Pension Numpty!

happyandcontented

I went to see an IFA yesterday re various issues which have come up due to an unexpected, but now imminent, six figure settlement payment.

I am a complete numpty in this area and will need a lot of coaching and help from him but I have been mulling stuff over all night and wondered if anyone could help.

He asked me to collate all pension docs and said he charges £150 per pot to review and then a further 3% if I decide to act on his advice. Is that the going rate?

My "problem" is that I have at least 4, possibly five, pots. He has asked me to ring them all and get the following info from them- charges, where invested and value of pots.

I have current (2014) statements on three, but the 4th is a now closed final salary pension from my current employer. IFA said they may not disclose the value of that pot, but it may be possible to work it out from the answers to certain questions. I also may have another pot from a previous employer, but I may have transferred that in to my current pot when I moved employers, so I also need to find out about that.

The three pots I know the value of are £80,000 x 2 and £40,000, then the final salary pot which accounted for most of my working life up to 2008 when the scheme closed and we moved to another form of pension. Does that sound like a reasonable pension provision?

I will receive a six figure settlement of which I will take £30,000 tax/ni free then the advisor says that as I am (just) 55 I can request the rest up to a maximum figure goes into my pension pot and that will also be tax free. Is that right? Have I understood that correctly?

I know I will pay tax when I take it out but will that be at the low or higher rate or is that income dependent at the time?

He also said that I can withdraw that money anytime to use as income if needed if I don't get aother job and I need more than the initial £30,000. Which I hope I do not, but I do need the option.

Have I understood all the above correctly?

Are there any questions I should ask?

Would it be worth me amalgamating pots to minimise the review charges or would there be charges for doing that too?

Is is better to have all the pots with one provider or split them as they currently are?

I am hoping to find another job and work for the next 5 years to see my youngest child through University, so I expect to be in yet another scheme. Is it a good idea to pay more than the lowest contribution rate into a new pension scheme or just go with the lowest option?

So much going around in my head, the whole thing was unexpected but am starting to think it may be for the best as I will get my pension finances in order at last and perhaps even come to understand it!

I would really appreciate any advice or info here folks.:D

atush

The FS pension, how many years did you work there with this pension? What is the accrual rate? Have you got the latest statement?

How much is in the current pot?

these days, a % such as the 3% charged could work out high, we cant say as we dont know your total pot size. and I would not pay 150 per pot for review on top, it should be included. And I certainly would not pay it for the FS pension.

You could request a CETV for your FS pension if you like, but they are usually best left where they are (unless you have no spouse and are of ill health). And get a value of the current scheme and tell us what it is.

I assume you are still working, what is your salary? What is the compensation for?

jem16

happyandcontented wrote: »

He asked me to collate all pension docs and said he charges £150 per pot to review and then a further 3% if I decide to act on his advice. Is that the going rate?

The "going rate" percentage wise depends on the value of the investments. You mention that you have £200k in 3 different pots so 3% of that is £6000 which is very expensive in my opinion.

but the 4th is a now closed final salary pension from my current employer. IFA said they may not disclose the value of that pot, but it may be possible to work it out from the answers to certain questions.

A final salary pension is a Defined Benefit pension and does not have a pot. What it has is a defined set of benefits promised to you on retirement. It is possible to get a CETV (cash equivalent transfer value basically ) which is needed if you want to transfer this out to a Defined Contribution scheme. A critical yield figure would have to be worked out to see how easy or difficult it would be to match what you could get in a Defined Contribution scheme.

In most cases transferring from a Defined Benefit scheme is not going to be in your best interests unless you fall into certain categories such as ill health. Who is the final salary pension with and how much do you expect to get as an annual pension and possible lump sum?

I will receive a six figure settlement of which I will take £30,000 tax/ni free then the advisor says that as I am (just) 55 I can request the rest up to a maximum figure goes into my pension pot and that will also be tax free. Is that right? Have I understood that correctly?

You could ask for more to be paid into your pension. Annual Allowance limit is £40k but it is possible to contribute more using Carry Forward rules. You would then get tax relief based on 100% of your earnings.

I know I will pay tax when I take it out but will that be at the low or higher rate or is that income dependent at the time?

Pension income is taxed just as your normal salary is taxed.

He also said that I can withdraw that money anytime to use as income if needed if I don't get aother job and I need more than the initial £30,000. Which I hope I do not, but I do need the option.

Certainly from the defined Contribution pots, but not the final salary one. That's subject to scheme rules.

Aegis

happyandcontented wrote: »

I went to see an IFA yesterday re various issues which have come up due to an unexpected, but now imminent, six figure settlement payment.

I am a complete numpty in this area and will need a lot of coaching and help from him but I have been mulling stuff over all night and wondered if anyone could help.

