Investing current pension into a business

Northernspirit33

Good Morning!

First of all I apologise if this question has previously been raised. I have just had a quick look and couldn't find anything similar.

I am currently invested into the firefighters pension scheme (1992) and have been for 12 years. Since the government decided to change all the terms and conditions associated with my pension including increasing my contributions to 15% as it currently stands I have been looking at alternatives with regards to my pension.

I have calculated that over the last 12 years my contributions stand at 38760 (not including the employers) and I would like to use this to invest in or buy a business. I have looked at several options such as buying a franchise or a coffee shop etc.

What I would like to know is (because I cannot find any information on it) whether or not this can be done. Is it possible to withdraw what I have put into the pot to buy a business? If so what are the legalities regarding this? I.e if my business makes a profit what happens to that?

If anybody can help me with this I would very much appreciate it or even just point me in the right direction where I can get this information would be a start.

Thanks in advance

Craig

Dunnit

https://forums.moneysavingexpert.com/discussion/4828801

Similar thread:)

dunstonh

I am currently invested into the firefighters pension scheme (1992) and have been for 12 years. Since the government decided to change all the terms and conditions associated with my pension including increasing my contributions to 15% as it currently stands I have been looking at alternatives with regards to my pension.

What makes you think that any alternative will beat the fire-fighter scheme?

I have calculated that over the last 12 years my contributions stand at 38760 (not including the employers) and I would like to use this to invest in or buy a business. I have looked at several options such as buying a franchise or a coffee shop etc.

There is no fund. There are no employer contributions. The scheme does not work that way. you are buying a range of defined benefits (at very very good value).

Is it possible to withdraw what I have put into the pot to buy a business?

no. Theoretically, you could transfer the pension to a SIPP (buy would need an IFA to sign off on it and that is unlikely to happen given the amount you would lose). You could then buy a commercial property within the pension but you would have to pay market rents etc to the pension and you would be putting your pension at risk (beyond the loss you have already incurred by transferring it in the first place). The Govt is also looking to close the option to move out of defined benefit schemes.

You may be unhappy about the contribution going up to 15% gross (after tax relief it costs less than that). However, no alternative will match the benefits you get. If you tried to fund the same benefits in using private sector options, you would need to pay around 30-35% of your income to get the same. It would be crazy to leave the scheme.

atush

The money you pay into the firefighters scheme will buy you the best penion going- which is why you are being asked to pay more- which is fair as the amounts being paid out are much much higher now than in the past as people are living longer.

There is nothing you can do with your money (incl a franchise) that will pay more.

BUT, if you would like to fund a franchise for when you retire (and by then perhaps coffee shops will be old hat?) then by all means save into a DC pension alongside, or S&S isas and use that money to buy a franchise later.

mania112

Rather than working out your contributions, you should ask the scheme for a Transfer Value, you'll be surprised how much more than £38,760 it will be.

Northernspirit33

Thank you for the replies. Let me start off first by saying that I know that the Firefighters pension scheme is still going to be one of the best going. However, I signed up to a scheme in 2002 entering into a contract which has been changed at the swipe of a pen by somebody in government. The best way I can describe it is this... say you signed an agreement with a mortgage company to say you were going to borrow £100,000 over 20 years at a rate of 5% then after signing the contract the company turn around and say we aren't going to give you 100,000, instead we will give you 75,000 at an interest rate of 8% and you have to pay it over 30 years AND there is nothing you can do to stop us... well that's how it feels.

However

I am not doing this in order to cut my nose off to spite my face. The reason I am looking into business is because first of all I can not be 100% certain this will not happen again in future and also that I want an investment that not only will make me money in future (albeit less than the FPS) but also a business that my wife can run and take out a living from. This is something that could benefit me in the present as well as the future.

I appreciate the strong feeling from people on this matter, not everyone will agree with me and believe me this is something I have thought long and hard about.

I just basically want to know if it is possible.

thenudeone

Don't cut your nose off to spite your face.

If someone offered me a retirement income of £10 a year from age 65 for a lump sum cost of £50, I'd bite their hand off.

If, after after buying some, they say - sorry, it will cost £60 for the same benefit from now on. Would I still take it? Yes, because it's still by far the best option. No-one ever said that everything would stay the same forever.

On the other hand, speaking as a taxpayer, go ahead and stop contributing, and try to leave the scheme.

dunstonh

I am not doing this in order to cut my nose off to spite my face.

But that is what it looks like.

The reason I am looking into business is because first of all I can not be 100% certain this will not happen again in future and also that I want an investment that not only will make me money in future (albeit less than the FPS) but also a business that my wife can run and take out a living from. This is something that could benefit me in the present as well as the future.

Significantly less. We are not talking small amounts. We are talking really large amounts.

I appreciate the strong feeling from people on this matter, not everyone will agree with me and believe me this is something I have thought long and hard about.

It has nothing to do with feeling. As a taxpayer I am more than happy for you to leave the scheme and benefit the country by doing so. However, logic is that the scheme is vastly superior than any other option.

I just basically want to know if it is possible.

At great loss to you and at great expense.

atush

I have NO feelings on your pension other than you would be a WORLD class idiot to leave it. As it is better than ANYTHING you can do with your contribution, Might be able to come close with an employers contribution, but you wont have one if you opt out.

You talk about your wife- how would SHE be better off w.o the life insurance.death in service? If you are still in service, getting life insurance outside the govt would be more expensive than your pension i expect?

Basically, your idea is a non starter.

As for your wife, she can get a job and pay into a pension on her own- wont be as good as yours but will be something.

She could buy/run a franchise or coffee shop on her own, you both just need to save up for the deposit? Or she could while you a re still int he service, go back to college/uni and retrain for a career of her own?

there are options, better than opting out of the best pension going.

taktikback

I've seen so many threads like this. Perhaps the psychology needs to change -if you want to jump - jump. You've already decided to do it. Maybe it's best to accept that people sometimes just want to make the wrong decisions...

mania112

Northernspirit33 wrote: »

Thank you for the replies. Let me start off first by saying that I know that the Firefighters pension scheme is still going to be one of the best going. However, I signed up to a scheme in 2002 entering into a contract which has been changed at the swipe of a pen by somebody in government. The best way I can describe it is this... say you signed an agreement with a mortgage company to say you were going to borrow £100,000 over 20 years at a rate of 5% then after signing the contract the company turn around and say we aren't going to give you 100,000, instead we will give you 75,000 at an interest rate of 8% and you have to pay it over 30 years AND there is nothing you can do to stop us... well that's how it feels.

How about simply 'when we set this scheme up, we were advised the funds would grow by x%, in reality that projection was way off. If you want the pension we agreed, you must put more in.'