Transfer from Final Salary to SIPP?

RebTech

I have a smallish pot (under £10k) in an occupational final salary scheme plus a similar amount in a linked AVC. I'm now out of the industry, haven't contributed in many years and won't want to in the future (I'm 60).

I'm looking into transferring both (apparently they have to go together anyway) into my SIPP, mainly just to simplify things, but also I'm not entirely happy that the AVC is a with profits plan, which I know at one point at least was generally considered not a good thing.

My SIPP provider says they may insist I get formal advice before accepting the transfer, and they'd charge something like £1k for such advice! :eek:

I'm sure I could get it cheaper elsewhere, but I'm now wondering whether I shouldn't just leave things as they are. Any comments?

kidmugsy

RebTech wrote: »

I have a smallish pot (under £10k) in an occupational final salary scheme

No you don't.

jamesd

You probably can't get it cheaper. It's a high risk transaction for any IFA, presumed to be a mis-sale unless proven otherwise. £1,000 was cheap. Best to look on at least the final salary part as diversification and leave it alone.

With profits aren't particularly well regarded but some have done well. This might be one of those. You might be able to transfer the AVC portion on its own.

dunstonh

I'm sure I could get it cheaper elsewhere, but I'm now wondering whether I shouldn't just leave things as they are. Any comments?

Statistically, what you want to do is likely to be a financially bad option. Hence why the regulator has it as a mis-sale unless proven otherwise and only advice can prove it suitable or not.

My SIPP provider says they may insist I get formal advice before accepting the transfer, and they'd charge something like £1k for such advice!

£1000 for advice on defined benefit transfers is very cheap. Although statistically, you are likely to be told that you should not transfer it.

Why do you want to transfer the pensions? What benefit do you think you will get?

xylophone

http://www.fca.org.uk/firms/financial-services-products/investments/pension-transfers

There are few circumstances where transferring out of a deferred FS scheme can be considered a good idea.

When does your pension become payable? What benefits does it offer?

http://www.barnett-waddingham.co.uk/news/2012/07/revaluation-for-early-leavers/

RebTech

kidmugsy wrote: »

No you don't.

Helpful!

jamesd wrote: »

You probably can't get it cheaper. It's a high risk transaction for any IFA, presumed to be a mis-sale unless proven otherwise. £1,000 was cheap. Best to look on at least the final salary part as diversification and leave it alone.

With profits aren't particularly well regarded but some have done well. This might be one of those. You might be able to transfer the AVC portion on its own.

Nope, they're stuck together, apparently. Thanks for the other points, interesting and useful.

dunstonh wrote: »

Why do you want to transfer the pensions? What benefit do you think you will get?

In my obvious ignorance, I thought it would simplify matters at retirement time. Given the foregoing comments it now seems very obvious I should leave things as they are, which is not an outcome I'm unhappy with.

jamesd

Now that's dealt with, it may be useful to move on to other things if your'e interested?

Did you know that you can take and recycle personal pension income into new pension contributions from age 55, to get an extra cycle of tax relief and a new tax free lump sum? It's a trade of income you could take and save for a lump sum outside the pension and the income being moved into the pension plus lump sum with a boost to the value inside the pension that increases eventual income levels.

Any sign that you might be affected by the pension lifetime allowance?

hyubh

RebTech wrote: »

> No you don't.
Helpful!

He meant, you don't have a pot of money invested in your name that currently totals £10K, but defined benefits in a (presumably) final salary scheme whose cash-equivalent transfer value (CETV) is currently £10K. (Assuming, that is, you were actually quoting the CETV - there are other ways of putting a monetary value on benefits in a DB scheme.) Anyhow, the important point is that final salary benefits are usually best left where they are, as the others have said...

RebTech

jamesd wrote: »

Now that's dealt with, it may be useful to move on to other things if your'e interested?

Did you know that you can take and recycle personal pension income into new pension contributions from age 55, to get an extra cycle of tax relief and a new tax free lump sum? It's a trade of income you could take and save for a lump sum outside the pension and the income being moved into the pension plus lump sum with a boost to the value inside the pension that increases eventual income levels.

Any sign that you might be affected by the pension lifetime allowance?

On the last point, absolutely not! As for recycling pension income, that does sound interesting, can you recommend somewhere I can read up on it?

bilbo51

RebTech wrote: »

My SIPP provider says they may insist I get formal advice before accepting the transfer, and they'd charge something like £1k for such advice!

Ha! You'd pay them a grand and they would tell you to leave it where it is

jamesd

Here are some articles about recycling:

The pension trick that could get you a second tax-free lump sum of £13k and save your family £28k if you die
Recycling pension income
Income Recycling Calculator
Pensions - recycling cash or income

The principles are easy, though:

1. You put the personal pension into capped drawdown.
2. You take the 25% tax free lump sum and either reinvest that in a S&S ISA to keep it and its income outside the pension or you recycle it within the limits for lump sum recycling, which can just mean waiting until the third tax year after the lump sum's tax year even for large sums, but often won't.
3. You take the maximum income from capped drawdown and pay it into a personal pension. It can be the same one in many cases, most for those aimed directly at consumers.

The usual limits for pension contributions apply: your earned income; the £40,000 cap from April 2014, £50,000 now; or £3,600 gross if insufficient earned income to do more than this.

Your gain is the income tax on the new 25% lump sum you're accumulating. So £2,000 gain from £10,000 of new lump sum, £40,000 of total pension pot or £32,000 of contributions that get basic rate tax relief. You also have to allow for drawdown costs but that's fairly inexpensive at various places. If the new contributions are being made by salary sacrifice you also gain the NI saved on the whole contribution.