Transfer value

BIGEYE

I have a final salary pension with my previous employer and have been advised that the transfer value is just over £100k. Can anyone advise in layman's terms what a transfer value is, and what can I do with it? In real terms, is this transfer value actually mine and will I get my hands on it?

My thoughts are that this is a value that can only be used to transfer to another scheme or invest. There are so many 'pension advisors' out there, it's a minefield. How do I get the correct advice with a reasonable degree of confidence?

molerat

Yes, it is the value to transfer to another scheme. How old are you ? If under 55 you cannot "get you hands on it", it must be transferred to another registered pension provider. You need to speak to an IFA who is qualified in defined benefit transfers who will explore if it makes financial sense to move it. Expect to pay several £K for that advice even if you choose not to go ahead. Why do you think it would be a good idea to move it from the current scheme ?

BIGEYE

I'm 61, and weighing up options. There are a few other guys that have transferred and are getting good returns on their investment.
My thoughts are that when I retire, the final value of my transferred pension will be worth more as a lump sum than an annual pension.

xylophone

https://www.moneyadviceservice.org.uk/en/articles/transferring-out-of-a-defined-benefit-pension-scheme

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


https://www.handbook.fca.org.uk/handbook/glossary/G856.html

GunJack

BIGEYE wrote: »

I'm 61, and weighing up options. There are a few other guys that have transferred and are getting good returns on their investment.
My thoughts are that when I retire, the final value of my transferred pension will be worth more as a lump sum than an annual pension.

Just bear in mind it won't be a £100k lump sum - only 25% can be taken tax-free, the rest would be taxed if you took it out of a pension all at once, at your marginal rate...could cost you circa £30k in tax to take it as one lump sum, you'd need to look at drawdown or annuity purchase for the other £75k.

AnotherJoe

What would the annual pension be that you'd be giving up? What would you do with the £100k? Spend it on something particular (as said it would need to be spent gradually to avoid paying too much tax) or invest it to provide an income?

Marcon

See https://www.pensionsadvisoryservice.org.uk/about-pensions/when-things-change/uk-transfers

TPAS also give free, impartial information (but not financial advice - i.e. they won't be able to comment on whether transferring is a good idea for you) if you need to chat anything through to help you understand it better.

Silvertabby

AnotherJoe wrote: »

What would the annual pension be that you'd be giving up? What would you do with the £100k? Spend it on something particular (as said it would need to be spent gradually to avoid paying too much tax) or invest it to provide an income?

AnotherJoe is right - a £100K transfer valuation is meaningless without details of the guaranteed for life pension (and possibly widow's benefits thereafter) that you would be giving up.

I know that £100K sounds like a lot of money to you, but in pensionspeak it really isn't - especially at your age.

sandsy

Without knowing what you'd be giving up, it's impossible to say if £100k invested elsewhere is likely to be better for you. How comfortable are you investing money and watching it go up and down in value? Do you have other retirement income provision if you outlive the income you would want to pull out from £100k? It's not just about monetary values either - many people like the peace of mind that a secure inflation-linked lifetime income brings. There's a reason people refer to final salary pensions as gold plated.

An adviser will run through all of these things with you before recommending whether, in their opinion, you should keep the final salary pension or transfer it out. With a value of that size, you must (by law) pay for financial advice. You'll be looking at around £3000 minimum probably for that advice which is highly specialised - that's 3% of your pot gone already. Then you'll incur other charges if you transfer (which wouldn't be the case in a final salary scheme).

Educate yourself on the pros and cons of transfers before seeing an adviser so you can ask pertinent questions. As mentioned above, TPAS is a good source of generic information and provides free guidance (but not regulated advice).

kidmugsy

BIGEYE wrote: »

There are a few other guys that have transferred and are getting good returns on their investment.

This is an example of how careful you need to be about the tense in which you think. What you ideally should have said is "There are a few other guys that have transferred and have got good returns on their investment."

It's "have got" because it's a past tense - you know only what they have got up to (say) Friday afternoon. But what you'd like to know is how much they will get over the next (say) thirty years.

Even more important in many ways, you'd like to know what they will get over the next five years. That's because if their investments go through a large slump in the next five years they may never recover the lost ground during the rest of their lives. The technical term for this problem is "sequence of returns risk"; it's a big deal for the retired. If you have a preliminary chat with an IFA be sure to see whether he can discuss this problem intelligently with you. If not, don't hire him.