Unfortunate but necessary query

geelamch

Recently been diagnosed with tumours . Awaiting treatment plan.
Not entirely the end game but it's time to make sure the financial side of things are in order.
Age 50
Married
Male
Salary 43000
Fs pension (rail)

No debts or money issues.kids grown up and doing fine.

Wife 41
Salary 21000
Company pension ,contributions with employer combined £500pm
Employed 16 years

Acceptable scenario , recuperation of 24- 30 months
Employer in likely hood will not accept this .usually a years salary and a boost to pension of 10 years or enough to take me to the 40 year mark ,( mine would be 9 years boost ).

Worst case scenario would be unknown time frame.
I know I will need the advice of ifa however would a transfer of fs be a better option for my wife ? Death benefit is 4x salary £170000 and all avc (£48000) and 50% of pension for wife.
Rough guess at my annual pension would be around £22500

I am aware this is worst case but if I was to become more "sick" then events may over take me and could possibly lose out on a better deal for my wife , I would add that my employer has been very good to me and has assured me he will assist me in getting the best deal he/we can.

Kynthia

If your FS pension scheme is like mine I'd guess that your annual benefits statements are a simple document which isn't completely accurate. If so then it might be worth getting them to do you a full quote, which means they'd work out more accurately what you'd get and what your wife would get. Plus at the same time you could apply for a CETV figure if you are wanting to take that to an IFA.

You're saying your wife would get 50% for life plus 4 times your salary if you're still in service I'd the worst happens. Is that indexed upwards based on CPI each year?

Do you have any other insurances? Is your mortgage paid off? How much would your wife need and would you want to leave anything directly to your children?

Sounds like you have a good employer and you'll be okay financially if the acceptable scenario is the outcome? I hope things go well.

ex-pat_scot

Blimey!


Very sorry to hear of your circumstances. I hope the outcome is positive for you, and that the treatment is as good as it can be under the circumstances.


You state "employer in likelihood will not accept this". Do you mean that you anticipate asking them to give you early retirement on the grounds of ill-health?
It's good to hear that your employer has been supportive. The last thing you need is an awkward employer.


Your Death In Service benefit is useful, but only is relevant whilst you remain in employment. (obvious, but I thought I'd clarify!)


You ought to explore your FS pension scheme detail on the widow benefit angle - In very broad terms how much would she get if (a) you retired then were to die (50% of your pension?) or (b) before you were to retire (full transfer value?)


You also should consider setting up some sort of "enduring power of attorney" in case of your incapacity - it would allow her (or someone else) to make financial decisions on your behalf, if you were unable to do so.


As I see it (and DYOR), you have the following options:


(1) try and effect an early retirement, drawing your FS pension. Your wife would normally get a reduced percentage if you died.
(2) muddle on without accessing your FS pension. If you died, then your wife would get the full transfer value (I believe)
(3) you could transfer out of the FS scheme and buy an "impaired annuity" - with enhanced rates for people with specific illnesses. (NB I am not recommending this!)
(4) you could transfer out of the FS scheme and draw down, leaving the balance in the pot. (you might be able to access this before 55, if you can demonstrate critical illness).


Transfer out of FS is cumbersome, because it's rarely in the customer's best interest. You would need an IFA to advise (a receiving scheme would not allow a transfer without showing you have had advice, and few will accept any transfer from a DB scheme).




There are indeed lots of issues to consider. Inheritance tax is one issue, as is cashflow. You will also need to consider the impact on your wife's work, if she has to take a break to look after you during the treatment / convalescence, and the corresponding challenge to your family income. Also that the administration to effect any desired changes can take quite a bit of time and effort.


The thing to bear in mind through all this challenge is that you have a sound base - both yourself and your wife.


best wishes

geelamch

Kynthia wrote: »

If your FS pension scheme is like mine I'd guess that your annual benefits statements are a simple document which isn't completely accurate. If so then it might be worth getting them to do you a full quote, which means they'd work out more accurately what you'd get and what your wife would get. Plus at the same time you could apply for a CETV figure if you are wanting to take that to an IFA.

You're saying your wife would get 50% for life plus 4 times your salary if you're still in service I'd the worst happens. Is that indexed upwards based on CPI each year?

Do you have any other insurances? Is your mortgage paid off? How much would your wife need and would you want to leave anything directly to your children?

Sounds like you have a good employer and you'll be okay financially if the acceptable scenario is the outcome? I hope things go well.

Hi,
I believe the pension is CPI indexed, no mortgage and kids in my will. As I said we are OK money wise at the present, got a few little stashes so to speak. Just want to make sure I wouldn't leave her with problems.

