Transfer from previous employer DC into SIPP

marv_b

Hello,

I’ve recently changed jobs and have taken the opportunity to review my pension arrangements with my previous employer.

The details of my deferred pensions are:

Defined Benefit pension from previous employer (12 years’ contributions)
- Estimated lump sum at retirement age (65): £14.5k
- Estimated pension at 65: £5k p/a
- The above amounts increase with CPI each year. There is a spouse’s pension should I die before reaching retirement age.

Defined Contribution pension from previous employer (2.5 years’ contributions)
- Zurich Occupational Money Purchase Pension Plan
- Current transfer value £17k
- Estimated pension at 65: £1400 p/a
- No provision for spouse’s pension


I’m struggling to see the point of having the Zurich DC pension as it stands, because it seems that aside from the pot of money, there aren’t any additional benefits such as a spouse’s pension. Also, I find the Zurich online platform really difficult to use and the choice of funds is a bit limited. You can see where I’m going with this… is it worth transferring it into my SIPP or are there other aspects to be considered before making that decision?

jamesd

First thing to know, ignore the estimated pension at 65 for the defined contribution pension. It's a projection that assumes the money is blown by spending it to buy a dual life annuity with inflation linking. That is, what is normally one of the worst deals in the annuity market in part because it's such a poor deal that few people buy them so there's also very little competition in the market to add to the pain.

But that assumes that there is no guaranteed annuity rate for it. Is there one? Only likely if it is from before the year 2000. A GAR might be single life, not dual life, or there might be options for both.

Aside from the possibility of GAR or from contracted out money, GMP or perhaps an old with profits setup with final bonus, it's just another personal pension pot. Transfer as you like and it'll make no difference: if you want a spousal income after death you can use drawdown to get 100% spousal income, you can buy a dual life annuity or you can do some combination of the two.

Zurich don't have to offer the full range of options and if they don't you just transfer to a place that offers what you want. They may tall you "you can't" or "that's not allowed" without mentioning the key words "in our product" or "in the product you have with us" but that doesn't mean you can't do it by transferring.

If you were to die before reaching age 75 your spouse or other nominated beneficiar(ies) would get the whole Zurich pension pot as a tax free lump sum. You use an "expression of wishes" form to tell Zurich or another provider who you want to get the money. It's not part of your estate and not governed by your will or the rules of intestacy. From age 75 it's transferred to a pension pot of their own and they can draw the income taxed as normal taxable income for the years in which they take any thing out of it.

jamesd

For the defined benefit pension the thing to know about spousal pensions is that they are usually a poor deal compared to transferring and the spouse then inheriting the whole pot as a tax free lump sum.

But not always. Sometimes it's not a greatly reduced amount compared to what you would get that stops if they ever live with someone else. Sometimes it could be your own level of income for life regardless of who they cohabit with or marry in the future.

Which means that the value of spousal pension depends on the specifics of the scheme.

If you were to know that you were likely to die fairly soon and hadn't taken the pension yet it would be essential to get financial advice before just relying on the spousal pension. Not transferring could cost the spouse a lot of lost future income.

jamesd

And what all of that means is: you pretty much reversed the spousal benefit state of the two pensions, thinking the good one was bad and the probably but not necessarily bad one was good.

LHW99

Could the Zurich pot be transferred to the new employers' scheme?

May be worth finding out if it is possible / beneficial

marv_b

Thank you jamesd and LHW99 for your replies. :-)

The spousal benefits aren't the most important factors to me but I will go away and make sure the expression of wishes is all setup correctly for the Zurich pension.

LHW99 - I will investigate the option to transfer into my new employer scheme.