Pension Numpty!

happyandcontented

jem16 wrote: »

It would be earnings throughout the whole tax year.



Will work allow it?

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



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.

I don't know, but I will ask when I get my final figure for consideration. If that is not an option -

Would one of the current pots be suitable? or would I have to open a SIPP?

What are the benefits of a SIPP?

If I just stuck it into a pot for the time being are there charges/penalties for moving it around?

I am thinking this is all so complex I may not have the luxury of time to sort out the very best home for it at the outset.

My partner has worked for the employer for 14 years but has only just gone into the scheme so will have very little pension to come even if they work until 65 which is unlikely. What would be the benefits of using some of the payout for their pension? Will the employer allow it?

Thanks to everyone who is answering, it is very useful.

happyandcontented

xylophone wrote: »

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

What he said was the amount given as a CETV is not always what the pot stands at, but the actual pot value is not stated. It was agreed that it is often better to just leave it there. It is private sector.

dunstonh

happyandcontented wrote: »

What he said was the amount given as a CETV is not always what the pot stands at, but the actual pot value is not stated. It was agreed that it is often better to just leave it there. It is private sector.

There is no "pot" with a defined benefit scheme. The pot is zero. What you have on one hand are the benefits from the scheme and on the other hand a transfer value (to another pension) to give up those benefits.

Statistically (and historically) around 9 out of 10 defined benefit schemes are best left where they are. CETVs are running high at the moment so that 1 in 10 rough guide may be closer to 2 in 10 or 3 in 10 but it is something that you would expect to be wrong in the majority of cases.

What are the benefits of a SIPP?

I wouldnt be looking at solutions yet. That is jumping too far ahead.

happyandcontented

dunstonh wrote: »

There is no "pot" with a defined benefit scheme. The pot is zero. What you have on one hand are the benefits from the scheme and on the other hand a transfer value (to another pension) to give up those benefits.

Statistically (and historically) around 9 out of 10 defined benefit schemes are best left where they are. CETVs are running high at the moment so that 1 in 10 rough guide may be closer to 2 in 10 or 3 in 10 but it is something that you would expect to be wrong in the majority of cases.



I wouldnt be looking at solutions yet. That is jumping too far ahead.

I was thinking of the SIPP as a home for the balance of the settlement figure, not as a home for the transfer of the FS pension.

kidmugsy

Aegis wrote: »

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

That is simply wrong; I do wish people would stop saying it. The truth is that the remainder will be taxed as income, which is a plain different thing.

People who don't understand the expression "marginal" (including, apparently, G Osborne) should stop using it. In their hands it's a misleading affectation.

jem16

happyandcontented wrote: »

I don't know, but I will ask when I get my final figure for consideration. If that is not an option -

Would one of the current pots be suitable? or would I have to open a SIPP?

That depends on the other pots. If they are employer pensions they might not be able to take further contributions if you have now left.

What are the benefits of a SIPP?

I was only suggesting that if you couldn't use an existing pot or if the charges were better than existing pots.

My partner has worked for the employer for 14 years but has only just gone into the scheme so will have very little pension to come even if they work until 65 which is unlikely.

Then perhaps a separate PP/SIPP would be useful to allow an income with taking the LGPS early which would involve an actuarial reduction.

What would be the benefits of using some of the payout for their pension?

Your partner will have a tax-free allowance. If the majority of the pension income is in your name you will probably pay more tax than if enough is in their name to utilise that tax-free allowance.

Will the employer allow it?

It doesn't have to be the LGPS but if it was then you give the money to your partner who pays it into the pension. Same idea with any pension your partner would use.

happyandcontented

kidmugsy wrote: »

That is simply wrong; I do wish people would stop saying it. The truth is that the remainder will be taxed as income, which is a plain different thing.

People who don't understand the expression "marginal" (including, apparently, G Osborne) should stop using it. In their hands it's a misleading affectation.