He asked me to collate all pension docs and said he charges £150 per pot to review and then a further 3% if I decide to act on his advice. Is that the going rate?

Based on the values quoted below, I would say that this is too pricey - at £200,000 for three pots you'd be paying £6,450 if he suggests a consolidation exercise, plus what you pay on a regular basis. Worst of all, he's asking you to do a load of the work for him:

My "problem" is that I have at least 4, possibly five, pots. He has asked me to ring them all and get the following info from them- charges, where invested and value of pots.

Normally an adviser will provide you with a letter of authority allowing him to get the information from the providers. Half of the job is making sure there aren't any valuable benefits which might be lost if you transfer, which you probably don't have the experience to spot.

I have current (2014) statements on three, but the 4th is a now closed final salary pension from my current employer. IFA said they may not disclose the value of that pot, but it may be possible to work it out from the answers to certain questions. I also may have another pot from a previous employer, but I may have transferred that in to my current pot when I moved employers, so I also need to find out about that.

The three pots I know the value of are £80,000 x 2 and £40,000, then the final salary pot which accounted for most of my working life up to 2008 when the scheme closed and we moved to another form of pension. Does that sound like a reasonable pension provision?

It depends on too many unknown factors, including the value of your final salary pension entitlement, which may well be more valuable than the rest of your pensions put together.

I will receive a six figure settlement of which I will take £30,000 tax/ni free then the advisor says that as I am (just) 55 I can request the rest up to a maximum figure goes into my pension pot and that will also be tax free. Is that right? Have I understood that correctly?

Assuming this is redundancy payment, then the answer is "maybe" depending on the size of your payment and the remaining carried-forward annual allowance you have at your disposal. It will also depend on the company's willingness to make a pension contribution in lieu of redundancy payment - some firms will do this without complaint, others may point blank refuse.

I know I will pay tax when I take it out but will that be at the low or higher rate or is that income dependent at the time?

Generally 25% will be tax free with the remainder taxable at your highest marginal rate of income tax in the year of withdrawal.

He also said that I can withdraw that money anytime to use as income if needed if I don't get aother job and I need more than the initial £30,000. Which I hope I do not, but I do need the option.

Have I understood all the above correctly?

It sounds like you have, yes.

Are there any questions I should ask?

It may be worth asking around to find out whether another firm will operate on a lower-charging basis. 3% initial is very old school and has been superseded by a number of more professional charging bases throughout the industry.

Would it be worth me amalgamating pots to minimise the review charges or would there be charges for doing that too?

Is is better to have all the pots with one provider or split them as they currently are?

It's a "maybe" - it very much depends on what you currently have.

I am hoping to find another job and work for the next 5 years to see my youngest child through University, so I expect to be in yet another scheme. Is it a good idea to pay more than the lowest contribution rate into a new pension scheme or just go with the lowest option?

Again, it very much depends on your current provisions, what the new employer offers and what you want to achieve in the long run.

happyandcontented

atush wrote: »

The FS pension, how many years did you work there with this pension? What is the accrual rate? Have you got the latest statement?

How much is in the current pot?

these days, a % such as the 3% charged could work out high, we cant say as we dont know your total pot size. and I would not pay 150 per pot for review on top, it should be included. And I certainly would not pay it for the FS pension.

He mentioned 3% but I may have misunderstood what the % was levied on. I assume that it will be the % or the £150, that is if he advises x for one pot or no changes and we don't go ahead it will be £150, if he moves it to another fund it will be the %.

atush wrote: »

You could request a CETV for your FA pension if you like, but they are usually best left where they are (unless you have no spouse and are of ill health). And get a value of the current scheme and tell us what it is.

Advisor said it is hard to get them to disclose the pot value of an FS scheme. I have a spouse and we are both (touch wood) in good health. My thinking is not to touch that pot, would that be right?

atush wrote: »

I assume you are still working, what is your salary? What is the compensation for?

I am currently still working but on top of the settlement I will get 3 months notice and holiday pay. My salary with benefits is c 90k. It is a (currently) amicable parting of the ways due to restructuring. I do also have a redeployment option which I am considering, but which obviously would mean I lose the settlement package.

My FS scheme was in force from starting work at 16 in 1976 till 2008 when it closed and we moved to an new scheme.

happyandcontented

jem16 wrote: »

The "going rate" percentage wise depends on the value of the investments. You mention that you have £200k in 3 different pots so 3% of that is £6000 which is very expensive in my opinion.



A final salary pension is a Defined Benefit pension and does not have a pot. What it has is a defined set of benefits promised to you on retirement. It is possible to get a CETV (cash equivalent transfer value basically ) which is needed if you want to transfer this out to a Defined Contribution scheme. A critical yield figure would have to be worked out to see how easy or difficult it would be to match what you could get in a Defined Contribution scheme.

