Transfer out of Final Salary Scheme

edited 30 November -1 at 1:00AM in Pensions, Annuities & Retirement Planning
25 replies 3.9K views
Retiring1Retiring1 Forumite
13 Posts
I am trying to decide what to do about my pension. I am on here under a different name from usual as I am posting quite a lot of personal information.

I am 63, husband 67, been together forever and share everything equally. We are both active and in reasonably good health (both on low dose tablets for blood pressure) although his parents died at 63(M) and 66 (F) and mine at 82(M) and 63(F). I was the higher earner and have better pension provision. His total income, from final salary and state pension is about £11k. Mine from one final salary scheme is about £19k. We have saved £250k with about 40% in savings and 60% stocks and shares ISAs, mainly Vanguard 60% through their platform. We own outright a house worth conservatively £530k.

I have one further significant final salary pension due from a second employment (see below). I also have a minor local government pension at 65 of £800pa and have checked my state pension and providing I pay about £3K in NI contributions I will have a state pension of about £8k at age 66. That means a joint income of £38k in 3 years time (roughly £33,500pa or £2800 per month after tax at current rates) before considering my second significant pension. Our essential outgoings such as Council Tax, Heating, Lighting, Water, Phones etc but excluding food, car and insurances are currently £550 per month.

I have just enquired about the deferred pension I am due from my second employment. The normal retirement age is 65, if I take it now (as I would like to do, wishing to travel more while we are able) it will be £15,200pa if I don't take a lump sum, with indexation up to 5% and a half pension for my husband were I to die first. The transfer value is £468k.

The scheme is in deficit, in 2015 by £28million, 2016 by £43million and the annual update in 2017 showed liabilities of £623m, assets of £577m and a shortfall of £46million. The company (UK subsidiary of an international company) are paying an additional £10m per annum on top of normal contributions of 6%, and that will be reviewed again in 2019. The parent company are jointly liable to pay all contributions until 2020. The current wind up deficit would be £241million on liabilities of £741m.

I have paid particular interest to the state of the scheme because the £19k pension I already receive should have been more except it went into the PPF when my old firm went bust long after I left. That means a 10% reduction, and very limited index linking for the future. Once bitten twice shy. I had some responsibility for pension schemes in the past and would never previously have considered leaving the safety of a final salary scheme. But I have learned that they are not always so safe and that the PPF has limitations. In particular the real value of my £19k pension will decrease over time as the inflation linking in the PPF is very limited.

I am seriously considering going to an IFA (if I can find one to take me on) and transferring my second pension out into a SIPP on the basis that at least we would be in control of the investments. We have watched our stocks and shares PEPs and ISAs fall and rise over the years without panicking, and on our income and savings we could afford to ride out any down times. We would need to draw down less than the generally acknowledged as acceptable 4%. I am aware that average life expectancy for me is another 25 years at present, with a one in seven chance of reaching 100. We have one daughter and two granddaughters to inherit the house and anything left in due course.

I'd like to ask if there is anything I have missed that I should take into consideration. Also how do I find an IFA I can trust and who would be willing to take my case forward? I would probably manage my own investments, once I'd read up and decided on a suitable investment strategy, although obviously I'm open to advice on that too. We could afford to flex withdrawals downwards in years of poorer performance, using general savings if necessary instead. In addition our willingness to travel as much as we currently wish is likely to decrease as we age.

We think about things very carefully before putting any plans in place and that has served us well so far. Thanks for any comments


  • Daniel54Daniel54 Forumite
    692 Posts
    Eighth Anniversary 500 Posts
    A quick and dirty answer

    As a couple you have significant fixed income from the other DB schemes and the state pensions.

    You also have significant savings ,which you can progressively tax shelter if they are not already.

    You are experienced investors

    So whilst my normal view would be to take a DB over transfer,in your case I can see why it might be sensible to transfer out.

    I will leave it to others to suggest how best to access a suitable IFA ( I found mine through word of mouth ).
  • soulsaversoulsaver Forumite
    3.4K Posts
    Part of the Furniture 1,000 Posts Name Dropper
    What part of the country are you in?

    You probably know, but you'll need to find a pension specialist qualified IFA - which is an additional qualification, so not the common or garden variety.

    When you do get near to finding an suitable IFA it'll likely be the costs that you'll not like...

    I found several suitable IFAs & transferred my DB scheme out to sipp for £2.5K equivalent to 0.8%. So that'll give you an indication of what can be achieved or maybe you can do even better?

