National Grid/British Gas Final Salary

nxdmsandkaskdjaqd

Hi

My sisters husband has a Final Salary pension via National Grid/British Gas. He is 60 in the next few months. Can he go to an IFA for a open market quote or does he have to take the offer from National Grid/British Gas?

Thanks

Robert

Zelazny

if he has a final salary pension, then the amount that is paid is fixed, based on his service length and final salary (hence the name). This isn't an offer - it's the calculated accrued benefit.

He could in theory apply for a transfer, and see what the transfer value offered would buy, but given the admin costs and the fact that the scheme valuation assumptions will likely not favour transferees he's unlikely to get a better deal anywhere else (unless he's willing to forego things like a spouse's pension and pension increases).

atush

I dont' think any IFA is his or her right mind would touch a FS transfer. AS they would be held responsible later on for mis-selling.

It is a FS/Defined benefit scheme and has to be taken as it is, as it will be better than anything it could be transferred to. He MAY be offered a lump sum in lieu of some of his annual pension. This is quite often a bad idea, but you can tell by asking the administrator for the commutation rate- the rate at which the lump sum reduces the pension paid.

richardg_ifa

Normally final salary schemes have it written into their rules that they won't allow a transfer out if a member is within 12 months of the scheme's Normal Retirement Age (and I'm assuming here that 60 is the National Grid's scheme retirement age).

However, in my day to day work I've noticed quite a few schemes are waiving this rule because they don't want the ongoing liability to the scheme of paying pension benefits for years to come.

It may be worth asking for a transfer value but I doubt you'll better what's on offer, as Zelazny says.

nxdmsandkaskdjaqd

Thanks for the replies, I should have known this, but needed to check.

RichandJ

richardg_ifa wrote: »

Normally final salary schemes have it written into their rules that they won't allow a transfer out if a member is within 12 months of the scheme's Normal Retirement Age (and I'm assuming here that 60 is the National Grid's scheme retirement age).

However, in my day to day work I've noticed quite a few schemes are waiving this rule because they don't want the ongoing liability to the scheme of paying pension benefits for years to come.

It may be worth asking for a transfer value but I doubt you'll better what's on offer, as Zelazny says.

Yes, this is possible, one of my schemes even added a DoA to their rules to allow TVOs within a year of NRD.

OP can but ask if BG will allow it, but I'd reinforce the others saying it's not likely to be a good idea unless some aspects of the FS benefit such as spouse's pension aren't required.

chainsaw

A BG /NG pension will have a considerable transfer out value and if you run the pension yourself you can generate a better pension than BG/NG will give you however you have to be able keep on top of your investments for the rest of your life. Do you want to be worrying about such things when you are 90

mania112

atush wrote: »

I dont' think any IFA is his or her right mind would touch a FS transfer. AS they would be held responsible later on for mis-selling.

It is a FS/Defined benefit scheme and has to be taken as it is, as it will be better than anything it could be transferred to. He MAY be offered a lump sum in lieu of some of his annual pension. This is quite often a bad idea, but you can tell by asking the administrator for the commutation rate- the rate at which the lump sum reduces the pension paid.

That is largely true of a pension transfer.

But at retirement an IVP to Annuity can be justified, legitimately.

jamesd

Why does he want to do this?

There is one reason why it can occasionally be a good idea: for someone who has serious ill health that greatly reduces their life expectancy. Another possible one is if the pension has substantial spouse benefits but he person is single, though this is less likely to work.

If he will have a total of at least £20,000 a year in final salary, state pension and annuity income he has one potentially interesting option: Flexible Drawdown. With this he can put money into a personal pension, get the tax relief, then later take out all of the money. The first 25% of the pension pot is the normal tax free lump sum. Any other money is taxed as normal income, so potentially higher rate tax if it's a lot. This can sometimes make it a wonderful idea for a person with a nice final salary pension to make pension contributions to a personal pension, because it removes the usual can't get at all of the money disadvantage of a pension pot.

kidmugsy

chainsaw wrote: »

... if you run the pension yourself you can generate a better pension than BG/NG will give you ...

Aye, or a worse pension.

atush

chainsaw wrote: »

A BG /NG pension will have a considerable transfer out value and if you run the pension yourself you can generate a better pension than BG/NG will give you however you have to be able keep on top of your investments for the rest of your life. Do you want to be worrying about such things when you are 90

rubbish. Show your figures,