Should I transfer protected rights pension?

Innys

Hi

I am in the process of trying to consolidate all my individual pension pots into one scheme.

Of the schemes contains a protected rights pension. Can anyone please explain to me what this is - as far as I knew I was making salary deductions to my pension for that employer. Also what is the difference between protected and non-protected rights ?

And finally, without asking for financial advice (!), is it a generally a good idea to transfer protected rights benefits into a current pension fund. I know this is generally a bad idea for defined benefits schemes, but was wondering if it was the same for a protected rights scheme.

Thanks very much

I

Bean_Counter

Hello,

I must point out that I am NOT an IFA, to start with.

A protected rights pension means that you have some sort of guarantee of the amount of pension that you receive when you retire, rather than the pension that most of us have where you just have to wait and see how much money is in the pot at the end of the day.

It is USUALLY a very BAD idea to transfer out of a protected rights scheme as you will be losing these guarantees and the market will need to perform exceptionally well to compensate.

If I were you, I would get proper financial advice before even thinking about transferring this amount.

Innys

Bean_Counter wrote: »

Hello,

I must point out that I am NOT an IFA, to start with.

A protected rights pension means that you have some sort of guarantee of the amount of pension that you receive when you retire, rather than the pension that most of us have where you just have to wait and see how much money is in the pot at the end of the day.

It is USUALLY a very BAD idea to transfer out of a protected rights scheme as you will be losing these guarantees and the market will need to perform exceptionally well to compensate.

If I were you, I would get proper financial advice before even thinking about transferring this amount.

Thanks for you response.

But are you sure about the guarantees bit?

Having read the blurb from the existing schemes adminsitrators it quotes what my find might be at retirement, using different rates of investment growth. From this, they have calculated what my pension may be. It then goes on to say "...these figures are not guaranteed - they are not a minimum or maximum amounts. Your retirement fund depends on how your investment grows..."

Are you sure the guarantees you are referring to are not from a defined benefit scheme?

Bean_Counter

Innys wrote: »

Thanks for you response.

But are you sure about the guarantees bit?

Having read the blurb from the existing schemes adminsitrators it quotes what my find might be at retirement, using different rates of investment growth. From this, they have calculated what my pension may be. It then goes on to say "...these figures are not guaranteed - they are not a minimum or maximum amounts. Your retirement fund depends on how your investment grows..."

Are you sure the guarantees you are referring to are not from a defined benefit scheme?

It is hard to say without reading the exact wording of your agreement, whuch you are best getting an IFA to do.

There are lots of different pension schemes around and I am just going by what our company IFA has said. I was really just going back to the principle of 'protected rights' that you mentioned in your opening post and being careful not to lose them.

LOST

protected rights are the pot of money that has been contracted out of the state's second pension (S2P).

If your protected rights are kept in a normal individual personal/stakeholder arrangement - there is not normally any guarantees associated with these plans as it would just be a normal money purchase scheme (the term is referred to as guaranteed annuity rates - whereby it is similar to defined benefit schemes).

Money purchase schemes' funds growth depends on the amount of contributions made into the plan and also the rate of growth acheived by the underlying fund.

If you are looking to move your protected rights pot - it is only worthwhile if, the charges in your current pension are more unfavourable than the pension you'd like to move it to and also if the funds available in the newer arrangement are better performing whilst still conforming to your risk profile.

With all this in mind - remember not all pension providers will allow transfers in if the fund is below a minimum amount (e.g. below £5k)

dunstonh

Bean Counter is correct in some cases where there is GMP involved but where there is no GMP and no GARs then the protected rights can be transferred with no problem. GMP would only be an issue with occupational schemes and section 32 buy out bonds.