Brexit & defined benefit pension scheme

petjoke

Hi,

Advise please. I have a defined benefit final pension scheme which I am planning to cash in sometime in the next 3 months. Will Brexit make a difference? Should I cash in now or wait to accrue a little more pension?

Thanks

AnotherJoe

No one knows. Even if anyone did know what each particular Brexit variant meant, no one knows which sort we'd get or if we even get one.

Have you already started the process? Got a specialist IFA to quote you if its over £30k??

Dazed_and_confused

It may well take longer than 3 months to go through the whole process.

Why have you decided not to take the defined benefit pension you have accrued?

dunstonh

Advise please. I have a defined benefit final pension scheme which I am planning to cash in sometime in the next 3 months.

What is the CETV for this pension?
Are you sure you are not pushing it for timescale?

Will Brexit make a difference?

in theory no. There is no EU specific legislation involved and any that may be is being carried over.

Should I cash in now or wait to accrue a little more pension?

If you are exercising trivial commutation then it will probably take 4 weeks or more. If you are going to need to transfer it out to a plan that then allows you to draw the pension then you are going to need to employ an IFA. You are looking closer to 4-6 months as a timescale.

petjoke

Thank you for all your replies
It's value is about £300,000. I am told the process will only take 2 weeks. I would prefer to wait a few months but will cash it in now if there's a risk.
I just wandered whether the current pension value is protected and only the companies future investments would effect the pension value. ie. to wait won't make mush difference. Alternatively, if all of the pension could be devalued if there's a sudden drop in financial worth then sooner would be better.
I don't know if I am making myself clear?

Dazed_and_confused

No.

A defined benefit scheme pays out according to the scheme rules for example it might be you have 30 years service and it uses a 60ths scheme you get final salary (subject to more specific rules to determine this) x 30/60

What you are proposing is to give that guaranteed income up in return for £300k.

Which you then have to invest and look after yourself or by paying someone to do it. What would you do if next year your £300k turned into £250k (or less)?

Is that what you are intending and if so why do you see doing that as a better option than sticking with your defined benefit entitlement?

dunstonh

It's value is about £300,000. I am told the process will only take 2 weeks.

1 - you cannot cash it in.
2 - it will require a transfer from the DB scheme to a DC scheme which can then be cashed in but you will lose nearly half of it in tax
3 - If will require an IFA to carry out the transaction
4 - You are looking at 6 months and the IFA is likely to reject what you want to do as being suitable.

There is no way on this planet that it will take 2 weeks.

I just wandered whether the current pension value is protected and only the companies future investments would effect the pension value.

There is no investment value on a DB scheme.

I don't know if I am making myself clear?

You do sound very confused and you appear to be considering a potentially daft and financially catastrophic transaction.

HappyHarry

petjoke wrote: »

It's value is about £300,000. I am told the process will only take 2 weeks.

If you have a defined benefit scheme, I'm afraid it's going to take much longer to surrender. I would suggest a minimum of 3 months, possibly as long as 6 months.

Who told you it would only take a couple of weeks?

Alternatively, are you sure it's a defined benefit pension? If not, then a couple of weeks sounds reasonable.


Edit: crossed with dunstonh above

enthusiasticsaver

There will be a cost for the IFA advice. My DB pension I was considering transferring is about 20% of the value of yours and I have been quoted £5000 as the cost for this. Any DB pension over £30k has to have IFA advice before transferring and it will take a heck of a lot longer than two weeks. Who told you that?

How old are you and what is the benefit you will be giving up for that £300k. As for investment prices who knows but it is not invested at the moment if it is a DB scheme. A DB scheme is a promise to pay a certain amount every month so there is no pot to value as such.

Albermarle

When thinking about pensions , it is a long term game with long term implications and something like Brexit is largely irrelevant .
If you really are thinking about transferring out of a final salary/defined benefit scheme , the pros and cons are nicely summed up here:https://www.royallondon.com/media/press-releases/2018/may/five-good-reasons-to-transfer-and-five-good-reasons-not-to-royal-london/

If somebody says it will take two weeks then it must be a scam or you are confused about it being a defined benefit scheme you currently have ,

LHW99

Where has the suggestion to transfer come from? Legitimate advisors don't make statements about "only 2 weeks" for transfer.
If it was an unsolicited phone call, then it would IMO be a scam, and you could lose not just the fees, but could be taxed massively (55%?) by HMRC once you have gone through with the transfer.