Transfer Value Guarantee Query

LittleMax · 6 September 2008 at 7:03PM

I have recently joined the NHS after 10 years in local Government. I will be transferring my local government pension to the NHS scheme as this will be one for one. I also have a deferred pension with J Sainsbury and have an option to transfer this.

I have received the transfer value quote from JS Pensions with a covering letter containing the paragraph, 'Please note that we are currently reviewing the basis on which we calculate cash equivalent transfer value. Potentially, the revised basis could provide a larger cash equivalent than under the current basis. We would hope to have the revised basis in place by September 2008. this does not prevent you from proceeding with a transfer at this time, calculated under the existing basis.'

My quote is guaranteed for three months until 15/11/2008. I have 12 months from date of joining the NHS scheme to transfer in any other pots - this will be 21 April 2009.

My gut feeling is that I should apply for a new quote in September. But what if it is not higher? Can I still use the quote I have that says it is guaranteed until November, or by applying for a new quote will I invalidate the existing quote?

MikeJones_2 · 7 September 2008 at 12:31AM

Hi LittleMax,

Fantastic! Well done for spotting this. I’m stunned that this has not been more widely discussed in the media.

Adapted text from Govt sources, for your information (bold and italic text by me, for emphasis and ease of reading)

Up to 30 September 2008, under the existing arrangements, responsibility for the calculation of pensions transfer values is delegated to actuaries. Guidance for actuaries on the calculation of individual transfer values is contained in the (actuarial) guidance note GN11 (apologies - it's very technical and not for the lay person).

The Board for Actuarial Standards has confirmed that GN11 will continue to apply until the new regulations come into effect in (sic: on 1st) October 2008.

From (sic: on 1st) October 2008, responsibility for the calculation of pension transfer values will pass to the trustees of pension schemes.

My own comments:

What assumptions are we talking about?
In calculating a transfer value, assumptions must be made for a variety of factors including future inflation (RPI) and future investment returns.

With effect from 1st October 2008, (most) defined benefit pension schemes will amend the way that they calculate transfer values - based upon the fact that the trustees of the scheme will choose the basis of the assumptions, when previously, it was up to the actuarial professional. Actuarial advice must be sought by the scheme trustees in arriving at their decisions.

What this means to you
As the NHS and LGPS are members of the Public Sector Transfer Club, this element of your post is likely to be unaffected. I expect that you would continue to receive beneficial terms (i.e. a one-for-one transfer). But it would be sensible that you query this and confirm it in writing from both the LGPS and the NHS.

As for your Sainsbury transfer value: this might be higher after 30 Sept 2008 and hence buy more days service in the NHS scheme (your current employer). It could also be lower for a variety of reasons - so it is important that you understand that there is an element of RISK involved in your decision.

Your current Sainsbury transfer value is guaranteed until after 30 Sept 2008 and I would suggest that if you want to consider transferring your Sainsbury pension to the NHS pension that you ask the pension scheme administrators the following question:

If I request to transfer my Sainsbury pension into the NHS Pension Scheme based upon my current transfer value which is guaranteed until 15th November 2008, and because I am only legally entitled to one transfer value in any 12 months period, if the new transfer value basis effective from 1st October 2008 is greater than that which you have currently quoted me, will you pay the higher of the two (and if not, why not) (a) if my request is made in writing before 1st October 2008 but before 15th November 2008 or (b) if my request is made in writing after 30th September 2008 but before 15th November 2008?

The important bit here is the legal entitlement to one transfer value request every 12 months (although pension schemes may provide more than one at their discretion subject to scheme rules or sponsoring employer consent). (There are exceptions but that’s not for this post).

Sorry for the long-winded reply, but I hope it helps.

If you want a background to the changes see: Transfer Values

I'd recommend you seek out an IFA - particularly for the Sainsbury/NHS transfer and ask for a pension transfer analysis (TVAS).

Mike Jones

I work in the field of Pension Education and Pension Guidance in the UK. I am a current member of the Specialist Pensions Forum as well as being a Voluntary Adviser for The Pensions Advisory Service. I work with scheme members, employers, trustees, scheme administrators and advisers on most things to do with employer sponsored pension schemes. The views expressed by me in this thread are my personal opinions. You should seek professional advice from an appropriately experienced and qualified adviser. I am not an IFA.

LittleMax · 7 September 2008 at 10:25AM

Thanks Mike

I know that I definitely want to transfer my LGPS. Since they are final salary schemes and my new salary is 25% higher, I can't think of any reason why it would not be right to transfer my local gov service over.

Can I transfer this now, and then transfer the JS one later, or does it all have to be done together?

jonathon_hart · 8 September 2008 at 8:58AM

Each transfer is entirely separate - you can do both now or one now and one later. One thing to be careful of though is that some schemes can charge if you have 2 transfer out quotes within 12 months, so check on that before requesting a new quote.

The other thing to check is whether the benefits of the transferring actual work - i.e you will get more pension under the NHS scheme than you would leaving it in the Sainsbury scheme.

Debt_Free_Chick · 8 September 2008 at 9:23AM

LittleMax wrote: »

Thanks Mike

I know that I definitely want to transfer my LGPS. Since they are final salary schemes and my new salary is 25% higher, I can't think of any reason why it would not be right to transfer my local gov service over.

This does not make it right to transfer. It's like comparing a kilo of tomatoes with a kilo of potatoes - you get more tomatoes, but there's still only a kilo in weight.

So, in very broad terms, if your salary is higher, the pensionable service in the LGPS is likely to be lower. Either way, the value of the pension (using the transferred pensionable service) in the LGPS is going to be worth roughly the vaue of the pension in the JS scheme.

What's more important is future salary increases.

As Mike Jones suggest, you really need an IFA who is qualified in transfers to go through the options with you.

LittleMax · 19 September 2008 at 10:07PM

Sorry Debt-Free-Chick you've confused me, why would it not be right to transfer LGPS to NHS. They are both in the gov pension club so I get 1 for 1 on my years service, and since my salary is higher now than in my last job, I don't understand why I would not be better off. Can you clarify what you mean?

Debt_Free_Chick · 19 September 2008 at 10:12PM

LittleMax wrote: »

Sorry Debt-Free-Chick you've confused me, why would it not be right to transfer LGPS to NHS. They are both in the gov pension club so I get 1 for 1 on my years service, and since my salary is higher now than in my last job, I don't understand why I would not be better off. Can you clarify what you mean?

My comments were in relation to the transfer of your JS pension. Sorry, but I missed out the last sentence of your post when I quoted it, but I mentioned the JS pension in the 2nd paragraph.

HTH

LittleMax · 19 September 2008 at 10:17PM

Yeah, thanks.

Andy_L · 19 September 2008 at 11:46PM

LittleMax wrote: »

They are both in the gov pension club so I get 1 for 1 on my years service

This is not necessarily the case. They will ignore your salary increase but make allowances for the schemes having, eg, differing retirement ages, contribution & accrual rates, dependants benefits etc.

Transfer Value Guarantee Query

Comments

Confirm your email address to Create Threads and Reply

🚀 Getting Started

Categories

Is this how you want to be seen?

Get our FREE Weekly email full of deals & guides - and it’s spam-free