In most cases transferring from a Defined Benefit scheme is not going to be in your best interests unless you fall into certain categories such as ill health. Who is the final salary pension with and how much do you expect to get as an annual pension and possible lump sum?



You could ask for more to be paid into your pension. Annual Allowance limit is £40k but it is possible to contribute more using Carry Forward rules. You would then get tax relief based on 100% of your earnings.



Pension income is taxed just as your normal salary is taxed.



Certainly from the defined Contribution pots, but not the final salary one. That's subject to scheme rules.

I don't know many details of the FS scheme, I will have to find out tomorow.

Is tax relief the same as being tax free?:o I will definitely have unusued allowance so it seems that I could put the whole or virtually the whole of the balance after the first £30.000 into the pension pot?

How may years can be carried forward?

My partner is a non tax payer (part time, low earner)but does pay into a pension scheme, someone at work mentioned tax breaks there but wasn't detailed enough for me to know if it applied to us.

jem16

happyandcontented wrote: »

I don't know many details of the FS scheme, I will have to find out tomorow.

Certainly a good idea. With 32 years in a final salary scheme, a spouse and in good health, staying put is probably best with this one.

Is tax relief the same as being tax free?:o

Depends on how you look at it I suppose. If it's paid into the pension, then no tax is due on it as you've reduced your taxable income.

However, as Aegis has pointed out, not all firms will allow you to pay the redundancy pay into a pension.

I will definitely have unusued allowance so it seems that I could put the whole or virtually the whole of the balance after the first £30.000 into the pension pot?

How may years can be carried forward?

Carry Forward allows you to utilise unused allowances from the previous 3 tax years. However tax relief is limited to 100% of your earnings in the tax year the contribution was made.

My partner is a non tax payer (part time, low earner)but does pay into a pension scheme, someone at work mentioned tax breaks there but wasn't detailed enough for me to know if it applied to us.

Is it an employer's scheme? If so what kind?

dunstonh

He asked me to collate all pension docs and said he charges £150 per pot to review and then a further 3% if I decide to act on his advice. Is that the going rate?

3% needs to be placed in context of monetary amount. Their may be a cap and collar to that charge. Or it could be tiered and 3% is one of the tiers. A flat 3% with no cap and collar is old school.

3% on £300k is very very high in 2015. However, 3% on £20k would be very good.

happyandcontented

jem16 wrote: »

Certainly a good idea. With 32 years in a final salary scheme, a spouse and in good health, staying put is probably best with this one.



Depends on how you look at it I suppose. If it's paid into the pension, then no tax is due on it as you've reduced your taxable income.

However, as Aegis has pointed out, not all firms will allow you to pay the redundancy pay into a pension.



Carry Forward allows you to utilise unused allowances from the previous 3 tax years. However tax relief is limited to 100% of your earnings in the tax year the contribution was made.



Is it an employer's scheme? If so what kind?

Thank you. Would that mean that if I tied this all up say four months from now (including notice period) then I would only be allowed to put the equivalent to my earnings from this April to that point into the pension scheme tax free rather than my full yearly earnings?

Or would it be my deemed annual salary? The latter would cover most of the balance of the pay out, the former not so.

Is this the best course of action? It seems a no brainer to me but are there things I haven't considered?

My partner has a local authority pension scheme.

jem16

happyandcontented wrote: »

Thank you. Would that mean that if I tied this all up say four months from now (including notice period) then I would only be allowed to put the equivalent to my earnings from this April to that point into the pension scheme tax free rather than my full yearly earnings?

It would be earnings throughout the whole tax year.

Is this the best course of action? It seems a no brainer to me but are there things I haven't considered?

Will work allow it?

Otherwise I expect you could make a payment to a PP/SIPP.

My partner has a local authority pension scheme.

Definitely worth paying into even without tax relief. You could pay extra into that for your partner if the likely pension income in retirement is less than the Personal allowance so making sure to utilise all the tax-free income.

xylophone

Advisor said it is hard to get them to disclose the pot value of an FS scheme. I have a spouse and we are both (touch wood) in good health. My thinking is not to touch that pot, would that be right?

Did he actually say this? It surprises me that an IFA qualified and with the necessary permissions in pension transfer would speak in these terms.

A DB/FS pension does not have a pot but a Cash Equivalent Transfer Value can be obtained and this should not prove difficult?

Was this pension in a private company or a public sector scheme?

If in an unfunded public sector scheme, a transfer out would almost certainly not be permitted.

Even where permitted, a transfer out of a DB scheme could well not be in your best interests.

http://www.pensionsadvisoryservice.org.uk/about-pensions/when-things-change/transferring-your-pension

https://www.moneyadviceservice.org.uk/en/articles/transferring-out-of-a-defined-benefit-pension-scheme