PensionTech

Transfer out of FS is cumbersome, because it's rarely in the customer's best interest. You would need an IFA to advise (a receiving scheme would not allow a transfer without showing you have had advice, and few will accept any transfer from a DB scheme).

In most circumstances, yes, but in the OP's case it could secure the best possible death benefit available for his wife. £22500 is a heck of a pension and for a 50yo, the transfer value would probably be in excess of £300k, plus the £50k AVC. Obviously this is an alternative to the death in service and the spouse's pension. The value of those two things together could be worth more than your transfer value, but if the OP leaves the company at any point (through retirement or otherwise) and then passes away afterwards, the DIS goes and the 50% spouse's pension will probably be worth much less than the transfer value of the original pension. The transfer being cumbersome is not, in this case, much of an issue - there is easily enough money at stake to make it worthwhile forking out a grand or two for an IFA, and I think many IFAs would be happy to advise the member on a transfer in this particular circumstance.

OP, I assume you'll have some notice if things start to go south. I'd hang tight for now if you can stay employed, because transferring out and leaving active accrual would probably be a bad idea for you if things improve health-wise, but if it starts to look terminal or if you have to leave work for any reason then I would do the following:

a) Obtain a transfer value (you may have to pay for this if you're still employed, because active members don't have an automatic right to transfer values)
b) Speak to an IFA about whether or not you should transfer to a personal pension (you will definitely have to pay for this, but it will be worth it)
c) Listen to what they say - but as a guide, if the transfer value is over, say, £350k, then I would be leaning towards transferring out. If you can't stay employed until you pass away (and would you really want to?), then you lose the death in service benefit and the spouse's pension on its own won't be worth nearly as much as the transfer value in a personal pension (which can be passed on tax-free). Even with the death in service benefit intact, a transfer value over £350k could outstrip the value of the scheme benefits.

Best of luck with your treatment - feel free to ask more questions if you have any.

jamesd

geelamch wrote: »

I know I will need the advice of ifa however would a transfer of fs be a better option for my wife ?

Almost certainly better for her in your situation if you were to die before a long retirement. She'd inherit 100% of the transferred pension pot value tax free or you could take it all as a tax free lump sum at whatever point medical advice is that you have no more than a year to live.

If you don't die but instead have a high chance of living a long life then it would probably not be in your best interest to transfer, so getting ready to do it but not doing it until it is clearer that you might actually die would probably be the optimal course.

If the employer boost is available without taking the income from the work pension it would probably be sensible to get that boost before starting the transfer process.

Those who have greatly reduced life expectancy are a major group for whom a transfer out of a final salary pension scheme is likely to be good advice that an IFA could comfortably give, even more so at a point where doctors are giving a life expectancy of less than a year. Anecdotally, though, it's still hard to find willing IFAs so starting that search early would be a good move.

geelamch

PensionTech wrote: »

In most circumstances, yes, but in the OP's case it could secure the best possible death benefit available for his wife. £22500 is a heck of a pension and for a 50yo, the transfer value would probably be in excess of £300k, plus the £50k AVC. Obviously this is an alternative to the death in service and the spouse's pension. The value of those two things together could be worth more than your transfer value, but if the OP leaves the company at any point (through retirement or otherwise) and then passes away afterwards, the DIS goes and the 50% spouse's pension will probably be worth much less than the transfer value of the original pension. The transfer being cumbersome is not, in this case, much of an issue - there is easily enough money at stake to make it worthwhile forking out a grand or two for an IFA, and I think many IFAs would be happy to advise the member on a transfer in this particular circumstance.

OP, I assume you'll have some notice if things start to go south. I'd hang tight for now if you can stay employed, because transferring out and leaving active accrual would probably be a bad idea for you if things improve health-wise, but if it starts to look terminal or if you have to leave work for any reason then I would do the following:

a) Obtain a transfer value (you may have to pay for this if you're still employed, because active members don't have an automatic right to transfer values)
b) Speak to an IFA about whether or not you should transfer to a personal pension (you will definitely have to pay for this, but it will be worth it)
c) Listen to what they say - but as a guide, if the transfer value is over, say, £350k, then I would be leaning towards transferring out. If you can't stay employed until you pass away (and would you really want to?), then you lose the death in service benefit and the spouse's pension on its own won't be worth nearly as much as the transfer value in a personal pension (which can be passed on tax-free). Even with the death in service benefit intact, a transfer value over £350k could outstrip the value of the scheme benefits.

Best of luck with your treatment - feel free to ask more questions if you have any.

Employer said he will definitely give me at least a year 100% salary so will definitely remain employed.
You're right in the comment of not wanting to be at work possibly. Got a wee bucket list that's gonna blow my savings lol.