Is it worth me transferring out LGPS pension to new DC scheme?

ses6jwg

Hi guys,

Just a quick one.

I am 22 I worked in Local Government in a temporary job for 1 year and have just under £1k contributed to an LGPS pension obviously + government contributions on top of this as well.

I am now working in the private sector and have around £2.5k in a new Defined Contribution scheme which I pay 5% of my wages into and my new employer pays 9% into. I have opted to have my contributions invested in an L&G Global Equity fund and my employer pays into an L&G Stability Fund.

I have no plans on going back to Local Government is it worth me transferring my LGPS into the new scheme - I just don't want pots of pensions sat around everywhere as when I turn 65 I am guessing I will get about £3 a month or something stupid from the LGPS.


Any thoughts appreciated.

dunstonh

is it worth me transferring my LGPS into the new scheme -

statistically, almost certainly not. You will probably find your current scheme wont accept it anyway without an IFA signing off on it first.

Old_Slaphead

dunstonh wrote: »

You will probably find your current scheme wont accept it anyway without an IFA signing off on it first.

Out of interest, why is that?

Linton

Pension companies are very wary of transfers because of the risk of future mis-selling claims. Some wont accept any transfer, even a simple one, without an IFA sign off which of course moves the risk of a mis-selling claim to the IFA.

In the case of a transfer from a DB scheme to a DC scheme this is so unlikely to be in the customer's financial best interest that it is unlikely that any pension company would touch it without an IFA sign-off, and it is unlikely that an IFA would recommend it unless there was an extremely good case.

Would a DB pension of 1 year be worth the effort to determine this?

dunstonh

Back in 2008 the FSA issued a warning on doing non-advised defined benefit pension transfers. In 2010, this was followed with both the FSA and the Pension Regulator stating that the assumption that such a pension transfer is unsuitable unless proven otherwise. To this end it has reminded IFAs and pension trustees of their responsibilities under the client's best interests and pension transfer rules.

This only applies to defined benefit schemes. Not money purchase. Since then, the receiving schemes ask for an IFA to sign off on it. As Linton says, it is so unlikely to be in the interests of the individual, that statistically it is unlikely an IFA will sign off on it unless it is one of the minority reasons that makes it worthwhile.