Is this good advice?

fiesta04

I have had an "offer" to transfer my deferred FS pension with Dairy Crest elsewhere. The current value being £79k, but to transfer it with an enhancement of £21k, making it £100k.

Dairy Crest have appointed a company, JLT, to advise me as to ,whether I should transfer or stay in my FS pension.

After filling out a short questionaire, they are "advising" me to transfer into a Friends Life New Generation Personal Pension.

I am 54 years old and single. Divorced but no charge on each others pensions.

Any advice and information welcome.

jem16

fiesta04 wrote: »

Dairy Crest have appointed a company, JLT, to advise me as to ,whether I should transfer or stay in my FS pension.

I would imagine that any company appointed by dairy Crest would be looking after Dairy Crest's interests rater than your own.

Nine times out of ten, it is not in your best interests to transfer out of a final salary pension. To find out if you are in the 1/10 I would seriously suggest seeing an IFA who would be looking after your interests although there would be a fee for this.

Perhaps give some figures. What would your annual pension and lump sum if you stayed in the scheme?

fiesta04

Dairy Crest projected figures are Full pension of £6882. Or Reduced Pension of £4733 with a lump sum of £31,550.

jem16

At what age? Is the pension index-linked?

fiesta04

This is for retirement at 65.

The DC pension is indexed linked.

Pension that would have paid as at April 2002 would have been £4680.

xylophone

http://www.pensionsadvisoryservice.org.uk/workplace-pension-schemes/final-salary-schemes/transfer-incentives
http://www.telegraph.co.uk/finance/personalfinance/pensions/8708013/Cash-for-pensions-deals-warning.html
http://www.ft.com/cms/s/2/e9cc6d54-a709-11df-90e5-00144feabdc0.html#axzz1j0ImoCyz

Think very carefully!

gjs6385

I would agree with the above - you should see an IFA as it may not be the case that 100k as a defined contribution pension pot will buy you a better pension than your 79k defined benefit pot.

Depending on how near you are to retirement - I would suggest that you leave it where it is and then should you go part time in your final 3/5 years prior to retiring then maybe transfer it as your DB pension will be linked to your final pensionable salary.

Zelazny

You need to consider how you think the fund would perform until you reach age 65.

An annuity of £6882 p.a. would currently cost a 65 year old male somewhere in the region of £190k (assuming a 50% spouse provision and increases at 3% per year). If you don't plan to remarry, you'd need £165k or so. This is based on the annuity rates at http://www.ft.com/personal-finance/annuity-table which may be out of date (and an IFA may be able to do better). For a female, the requirement is a little higher.

The important things to consider are:
1. That you will get 11 years of returns (age 54 now, retirement at 65) which assuming returns of 5% over inflation would take a pot of £100k up to £171k.
2. That annuity rates have been steadily falling for some time, and may continue to do so.
3. It looks like there will be legislation that forces equal annuity rates for males and females. If you are male, this will mean you need more saved up, whereas if you are female this may slightly improve the situation.

If you leave the pension where it is, all of the risk is with Dairy Crest. If you're confident that you can manage the DC funds to provide a return of better than 5% per year over inflation, then you may be better off taking the transfer, but it would be risky.

Personally, I'd stick with the final salary pension - but it's your choice.

CannySaver_2

Hi

The presumption with these issues is that it is better to leave it with the current scheme, however there is always the 1 in 10 where it is wise to transfer it.

Some very rough numbers:

£100,000 fund over 11 years (assuming you retire at 65) would be worth £171,000 c. using an assumed growth rate of 5% (you could assume more, you could assume less)

Looking at the two most popular retirement income options i.e. an Annuity or Income Drawdown:

A single life RPI linked Annuity for a healthy 65 year old would provide an income of £6,328. (Source: http://www.!!!!!!.uk/free-services/annuity-calculator/)

Income Drawdown, assuming you took max GAD, would give you an income of £9,576 (this is unlikely to rise each year and would depend on a wide variety of factors including charges, performance, changes to legislation etc.) (Source: A handy calculator on the Standard Life website)

If you are a cautious chap, who doesn't like investment risk then to me, on these rough numbers, I would be inclined to leave it where it is. A 5% annual return, plus current annuity rates gets you close to the current scheme, however the figure you give of £6,882 may be indexed between now and retirement.

I really think it comes down to your view of investment risk and whether you are prepared to give up a bird in the hand for something which could be slightly better.

However, these are just my views, it's clearly complicated and I'd agree with the others, see an IFA with the suitable qualifications and experience, get a recommendation from friends or family or use www.unbiased.co.uk

The IFA you choose should be unconnected to the Dairy Crest pension and you should pay them a fee for their advice, i.e. whether to transfer or not, the IFA remuneration, at this stage, should not be linked to you transfering to a plan he recommends.

The Canny Saver

kidmugsy

You might like also to contemplate your personal life expectancy. Good health record? Smoker? Age at death of parents, siblings....

Perhaps even have a medical?

fiesta04

Yes I am looking at all possibilities. Some facts are...

1-Mum died at 64
2-Brother died at 55
3-Mums siblings died 58,61,64 and 72.
4-Fathers side unknown
5-I am in reasonable health, although I do have Diabetes Type2
6-Few other ailments caused by alcohol abuse
7-Do not smoke
8-Although single now and no plans to remarry who knows
9-I am adverse to risk

Time to think it all through.

Of course I would welcome more input.