will add though is that, in the course of all this, I have been made aware (from said person) of an apparently obscure means of obtaining ones pension funds, albeit indirectly - and which is not an out and out pension 'liberation scheme' (which even I am aware is unambiguously illegal in the eyes of HMRC).

On the face of it my immediate reaction was to advise extreme caution to this person but, when challenged, I had to confess to finding it harder to pick holes in the proposed scheme. The only (and serious!) flaw is that this particular obscure part of pension law is effectively being 'abused' - and as such at risk of incurring the wrath of HMRC at some later date???

There are, apparently, a number of companies offering the services of UMbrella Pension Trusts, but this one (below) explains it more quickly and simply than most. At the very least it looks like a much more sneaky and sly way of getting hold of ones pension money early?

http://www.umbrellapensiontrust.com/

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