Could you explain that in more detail please?

agarnett

I think the first thing to realise is that you are a way above average lucrative prospect for a financial adviser, especially one that has his or her eye on a good reason to transfer the FS pension. 2015 may well be a one-off window of opportunity to transfer at the peak of CETV quote levels in some schemes (not all). Financial Advisers have to be careful not to appear too keen to transfer clients out of FS schemes, but many are realising that they shouldn't automatically refuse to consider advising on such, because someone else might (and find good reason to do so).

Up until gilt yields fell through the floor and pension schemes had to admit that defined pension benefit promises were consequently worth much more in CETV terms, historically speaking, the received wisdom was as dunstonh says i.e. generally not a good idea at all. I wouldn't use the term "statistically" as it is pretty meaningless, and I would not try to put statistics on how many out of ten are sensible transfers in 2015 either.

The fact is that Cash Equivalent Transfer Value calculations are a black art and are heavily influenced by power games. There is no statutory method of calculating them that you can rely upon.

You say you are expecting a six figure leaving settlement, and I am guessing you may have a strong union representation at your workplace to partly thank for that. Maximum statutory redundancy is just £14,250 I think. That might be a signal that the union have also managed to ensure that CETV quotes are not under-egged!

If I were you, I'd get one fast. If you haven't asked for one lately, you may find it looks life-changing compared with the other sums you have mentioned!

Just summarising between the lines:

You have accumulated DC pension pots worth £200,000 and you have another £100,000+ as a leaving settlement arriving imminently.

You were in a final salary scheme, man and boy, for 32 years. You don't know much about pensions, so we assume

• The DC pensions have probably been accumulated since 2008 when the FS scheme closed and you started in the new scheme?
• Your "final salary" in 2008 must have been well above national average income levels for you to have accumulated another £200,000 in pension pots since then.

That may not be a correct deduction, but it would seem a fair guess that the FS scheme benefits will have high value not just to you as an individual, but in average terms relative to all private pensions.
I am aware of a bank employee scheme which was an excellent FS scheme until around 2008-2010 and was continued as a generous DC scheme and which routinely reports two separately identifiable pots within the new DC part. Because the union representation is strong, and many of the bankers whose main pension promises lurk inside the FS scheme are pretty cute, and no easy pushover, the CETVs are very good in 2015

One of your three pots may be a SERPs contracted out policy - you mentioned a previous employment - although it isn't immediately clear where you squeezed in the previous employment if the FS scheme started when you were aged 16! Two jobs at one point perhaps?

And you are not sure if you transferred a pension from the previous employment into your FS scheme or into one of the other pots?

Before you go any further with any IFA, apart from getting a new CETV quote rapidly for the FS scheme (and a normal retirement illustration to compare with the CETV) I'd first continue to provide as much detail as you dare in this forum and try to educate yourself from the very varied and valuable spectrum of answers and opinions you will get.

happyandcontented

Yes, I realised we were a good prospect from some of the comments made, but my gut feel was that he was trustworthy and knowledgeable and he was reccomended by two sets of friends who have dealt with him for several years.

I think one of the pots is a SERPS pot.

No union involvement in my case, although there is a union.

I worked for the same company from 16 till 24, was made redundant went to another firm who also had a final salary scheme, worked there for 2 years then went back to the original firm and have been there ever since. It is the 2 years with the other company where I am not sure what happened to the pension conts.

Aegis

kidmugsy wrote: »

That is simply wrong; I do wish people would stop saying it. The truth is that the remainder will be taxed as income, which is a plain different thing.

People who don't understand the expression "marginal" (including, apparently, G Osborne) should stop using it. In their hands it's a misleading affectation.

I'm not sure this is relevant in this thread at all. That said "taxed as income" is more misleading, as income is taxed differently depending on the regime it falls into. Earned income and pensions are taxed differently to dividend income and differently again to ISA income, etc. "At highest marginal rate" is a good explanation because it shows that you add this to your other taxable income and look up the progressive rates of taxation for that type of income, starting at the highest rate you previously paid before earning this tranche of income.

To say "this is simply wrong" when all you disagree on is terminology is at best not helpful and at worst entirely misleading, especially as you quoted an entire section which dealt with the 25% tax free cash to disagree with only a small aspect of the section.