Retiring Soon Do I Stay In Scheme or Tranfer Out

Soreneck

Hi everyone,
Your help and advice would be appreciated I’m sorry if this as already been covered I have tried searching the forum but no joy. I am retiring soon at 55 on quite a good annual NHS pension of £18000 with a lump sum of £55000, but my financial advisor is asking me to consider transferring the total fund of £290000 to a ‘unsecured pension scheme’ which would give a lump sum of £71000 and a maximum pension of £15000 then converting it to annuity at age 75. I’m sure it’s a very good scheme and I can see the advantages but I’m not sure they out way the security of a regular £18000 a year which would be linked to future pay increases and last as long as I and the wife do, which hopefully could be quite some time. It’s a big and important decision to make and important to get it right. What have others done in the same position and have they made the right choice?

Mortgage_&_debt_free

I have never heard of anyone giving up an NHS scheme for a better one 'cos unless you are an MP there probably isn't a better one.

I am assuming it's a final salary scheme, but if it is the nominal fund value would be a lot more than £290000, probably around 360,000.

Be very careful - you could be giving up a guaranteed pension which on your figures is giving you 6.2% p.a. index linked for nil risk, as well as other benefits that the NHS pension offers.

Why would you consider taking such a risk at your time of life?

There are loads of stories of people in the '80s who were persuaded out of the NHS & lost £000s and had to go through hell to get reimbursed.

If you want to do something talk to your scheme administrators and get the full picture on what you would be losing if you transferred out.

HTH

dunstonh

Judges have the best pension. Apart from that, the NHS scheme is pretty much up there.

There are loads of stories of people in the '80s who were persuaded out of the NHS & lost £000s and had to go through hell to get reimbursed.

There has been some back tracking on that recently with the person that set up the pension review admitting that too much redress/compensation was paid to people that were encouraged to lie about why they left the schemes.

An occupational pension transfer is high risk. To go drawdown is high risk. You are doing both together here. Whilst there are a few advantages, there are certainly disadvantages as well. I would suggest you verify the qualifications of the adviser as they should have diploma level to do this (G60 minimum) and I would ask for a report in writing before you do anything. A transaction like that should be a 20-30 page easily.

If you want to do something talk to your scheme administrators and get the full picture on what you would be losing if you transferred out.

They are not allowed to give advice.

EdInvestor

I would suggest you verify the qualifications of the adviser as they should have diploma level to do this (G60 minimum) and I would ask for a report in writing before you do anything. A transaction like that should be a 20-30 page easily.

You can also get him to tell you how much commission he is expecting to make from the deal.That will probably be helpful in understanding his motivation.

Mortgage_&_debt_free

dunstonh wrote: »

Judges have the best pension. Apart from that, the NHS scheme is pretty much up there.



There has been some back tracking on that recently with the person that set up the pension review admitting that too much redress/compensation was paid to people that were encouraged to lie about why they left the schemes.

An occupational pension transfer is high risk. To go drawdown is high risk. You are doing both together here. Whilst there are a few advantages, there are certainly disadvantages as well. I would suggest you verify the qualifications of the adviser as they should have diploma level to do this (G60 minimum) and I would ask for a report in writing before you do anything. A transaction like that should be a 20-30 page easily.



They are not allowed to give advice.

Hi Dunston

Just to clarify, I wasn't suggesting they could give financial advice, but that they could state the facts re what the benefits of the scheme are, as many people are unaware of the full range of benefits their pension offers.

dunstonh

Mortgage_&_debt_free wrote: »

Hi Dunston

Just to clarify, I wasn't suggesting they could give financial advice, but that they could state the facts re what the benefits of the scheme are, as many people are unaware of the full range of benefits their pension offers.

The problem is that they will only provide factual information about the scheme. They wont have a clue what income drawdown is or how the occ scheme stacks up against the drawdown arrangement.

Occupational pension administrators have been scared of proving advice or opinion for some time and any question which even sounds like it could be interpreted as advice or opinion usually sees most of them say "you need an IFA to tell you that".

If you have a scheme booklet and a benefits statement, then you have the same sort of information a pension adminstrator will give you.

We have to be really careful here as the assumption is that the advice is bad. However, there are benefits and the outcome could see a higher income later in retirement as well as the initial benefit of a higher lump sum to begin with. If the risks are being dealt with, discussed and considered but the benefits of drawdown still come out on top then the advice is good.

EdInvestor

Before doing anything mad like transferring out from the NHS scheme into drawdown, ask for an opinion from the people here: https://www.thepensionsadvisoryservice.org.uk They are experienced in both occupational and private pensions.The advice is free and not commercially biased.

EdInvestor

Before doing anything mad like transferring out from the NHS scheme into drawdown, ask for an opinion from the people here: https://www.pensionsadvisoryservice.org.uk They are experienced in both occupational and private pensions.The advice is free and not commercially biased.

Retired_I.F.A.

May as well ask the milkman as the p.a.s. he's just as legally allowed to give advice.

dunstonh

EdInvestor wrote: »

Before doing anything mad like transferring out from the NHS scheme into drawdown, ask for an opinion from the people here: www.pensionsadvisoryservice.org.uk They are experienced in both occupational and private pensions.The advice is free and not commercially biased.

They still cannot give advice.

It may or may not be mad. We dont know enough facts.

Soreneck

Hi guys
Thanks, Dunstonh, Mortgage & dept free and EdInvest for your responses I must admit it sounds risky compared with the comfort of the NHS pension that’s why I thought I would run it by the forum.

I am intending to work part time on a casual basis after retiring. If I stick with the NHS pension by paying off loans and the mortgage being only £10,000 from Sept next year I could probably put £400 pounds a month into savings or investments.

The two main benefits that my IFA points out are –
(1) If I take a lower annual income than the maximum allowed in the USP I would be paying less overall to the taxman on my pension and earnings. (I could probably manage on £13,000 pa with part time work but with a much reduced capacity to save)
(2) The pension fund money is available to my wife on my death and subsequently our children.
The projected figures for the USP scheme at 5% show a potential growth in the fund to £418,000 after 20 years at age 75. This would then be used to purchase an annuity giving an income of £33,400 pa.
Obviously this depends on the state of the financial markets over that time and could be higher or lower.
The IFA would receive £15,000 to 20,000 in the first year, the amount will be deducted from the scheme, this seem rather a lot to my mind.