Company Pension transfer problems

laurasplog

Hi all

Hoping someone can help me as I'm going round in circles with this.

I recently left Company A, for whom I'd worked for 18 months. They have sent me a letter saying that I need to decide what to do with my money purchase scheme fund - I can receive £1000 cash (contributions made to date) or £8000 transfer value to another pension. Seems simple.

However, my new company (Company won't let me transfer a fund into them until I've been working for them for two years. Anxious not to lose £7000, I consulted an independent financial advisor... who wanted to charge me £1000 for his advice!

Basically I want to open a private pension fund for just 2 years until I can transfer the money into Company B's pension scheme. I do not wish to make additional monthly contributions, and would like the fees to be as low as possible. I do not need to see massive growth on the fund - just for it to still be there in 2 years' time.

So I called HSBC to see if they could open a private pension plan for me. They said they couldn't give advice as the regulations are changing with the FSA at the moment, so I'd have to purchase a non-advised pension... but if I went down that route, I wouldn't be able to transfer money into it!

This seems utterly ridiculous - I just want to give £8000 to someone to look after for two years.

Can anyone advise on the best course of action? If I don't let Company A know where to transfer the £8000 to soon, they will just do me a cheque for £1000 and that will be that.

Thanks in advance.

Laura

Emmamumof2

If you looking for the cheapest possible place to put the fund until you can transfer in company B pension plan a stakeholder would be the cheapest method as the charges are capped, if you want to do it without the aid of an IFA you will need to track down a stakeholder provider who would allow you to transfer funds in on a non-advised basis - this will probably involve trawling the internet. I agree that it sounds outrageous the IFA you spoke to would charge £1000, I would ring around a few more IFA's if I was you and explain your requirements!

laurasplog

Thanks - I think I'm making progress, and I checked out moneymadeclear.org - which gave me a starting point. However, when I called a couple of the companies, they still wouldn't let me sort out the fund transfer myself - needed to come from another IFA. This seems ridiculous.

Does anyone know any stakeholder pensions that not only allow you to open a fund on a non-advised basis, but also allow funds transfers?

If this line of questioning is fruitless, I will take your advice and try another IFA.

Thanks

Laura

dunstonh

f you looking for the cheapest possible place to put the fund until you can transfer in company B pension plan a stakeholder would be the cheapest method as the charges are capped

Not any more. Modern personal pensions come in cheaper a lot of the time now. Indeed, they can beat nil commission stakeholders often.

I consulted an independent financial advisor... who wanted to charge me £1000 for his advice!

That seems fair enough for such a high risk transaction.

However, when I called a couple of the companies, they still wouldn't let me sort out the fund transfer myself - needed to come from another IFA. This seems ridiculous.

The FSA works on the basis that occupational pension transfers are not in your best interests unless there is evidence to the contrary. They apply this to direct offer as well as advice. With around 9 out of 10 occupational pensions not being best to transfer, you can see their point. For example, have you dont a transfer value analysis (TVAS) to compare the benefits of the scheme?

Does anyone know any stakeholder pensions that not only allow you to open a fund on a non-advised basis, but also allow funds transfers?

Not unless they want to run the risk of the FSA fining them millions.

So I called HSBC to see if they could open a private pension plan for me. They said they couldn't give advice as the regulations are changing with the FSA at the moment, so I'd have to purchase a non-advised pension... but if I went down that route, I wouldn't be able to transfer money into it!

There are no rules changing. What they mean is that they dont allow their staff to do it due to it being high risk. That is normal with sales staff rather than independent advisers.

laurasplog

dunstonh wrote: »

Not any more. Modern personal pensions come in cheaper a lot of the time now. Indeed, they can beat nil commission stakeholders often.



That seems fair enough for such a high risk transaction.


The FSA works on the basis that occupational pension transfers are not in your best interests unless there is evidence to the contrary. They apply this to direct offer as well as advice. With around 9 out of 10 occupational pensions not being best to transfer, you can see their point. For example, have you dont a transfer value analysis (TVAS) to compare the benefits of the scheme?


Not unless they want to run the risk of the FSA fining them millions.



There are no rules changing. What they mean is that they dont allow their staff to do it due to it being high risk. That is normal with sales staff rather than independent advisers.

Thanks for this. Regarding the TVAS - would this still be relevant in my circumstances? Company A won't let me keep the pension in the fund where it is currently because I only worked for them for 18 months. So my choices are a) take £1000 cash or b) find a fund to transfer the £8000 to.

I don't understand why a company would be penalised by the FSA if I make my own decision to transfer a fund to them - after all, it's my choice.

Thank you

Laura

dunstonh

Thanks for this. Regarding the TVAS - would this still be relevant in my circumstances? Company A won't let me keep the pension in the fund where it is currently because I only worked for them for 18 months. So my choices are a) take £1000 cash or b) find a fund to transfer the £8000 to.

Not in this case. Although the IFA would want written confirmation that they wont allow you to keep it there. It's very straightforward for the IFA to do but its still classed as a high risk transaction for reporting purposes as well as PI liability insurance and some compliance firms won't allow all advisers to do it without having a specialist licence (which often costs money to have). Some will also prevent advisers from doing execution only on it. I just checked my own compliance manual as I thought I ought to look in case it had changed.... It said that if the trustees confirm in writing that benefits cannot be retained in the current scheme then the transfer would not constitute an occupational pension transfer.

I don't understand why a company would be penalised by the FSA if I make my own decision to transfer a fund to them - after all, it's my choice.

Welcome to the world of FSA regulation.

maggieann155

does a transfer value analysis compare, giving all the figures, what the company scheme offers as a pension now with what a personal pension would give now?

dunstonh

maggieann155 wrote: »

does a transfer value analysis compare, giving all the figures, what the company scheme offers as a pension now with what a personal pension would give now?

That amongst other things. Critical Yield is a key requirement to know.

laurasplog

dunstonh wrote: »

That amongst other things. Critical Yield is a key requirement to know.

I'm sorry - you've lost me now. I haven't been given any information about critical yield.

Literally the choices I've been given are:

"Receiving a refund of the value of your contributions (less tax). As well as the refund of contributions due to you frmo the DCS, you will also receive an extra payment of £437.47 (less tax and National Insurance from your previous employer" (total value = £1064.99

OR

"Transferring the value of your DCS account to another registered pension plan, such as your new employer's pension scheme or a personal pension plan" (total value = £8108.74)

As my new employer will not permit transfers in until I have been working here for 2 years, what are my options? It seems foolhardy to pay an IFA an eighth of my pension pot to physically fill out paperwork I'm capable of doing myself.

As ever - really appreciative of all advice.

Laura

dunstonh

I'm sorry - you've lost me now. I haven't been given any information about critical yield.

You wont be. That is for the IFA to work out. Although in your case, its less important as you dont have a choice.

As my new employer will not permit transfers in until I have been working here for 2 years, what are my options? It seems foolhardy to pay an IFA an eighth of my pension pot to physically fill out paperwork I'm capable of doing myself.

Phone around IFAs asking them what they would charge for doing it on execution only basis. Some will refuse to do it on execution only but there are some that will. Then see if they will do it cheaper.

laurasplog

I spoke to a colleague who recommended Hargreaves Lansdown. I called them and they seemed perfectly happy to transfer my company pension into a stakeholder or a SIPP. I double checked I wouldn't need to go down the "advised" route, and they seemed surprised that this had been suggested to me before.

Before I do the deal, is there anything I should be aware of?!

Also - why would a stakeholder pension be recommended rather than a SIPP?

Thanks!

Laura