Repensioning. Increase your pensions return without any risk discussion area

Superboy123

So what's in it for Cavendish? And assuming the above risks didn't apply, would the process still only be worthwhile for those increasing contributions? Or towards the end of the plan?

stphnstevey

The idea sounds good - but seems you have to take alot more into consideration than you might first think.

Martin - Any chance you might be able to do an Q&A article with Cavendish (or another) where they answer some of the questions that have come up here? :money:

I don't think anyone is convinced to proceed without more information.

dunstonh

Scottish Widows are now reporting that they intend to bring in a loyalty bonus for those that hold one of the pensions for a certain number of years. Whilst details are not yet known, repensioning would reset your year counter back to 1 and you would miss out on that bonus.

wotsthat

Whilst details are not yet known, repensioning would reset your year counter back to 1 and you would miss out on that bonus.

Surely not in all cases? If someone had purchased a pension fund directly with Scottish Widows and simply changed agency then the fund holding has been continuous and just the financial advisor has changed.

Martin - Any chance you might be able to do an Q&A article with Cavendish (or another) where they answer some of the questions that have come up here?

I'd like to see this as well. The debate on this issue has also seen the argument that the pension wrapper, especially for a lower rate tax payer, is inferior to investing in ISA's. I've only really seen this argument on this site but no figures to go with it - are pensions like the emperors new clothes and should we be trying to save for retirement in a different way rather than worrying about reducing pension costs.

That said, if people have pensions and there's a 'safe' way to save then I'm all for hearing about the pros and cons.

dunstonh

Surely not in all cases? If someone had purchased a pension fund directly with Scottish Widows and simply changed agency then the fund holding has been continuous and just the financial advisor has changed.

It's not an agency transfer. It is cancellation and re-issue of the policy. An agency transfer would not affect the charges and this is all about reducing the charges. Only a policy re-issue can do that.

Nick_C_4

Also, under post April 2006 rules, anyone with primary or enhanced protection on their pensions would lose the protection if they did this transaction.

dunstonh - is this referring to protecting tax-free cash > 25%? Or protection in general? I can't see how transferring a pension invalidates protection as it relates to the lifetime allowance....can you explain further?

dunstonh

http://www.scottishlife.co.uk/scotlife/web/site/BeeHive/BeeLines/BHBLMay04page115.asp

bit on primary and enhanced protection. Also referred to now as transitional protection. I have had a look into the technical side of this and whilst information is very limited, it does appear that some transitional protections can be maintained on transfer, if specified. However, some can be lost.

if contributions are made to any existing money purchase scheme after A-Day or the member joins any other registered pension scheme, the enhanced protection will cease. Enhanced Protection will also be lost if the individual is or becomes an active member of a defined benefit scheme after A-Day..

Nick_C_4

I think it depends on your interpretation, but I thought the intention is that if you take Enhanced Protection, you can't make any more new contributions to a pension. But "joins any other registered pension scheme" does seem to cover transfers...

dunstonh

Using that last quote, it is clearly open to interpretation but the bit that says "joins any other registered pension scheme" does sound as if it would encompase a new policy. A repension would be a new registered scheme. Its not just a policy re-issue but a post 6th April 2006 contract. I have checked a couple of transfer forms and they use the wording "do you have any transferable transitional protection" or similar. Problem I cannot find a single reference point that gives a clear answer. I could raise a research request (which is what you would do if this was a real life situation and you dont know the answer) but I fear that it would be quite time consuming to find what is and isnt transferrable and its not fair to ask someone to do that.

Nick_C_4

From the pensions manual:

"A scheme member who is entitled to primary protection (see RPSM03100050), but transfers their pension rights out of the pension scheme of which they were a member at 5 April 2006, retains any primary protection obtained in relation to those pension rights. This retention of primary protection also applies on any subsequent transfer."

And:

"When a member applies to transfer benefit rights which have enhanced protection, the enhanced protection will be lost unless the transfer is a permitted transfer (see RPSM03104090)"

The definitions of permitted and non-permitted transfers are given here:

http://www.hmrc.gov.uk/pensionschemes/rpsm-chapter3-protection.pdf (p61 onwards).

It's quite complex, but if you do a full transfer of a money purchase pension to another, and don't receive any new type of benefit as a result (and this is presumably what repensioning is), you'd retain enhanced protection. The spirit of the regulation seems to be that as long as you're not attempting to accrue new benefits, then it's OK.