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    • ghostwriter
    • By ghostwriter 7th Oct 16, 11:40 AM
    • 11Posts
    • 0Thanks
    ghostwriter
    Pension Transfer Value
    • #1
    • 7th Oct 16, 11:40 AM
    Pension Transfer Value 7th Oct 16 at 11:40 AM
    I have an old defined contribution workplace pension which I stopped paying into in 2001. I get an annual statement of what it's worth and what the transfer value is.

    There are two parts, "former protected rights (i.e. contracted out)" and "retirement fund (contributions)". The transfer value of the "former protected rights" part is almost 100% of the value but the transfer value of the "retirement fund" is only ~60% of the value.

    How come I lose so much of the "retirement fund" if I transfer this to another provider?

    The current provider has been closed to new business for over a decade and isn't putting any effort into this pension. Given that the value of this pension is <£10k in total is it worth taking the hit to move this to a better provider?

    Thanks.
    Last edited by ghostwriter; 07-10-2016 at 12:15 PM.
Page 1
    • xylophone
    • By xylophone 7th Oct 16, 12:37 PM
    • 19,214 Posts
    • 10,925 Thanks
    xylophone
    • #2
    • 7th Oct 16, 12:37 PM
    • #2
    • 7th Oct 16, 12:37 PM
    There are two parts, "former protected rights (i.e. contracted out)" and "retirement fund (contributions)". The transfer value of the "former protected rights" part is almost 100% of the value but the transfer value of the "retirement fund" is only ~60% of the value.

    How come I lose so much of the "retirement fund" if I transfer this to another provider?

    The current provider has been closed to new business for over a decade and isn't putting any effort into this pension.
    I really don't follow this.

    What exactly does the statement say?

    Are you saying that a transfer fee would be charged by the existing provider?

    What effort would you expect from the provider?

    How old are you?

    If under SPA, have you obtained a new state pension statement?
    • Malthusian
    • By Malthusian 7th Oct 16, 2:47 PM
    • 1,196 Posts
    • 1,583 Thanks
    Malthusian
    • #3
    • 7th Oct 16, 2:47 PM
    • #3
    • 7th Oct 16, 2:47 PM
    How come I lose so much of the "retirement fund" if I transfer this to another provider?
    Originally posted by ghostwriter
    Have you asked the provider?

    Old pension plans are often designed under the idea that the provider's costs are taken over the likely lifetime of the plan (i.e. until the selected retirement date) and if the plan is cancelled early then the outstanding costs would be recovered all at once via transfer penalty.

    Often contributions paid in the first couple of years would buy "capital units" to which very high annual charges and early transfer penalties apply, and thereafter contributions would buy "accumulation units" to which lower annual charges and no transfer penalties apply. If you stopped paying in contributions after a few years, it isn't uncommon for the plan to consist mostly of capital units which means the transfer penalty is very high.

    Some old-style plans had different terms & conditions for what used to be protected rights (National Insurance rebates) and non-protected rights (employer/employee contributions). E.g. protected rights only ever bought "accumulation units", on which there was no transfer penalty.

    This is all guesswork as you haven't given us much to go on.

    The current provider has been closed to new business for over a decade and isn't putting any effort into this pension. Given that the value of this pension is <£10k in total is it worth taking the hit to move this to a better provider?
    Again we don't have much to go on. But probably not, at least for the non-protected rights part. Even if you can get lower charges at a better provider it's unlikely it will make up for a transfer penalty of 40%.
    • ghostwriter
    • By ghostwriter 8th Oct 16, 8:45 AM
    • 11 Posts
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    ghostwriter
    • #4
    • 8th Oct 16, 8:45 AM
    • #4
    • 8th Oct 16, 8:45 AM
    Have you asked the provider
    Originally posted by Malthusian
    I called them and they stated it was a defined contribution scheme and the lower transfer value is down to an early termination penalty.

    It sounds exactly like the pension you describe.
    Last edited by ghostwriter; 08-10-2016 at 8:56 AM.
    • sandsy
    • By sandsy 8th Oct 16, 8:50 AM
    • 971 Posts
    • 550 Thanks
    sandsy
    • #5
    • 8th Oct 16, 8:50 AM
    • #5
    • 8th Oct 16, 8:50 AM
    Such penalties are due to be capped next year. Your 60% could end up nearer 99% if you wait.
    • ghostwriter
    • By ghostwriter 8th Oct 16, 6:10 PM
    • 11 Posts
    • 0 Thanks
    ghostwriter
    • #6
    • 8th Oct 16, 6:10 PM
    • #6
    • 8th Oct 16, 6:10 PM
    Such penalties are due to be capped next year. Your 60% could end up nearer 99% if you wait.
    Originally posted by sandsy
    That's great news, thanks.

    Where can I find out more about that?
    • dunstonh
    • By dunstonh 8th Oct 16, 8:47 PM
    • 85,148 Posts
    • 50,158 Thanks
    dunstonh
    • #7
    • 8th Oct 16, 8:47 PM
    • #7
    • 8th Oct 16, 8:47 PM
    That's great news, thanks.

    Where can I find out more about that?
    Originally posted by ghostwriter
    It is worth noting that it may not be good news. It depends on the reason for the exit charge. For example, a market value reduction will still be allowed. Also, those that have had increased allocations will be allowed to claw back those allocations on early transfer/commencement. Plans with conventional with profits with a basic sum assured will also be able to levy a higher penalty as the sum assured was based on you keeping it to the selected age. As you are not going to that point, you shouldnt keep the full benefit.

    So, at this stage, it is worth finding out what the penalty type is.
    I am an Independent Financial Adviser (IFA). Comments are for discussion purposes only. They are not financial advice. Different people have different needs and what is right for one person may not be for another. If you feel an area discussed may be relevant to you, then please seek advice from a Financial Adviser local to you.
    • Malthusian
    • By Malthusian 10th Oct 16, 9:24 AM
    • 1,196 Posts
    • 1,583 Thanks
    Malthusian
    • #8
    • 10th Oct 16, 9:24 AM
    • #8
    • 10th Oct 16, 9:24 AM
    That's great news, thanks.

    Where can I find out more about that?
    Originally posted by ghostwriter
    It's under consultation so I wouldn't get too excited.

    As the focus has been on removing barriers to people accessing the new "pension freedoms" I wouldn't be surprised if any cap only applied on people over 55, in addition to the caveats listed by Dunstonh.
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