Final salary pension transferred to private

lorrainer58

Hi


Back in my thirties when I knew no better I was advised to transfer my north west water final salary scheme pension to a private Scottish widows pension plan.


It had a transfer value in 1988 of approx. 7k.


Back in 1991 I was informed that the transfer shouldn't have been advised as I was mis sold and so they offered a GMP which I accepted.


For years the annual statements have shown a very low value until I raised the question with them about the GMP. As the private plan doesn't normally hold any GMP items, whenever I ask for information I get passed around the houses.
Anyway I now have a value and I have to now think about buying an annuity.
So facts
1. In 1988 I would have had a pension fund which would have paid a lump sum of 4412k together with an annual pension of 1470.
2. In 2017 this has now been revalued at a lump sum of £8990 plus an annual pension of £6750.
3. The transfer value in 1988 was 7598
4. The transfer value in 2017 was 36999


The fund appears to be 5 times the value? Not sure how I find out if this is right over 30 years.


If I look to buy an annuity to pay this do I use the transfer value as the "pot" value or is a transfer value normally less?


I am able to take this in full without loss in March 2018. I am just planning my finances to see if I can go part time and really need some good advice.
My next step is independent financial advise but wanted to see if anyone else here could help me


Many thanks


Lorraine

xylophone

Do you mean that you have a S32 policy with SW and that they are offering you a lump sum and an annual pension?

If so, what has been said about escalation in payment?

lorrainer58

I guess thats what I am saying - I am waiting for the latest statement and then I have to buy an annuity to get my pension and lump sum

Not sure I understand what you mean by escalation of payment

xylophone

You are sure that you have to buy an annuity rather than SW paying a lump sum and then an annual pension?

Escalation is the increase (usually annual and inflation linked) of a pension in payment.

https://www.pensionsadvisoryservice.org.uk/about-pensions/retirement-choices/pensions-in-payment/annual-increases

As you seem very unsure of your options, taking advice from an IFA could be your best course of action.

https://directory.moneyadviceservice.org.uk/en

Have you obtained a state pension statement?

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

Tom99

[FONT=Verdana, sans-serif]Are you saying your existing provider will give you a lump sum of £8,990 and an annual pension of £6,750 but you have the option of transferring this pension elsewhere at a transfer value of £36,999?

[/FONT] [FONT=Verdana, sans-serif]If so that is incredible poor value, I don't know what current transfer values are but if you are near retirement I would not be surprised if it was 30x the annual pension not 5x as in your case.[/FONT]

chucknorris

Tom99 wrote: »

[FONT=Verdana, sans-serif]Are you saying your existing provider will give you a lump sum of £8,990 and an annual pension of £6,750 but you have the option of transferring this pension elsewhere at a transfer value of £36,999?

[/FONT] [FONT=Verdana, sans-serif]If so that is incredible poor value, I don't know what current transfer values are but if you are near retirement I would not be surprised if it was 30x the annual pension not 5x as in your case.[/FONT]

Yeah I agree, that just can't be right, I'd say the value is more like something over £200k (assuming that the £6,750 is index linked).

sandsy

Assuming these figures are correct, it’s an absolute no brainer to take income of 6750. It’s worth way more than the fund value of 36999.

The lump sum figures look strange. In 1988, the lump sum was 3 times the income. Now it’s a around 25% of the fund value - might be worth checking if the old methodology can still be applied.

However, given these options, it’s also worth checking what the income level would be if you took no tax free lump sum given the income conversion rate appears so high.

bigadaj

sandsy wrote: »

The lump sum figures look strange. In 1988, the lump sum was 3 times the income. Now it’s a around 25% of the fund value - might be worth checking if the old methodology can still be applied.

The first methodology is standard for many db pensions, the latter for most if not all DC schemes.

If the numbers are correct then it shows the value of historic guarantees, and the impact that has on providers, especially where they have invested conservatively.

Absolute no brainer to take the income on those numbers.

AnotherJoe

Take note of what Sandys said about asking if you can take the lump sum part as income instead if ut follows the same maths it would be a no brainer to do that also

lorrainer58

thanks everyone. I don't really want to move it - I assumed it would pay those values. However SW are telling me that I have to buy an annuity, so I have asked for an updated statement and also a fund value rather than a transfer value.
I thought it rather low and as it had a GMP added I need the 6k per year plus the tax free lump sum. The letter should arrive any day now - so still lots to discuss and of course I think I do need an independent advisor but just thought id ask the question here first

L

Tom99

lorrainer58 wrote: »

thanks everyone. I don't really want to move it - I assumed it would pay those values. However SW are telling me that I have to buy an annuity, so I have asked for an updated statement and also a fund value rather than a transfer value.
I thought it rather low and as it had a GMP added I need the 6k per year plus the tax free lump sum. The letter should arrive any day now - so still lots to discuss and of course I think I do need an independent advisor but just thought id ask the question here first

L

I don't understand, how can the say you have to buy an annuity when they have already given you figures for your annual pension? Where does the lump sum and £6750 pa come in to that?