Forced to get an Financial Advisor

jamesd

The reason you were asked for an IFA to sign off on it is that the Financial Conduct Authority and before them the Financial Services Authority compel them to insist on it. The reason they have that rule is that it is usually a very bad move. There are a few exceptions where it is a good move, like those who will die much sooner than average because of ill health or a fatal illness, so those transfers aren't just completely banned.

The CETV has a few problems. One of them is the effect of increasing life expectancies over time. A CETV normally under-values that cost but your own pension that you have to replace the work one will cost you the full price of however much longer you live.

There are three other mistakes that people often make when comparing values:

1. Ignoring inflation. Final or average salary pensions invariably increase their income payments with inflation so just dividing the transfer value by the annual income payment over-estimates how long it takes to get ahead of transferring.
2. Getting their life expectancy wrong. Most life expectancies that show up in the media are for newborn children. That pulls down the average age of death. For a person who is already at retirement age they have already lived through all the childhood accidents and illnesses and teen and young drink driving binges. That means that on average a 65 year old is likely to live to around 88-90 and a quarter or so are quite likely to get to 100.
3. There are usually payments to a spouse after your own death and people tend to completely ignore the value of this.

Transfers out of defined benefit schemes aren't always a bad idea but almost everyone who asks about it isn't doing it in the limited number of cases where it is a good deal.

sandsy

Is the pension quoted the same as it was when you left the employment or has it increased substantially?

atush

Well there is another obvious mistake people make in comparison here, the transfer value is 50K and the pension is 500K so there has obv been a mistake.

Not only is that not possible, but i dont see 50K giving you only 500 quid per year either with a GMP.

I really dont think we can help this poster w/o real facts?

Uglymug

cganesh wrote: »

I think so, I have read it, but the more I hear the more confused I get to be honest. What they actually gave me seemed easy to understand but now after everything you've all said I'm not so convinced. Atush- its half that (50K) and the pension quote is only 500K a year which is why I assumed it wasn't such a good deal! ( A GMP is Guaranteed Minimum Pension -xylophone- but thanks for the links)

If you've got a guaranteed pension of £500K per annum (that's half a million a year) why are you thinking of selling it for £50K?

xylophone

The OP should have details of GMP and excess at the date of leaving - details of how these increase in deferment are given in the links I cited but if he has a scheme booklet this should set out the position.

It would seem that he left Barclays at the same time as this poster
https://forums.moneysavingexpert.com/discussion/4736856

mania112

^ well it's obviously a typo, isn't it.

cganesh

Yes Mania it is sorry, should say £500, and atush-those ARE the facts which as you say don't look good. Maybe this is why they are telling me an IFA is needed! I know its not a simple calculation but it really doesn't look anywhere near as good as my pru one. Thanks for the explanation James but I doubt if I will be one of those who live to 100 considering my health and family history but you never know. I don't remember getting any quotes or details of pension when I left xylophone-but that was in the early 80s and I have kept nothing. (SHE btw) I didn't even know I was getting much at all ,to be honest, they found me! Anyway, I get the picture guys, I am obviously not getting it so I will look into it further and probably seek help which it seems is now legally required.
What do you think of the new laws to be able to cash in your pensions then, or is this going to cause more confusion when the time comes?

dunstonh

What do you think of the new laws to be able to cash in your pensions then, or is this going to cause more confusion when the time comes?

Doesn't change much for most people. A few tweaks to existing options and a little loosening on accessibility for the lower paid. Anyone thinking of drawing their full pension pot in one go is probably going to be doing the wrong thing unless it is a small value pot.

Just because an option the already exists has been loosened up to allow more to utilise it does not mean it is suitable for everyone.

jem16

cganesh wrote: »

Yes Mania it is sorry, should say £500, and atush-those ARE the facts which as you say don't look good

I would suggest that you check out the £500pa pension to see if it has been revalued over the years since you left. You really need the full facts before making any decision.

cganesh

don't quite get you there Jem, these are the figures they are quoting NOW and the first figures I have seen since I left 25 years ago.I have nothing to compare it with and this is what they are quoting. If these are talking about 1980 when I left why aren't they quoting an up-to-date figure. Seems to me they are deliberately trying to confuse and not giving all the facts, I give up!!