Do we need a financial advisor

Pheaps

My husband is due to retire in six weeks (6 months early) and will take his DB pension (£12K pa) and work a bit part time. We have had an initial free consult with an IFA about his other 2 pension pots which we don't know what to do with. I rely on my state pension which has just started to be paid. We don't know whether it's worth paying the IFA £1000 fixed fee to search the whole market for an alternative to the DCs. We intend to put some more (£16K) out of earned income into one of the pots or a new scheme eg a SIPP (before he starts to take anything). One of the pensions is Onefamily ( ex Engage, ex Ecclesiatical/Allchurches), and the other is a Prudential bulk annuity (deferred) arising from a purchase by a DB BEC scheme which had promised to escalate at 3% pa whilst in payment. 3% pa. The annuity, worth about £40K offered by the Pru will increase with LPI, so we will query as to why it is not a guaranteed rate of 3%. The Onefamily pot is invested with Amity UK which has performed very well in the last few years. We intend to take the 25% tax free from both pots, but feel inclined to leave the rest of the annuity with the Pru , especially if we can get back the 3% deal. The Onefamily is worth £30K. The IFA advised against a SIPP but we are not sure why (maybe because of risk and dealing) as we would be considering a flexible drawdown product anyway, perhaps re-investing in the Amity fund. As we have never dealt in stocks and shares before, but would be interested in learning (my husband is a company accountant) and dabbling in the next 10 years or so, do posters think we would be wise/unwise to do our own research now and manage things ourselves in the future?

dunstonh

We don't know whether it's worth paying the IFA £1000 fixed fee to search the whole market for an alternative to the DCs.

if you intend to buy an annuity then an IFA charging £1000 is likely to be cheaper than DIY via the internet if the fund is above £20,000.

The IFA advised against a SIPP but we are not sure why (maybe because of risk and dealing) as we would be considering a flexible drawdown product anyway, perhaps re-investing in the Amity fund.

SIPPs are geared to experienced investors wanting more advanced options. Does that fit you?

do posters think we would be wise/unwise to do our own research now and manage things ourselves in the future?

Using an IFA or going DIY is like any job. Should I do my own accounts or use an accountant? Should I decorate my lounge or pay a decorator. Should I fix my own car or pay a mechanic.

If you can DIY and do it well then you can save money. if you DIY and do it badly then it can cost you more than getting someone to do it for you. Only you can decide if you have the time and inclination to learn about it.

kidmugsy

Pheaps wrote: »

My husband is due to retire in six weeks (6 months early) and will take his DB pension (£12K pa) and work a bit part time. We have had an initial free consult with an IFA about his other 2 pension pots which we don't know what to do with. I rely on my state pension which has just started to be paid.

Unless you are in poor health or from a short-lived family, you would probably be wise to suspend your State Pension ("pension deferral" they call it) because that pays a wonderful return - 10.4% extra pension for each year of deferral. Meantime you could replace that income with part of your husband's 25% tax-free lump sums. Similarly, if his state pension age occurs before 6/4/16, he could use the same trick.

Moreover, you should use some more of the TFLS to contribute £2880 p.a. net to a personal pension of some sort for yourself - that's £3600 p.a. gross. The reason is that you'll get tax relief on the way in (even though you probably won't actually have paid any tax) but, with your small annual income, you'll be able to take it out later without paying tax on it.

With your husband's accountancy background you should be able to run your own pensions with less trouble than many people. I'm not too impressed by your IFA if he can't explain "why it is not a guaranteed rate of 3%".

xylophone

The Bulk Annuity is not a DC pot?

Your husband had a deferred Defined Benefit Pension but the Trustees
paid a premium to the Pru who have taken on the liability?

Presumably you cannot make additional payments to the policy?

What would be the value of the annuity and how would it increase in payment?

From what age would it be paid?

How old is your husband now? Is he already drawing his state pension or has he deferred it? Or will he become eligible for State Pension in the New State Pension scheme?

Would it be worth your considering deferring your state pension ( you can do this even after having started it) and your husband drawing down the Engage pot to replace it?

Even though you are a non earner you could contribute up to £2880 net (£3660 gross) to a pension and receive tax relief.

Pheaps

Thank you everyone, I'll definitely look into putting £2880 in a AVC ( I have a very small Teacher's Pension) And when we have moved house (expensive!) I'll suspend my state pension. Unfortunately my husband just falls into the new state pension scheme so wouldn't benefit so much from deferring (half the rate I believe). Had a new statement from the Pru today and it looks like we'll have to have the IFA sign it off anyway as the benefits are 'guaranteed' as it derived from a DB scheme. (And my husband's current DB scheme won't allow any transfers in) And yet they are not honouring the 3% increase in annual payments under the old BEC scheme. No increases at all during retirement under the Pru. They didn't even work out for us the re-valued amount that would be paid out p.a. Just gave us the amount from 1988 that would be re-valued in line with RPI ( which we knew anyway). I think we will be getting the IFA onto it. Thanks again!

xylophone

Your TPS pension is already in payment?

Your husband was a deferred member of the BEC Scheme? When was he a member? Was the Scheme contracted out and if so was much of the deferred pension pre 88 GMP?

Are you saying that the Pru pension is revaluing in deferment but will not increase in payment?

Is your husband) seeking to transfer the Pru policy and the Amity policy to (say) a SIPP and then to contribute as much as possible before he becomes a non earner or his earned income is much decreased?

Pheaps

Thank you form your questions xylophone. Your TPS pension is already in payment? - No, still trying to get past contributions accurately credited, before I consider when to take it!
Your husband was a deferred member of the BEC Scheme? When was he a member? Was the Scheme contracted out and if so was much of the deferred pension pre 88 GMP? - He was a member only pre 1988, I think for about 6 years. He was contracted out, and the part BEC were saying that is eligible for re-valuing (because of the GMB rules) is roughly 50% of the total pa. However more recent letters from the Pru seem to indicate that all of it is being re-valued, but no increases after payment starts!
Are you saying that the Pru pension is revaluing in deferment but will not increase in payment? So it seems. We have queried the latter with them and await reply.
Is your husband) seeking to transfer the Pru policy and the Amity policy to (say) a SIPP and then to contribute as much as possible before he becomes a non earner or his earned income is much decreased? - Possibly - that was his original idea. But we will not be able to contribute much more, such that the annual restrictions won't matter. He will want to replace some of the lump sum contributions he makes by taking the 25% initial tax free lump sum.

xylophone

Regarding the Pru policy, it may be that at the time of the buyout the pension was split into GMP and excess.

It may be that GMP and excess are revaluing as here

https://www.barnett-waddingham.co.uk/comment-insight/blog/2014/08/18/what-is-a-gmp/

https://www.barnett-waddingham.co.uk/comment-insight/blog/2012/07/24/revaluation-for-early-leavers/

Is the pension age for this policy 65?

As all the GMP is pre 88 the Pru would have no obligation to pay any increase on this portion of the pension when it came into payment.

As this policy has guaranteed benefits and seems to be valued at over £30,000, your husband would need to take advice from an IFA qualified in pension transfers before moving it elsewhere.

You continued to teach/ are continuing to teach beyond Scheme Pension Age?

Your state pension shows a contracted out deduction?

If you decide to defer your state pension you should advise TPS if by that time you are drawing your scheme pension.

Has your husband requested a state pension statement?

https://www.gov.uk/state-pension-statement

https://www.unbiased.co.uk/ to search for IFA - there is a filter to find one qualified in pension transfers if required.