    But it was better than the £11k-13k I was quoted by most.

    I found them & a couple of others at that lower price (using albeit your pot is a bit bigger. PM me if you can't find someone suitable & you want the names of the people I used.
    241 Posts
    Ninth Anniversary
    We are quite a bit younger than yourselves, 53 and 56 when retired 2 years ago. Hubby took DB pension and I am a home maker.
    I decided to transfer my DB as we can manage comfortably on hubbys and until my retirement date if anything had happened to me he would have just got my contributions back.

    I contacted some local IFA's and firstly asked if they had the permissions needed to do the DB transfer, then had meetings with three to see whether I felt comfortable with them, I knew that they wouldn't give any advice at these meetings.

    The first one was discounted straight away as his company did not have permissions but they would get another company that they worked with do the transfer on their recommendation, I was a bit annoyed at this as I had specifically asked about this. The other two both had permissions and I went with the adviser that I felt most comfortable with ie no mention of investing our savings at the same tome whereas the other wanted to handle everything and charge handsomely.

    She also had the later life qualification as well.

    I was charged 1.5% of the transfer value and 0.5% going forward, I never felt pressurised at any time and it took me about 9 months of meetings and queries to finally make the decision. The pension has been invested very cautiously and at the first six month meeting it had made up the commission and was showing a gain of about £3,500.

    I know the value can go up and down but as the funds are not needed for income I am hoping to leave as an inheritance for our children.
  • Thank you for this, I may call on your help. Our nearest city is Canterbury
  • I am concerned by your timescale as I understand the TV will only apply for a limited period, I think I need to sort this quite quickly
  • LHW99LHW99 Forumite
    3.2K Posts
    Ninth Anniversary 1,000 Posts Name Dropper
    Just a comment - from other threads I have read, it may nowadays be easier to find an IFA who will do the transfer if you let them put it into their preferred investments initially, and then in a couple of years transfer out to your own arrangements, if at that stage that is still what you prefer.
    It appears that self management can be regarded as a reason you shouldn't transfer, due to the ongoing liabilities for the IFA and the line taken on transfers by the regulators.
  • edited 1 August 2018 at 9:35AM
    Retiring1Retiring1 Forumite
    13 Posts
    edited 1 August 2018 at 9:35AM
    Ok, I would be happy to do that if it makes sense, although I would prefer not
  • MalthusianMalthusian Forumite
    9K Posts
    Sixth Anniversary 1,000 Posts Name Dropper Photogenic
    LHW99 wrote: »
    It appears that self management can be regarded as a reason you shouldn't transfer, due to the ongoing liabilities for the IFA and the line taken on transfers by the regulators.

    To be more exact, there is nothing wrong with self management but the issue is that the IFA has to find out what assets you intend to invest in and then do due diligence on them to make sure they are suitable. As your preferred investments will almost certainly not be ones they've used before and already researched, this often comes at an extra cost.

    If you transferred on this basis and the IFA had signed off your preferred investments, but you subsequently found they weren't suitable, the IFA would be liable. If on the other hand you transfer into the IFA's preferred investments, then subsequently switch them against the IFA's advice, the IFA would no longer be liable (although you never know with the FOS).

    "I recommend you transfer so you can self-manage your money" is an automatic mis-sale.
    241 Posts
    Ninth Anniversary
    Retiring1 wrote: »
    I am concerned by your timescale as I understand the TV will only apply for a limited period, I think I need to sort this quite quickly

    The reason it took so long was I had problems with getting the CETV value in the first place as it had to go to the trustee, and she sat on it for over a month.

    Also I wanted to ensure that I didn't rush such an important decision so ended up getting another CETV value after 12 months, I was lucky that the value had increased by about £6K but my take was that if it had changed hugely then I would not go ahead.

    I am in the North West so bit far away for recommendations
  • Officer_DibbleOfficer_Dibble Forumite
    124 Posts
    Part of the Furniture 100 Posts Combo Breaker
    I used Tideway for a transfer (fairly similar situation - keeping a second DB scheme) that's just going through. 1% charge, then 0.75% "wealth management" ongoing. Excellent efficient process with them - I did go into their office (London Victoria) once for a meeting, but I think they'll also do them over the phone.

    They won't transfer into a DIY SIPP these days (the FCA weren't keen - thanks FCA), and even though they've recently reduced their ongoing fee from 1%, I don't think it's reasonable for portfolio assessments and adjustments that should take at most a few hours a year. You can transfer out a few months later though, subject to a minimum 0.5% charge.
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