Transfer out of FS and into SIPP

Mecb096a

Hi,
I am looking for some pension advice, my wife used to work for building society and acrued a small final salary pension that would pay out around £2500 pa (in todays money) when she turns 60 in 9 years time.

Out of curiosity we recently applied for the CETV and have been quoted nearly £160,000.

This is a huge multiplier and hence we have a desire to transfer the cash into a SIPP as part of our plan to retire early.

We would welcome any advice on the best (and ideally cheapest) way to go about this....

Regards

M

Silvertabby

I know CETVs are running high at the moment, but £160K from a £2,500 pension sounds extremely high. I would ask for confirmation that this figure is correct before making any decisions.

Mecb096a

Hi,
We were somewhat surprised with the offer and have spoken to the pension company to check. They comfirmed the number.
M

Silvertabby

Wow - in that case, it warrants some serious consideration! My field is DB pensions, but someone should be along shortly with some other information for you.

dunstonh

And have they confirmed that income level? Or is that based on the original date of leaving and not been updated since?

Silvertabby

And have they confirmed that income level? Or is that based on the original date of leaving and not been updated since? Posted by dunstonh

OP said that the £2500 is in 'today's money' However, I'm still struggling to accept that both of these figures are correct!

Mecb096a

Hi,

Please let me clarify.

According to the info pack that has been sent.

Total Deferred Pension at date of leaving - £1,538,85
Date of leaving - 29th March 1996
Normal retirement age - 60

Total transfer value, including liability for the GMP: £156,936.14
Total GMP cash equivalent/protected rights included above £30,802.54

When the pack arrived we rang the scheme administators with the simple question, " what sum would we receive it we transferred the CETV into a SIPP - they were very clear that the sum transferred would be £156,936.14.

This value is between two and three times what we expected.

To good to be true ?


She is just about to turn 51.

I have calculated what the FS pension would be worth in todays money by simply indexing up with RPI - I appreciate that this may not be a perfect calculation, but it gives a pension in todays money of around £2500.

Am I missing something ?

M

xylophone

You should check on how the deferred pension revalues in deferment and how it is index linked in payment.

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/

Your scheme booklet may have more details.

Have you each obtained a state pension forecast?

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

http://citywire.co.uk/new-model-adviser/news/millions-hit-by-govt-state-pension-forecasting-tool-error/a993805

You realise that the advice of a Pensions Transfer Specialist would be required?

http://www.pruadviser.co.uk/content/knowledge/technical-centre/pension_switches_transfers/

https://www.royallondon.com/Global/documents/GoodWithYourMoney/COMPANY-PENSIONS-FIVE-REASONS-TO-TRANSFER-OUT-AND-FIVE-REASONS-NOT-TO.pdf

Silvertabby

If your wife had been in a public sector scheme, then her £1538.85 on 29 March 1996 would be worth £2571.73 today. Different increase factors will apply in her case - but I can't see it being that much out (will be slightly less if her scheme caps increases at 5%, slightly more if they pay RPI instead of switching to CPI when the public sector did).

I would ask them for an up to date pension estimate and see what they come up with. I don't want to put the mokkers on you, but that transfer value does sound worryingly high. Yes, they've checked their figures and confirmed them - but have they checked that the information on your wife's record is correct?

Mecb096a

Hi,

All of the information that they quote on the info pack is correct. They know her age, when she started, when she left, what service she transferred in, the pack is 100% correct in every aspect.

The only area of doubt is the transfer value - it seems much too high.

I think we will have to go back and check (again)

On the assumption that the number is correct, what is the best way to progress ?

I have made a few tentative enquiries and the local IFAs want to charge a lot of money and transfer funds into a scheme that they normally use- they are talking about fees in the range of 3+%. This seems very high...or is it the norm ? anybody else done it who can offer some experience.....

B

dunstonh

I have made a few tentative enquiries and the local IFAs want to charge a lot of money and transfer funds into a scheme that they normally use- they are talking about fees in the range of 3+%. This seems very high...or is it the norm ? anybody else done it who can offer some experience.....

It is a high risk transaction that historically results in 4 out of 5 cases being classed as mis-sales on complaint. It is just about the highest risk transaction an IFA can carry out for a retail consumer. It requires a specialist adviser too. Only around 1 in 10 have the qualifications and permissions.

If you were carrying a lifetime of liability (yes, the adviser carries it for life, even if they retired 20-30 years earlier) and doing a very high risk transaction, I doubt you would have it priced the same as doing a stocks and shares ISA.

I still have doubts on the figures as it appears from what you have said that you are going by your calculations on the income for todays terms and not a revaluation from the scheme. You expect it to be high at the moment but you may be understating the income.