Final Salary Scheme - what to do with friends advice.

[Deleted User]

I'm sorry if this is repetitive but I had a friend nagging me at the weekend about the above. She has recently transferred a £200k pension pot to Scottish Widows to look after on the advice of a financial advisor her brother knows. I am not sure if it was a F.S scheme or not.


The reason she is nagging me is that she thinks I can do better and have more flexibility if I do the same.


Her main thinking is that as I have no dependants transferring it will allow me to draw down with more freedom than having a set amount per annum. Also if I should pass away a few years after retirement the money is lost whereas an investment can be left in my estate to pass on to whoever I like.


I can see the logic but didn't want to consider anything until my pension age of 58 in 3 yrs time when I will know my figures.


FWIW at the moment the pension is forecasting to be a pot circa £1million so I would presumably have 25% tax free lump sum and the rest to either invest or leave where it is to provide an annual sum. This will have to last me until I die and although I have other assests / income I want it to be safe which is one of the attractions of leaving it be.


What would most people without dependants do and what should I consider before deciding please.

wjr4

Firstly, do not listen to friend's 'advice'[ as what may be suitable for them may not be for you.

Secondly, what annual income will you be giving up, what is the normal retirement age, what is the CETV, how much investment experience do you have, what is your attitude to risk, do you have other pensions? (I could go on....)

p00hsticks

BBH123 wrote: »

Her main thinking is that as I have no dependants transferring it will allow me to draw down with more freedom than having a set amount per annum.

That's rather contrary to the reasons most people give for considering transferring - they give up the guarantee of a fixed income for life because they have dependants that they would like to leave money to if they die young.

If you have no dependants, then your main concern is to ensure that you are as well off as you can be throughout the rest of your life - and unless you have medical issues that mean your life expectancy is lower than average that's usually with a defined benefit pension if you are fortunate enough to have one.

Albermarle

Here are two links to advice giving the pros and cons of transferring out of a final salary pension.
https://www.royallondon.com/media/good-with-your-money-guides/five-good-reasons-to-transfer-out-of-your-company-pension-and-five-good-reasons-not-to/
https://www.moneyobserver.com/final-salary-pension-transfers-scenarios-when-you-should-consider-transferring

Also keep in mind two other issues:
1) You will need to find a qualified IFA to advise you on whether it is a good idea to transfer or not . This is compulsory . It can be hard to find one and then they may run scared of such a big amount . Cost will probably be around £10K for this size pot. If they advise against , you still can transfer but a lot of pension providers will not accept the transfer. It is all about fear of litigation (from you) if it all goes pear shaped in future.
2) The current 'Lifetime allowance ' for a pension is £1,050,000, so you will get affected by this when your transferred pension , hopefully grows. A final salary scheme is more leniently treated and this will not be an issue if you do not transfer.

p00hsticks

barnstar2077 wrote: »

They may not have a DB scheme, he may be referring to going into flixible drawdown instead of buying an annuity?

Well, the title of the thread includes the words 'final salary scheme', so I think we're safe in assuming it's a DB scheme.

Parking_Trouble

A lot of my co-workers have taken £1m+ CETVs instead of a Defined Benefit pension.

It is clearly very tempting and most appear to be doing it.

I chose not to transfer out. I get money in my account every month without having to think about it. It rises by RPI every year (max 5%).

My retired co-workers are paying large sums to have their investments administered/managed and are exposed to market fluctuations which sometimes work in their favour. They don't know how long their money needs to last.

You need to be clear on your retirement financial needs, taking into account your other income/savings, your risk appetite and what you want to happen with any remaining funds when the inevitable happens.

barnstar2077

p00hsticks wrote: »

Well, the title of the thread includes the words 'final salary scheme', so I think we're safe in assuming it's a DB scheme.

Ha, good point, glad one of us is paying attention! :rotfl:

Paul_Herring

What would most people without dependants do and what should I consider before deciding please.

Find less pushy friends...

Spreadsheetman

BBH123 wrote: »

...
What would most people without dependants do and what should I consider before deciding please.

Keep the FS defined-benefit pension, it's the no-hassle no-worry option of funding your retirement irrespective of how long you live.

Anonymous101

From what you describe above I'd think that you were best place to take a DB pension. I can't really see any benefit for you in transferring.

[Deleted User]

Spreadsheetman wrote: »

Keep the FS defined-benefit pension, it's the no-hassle no-worry option of funding your retirement irrespective of how long you live.

This sums my thinking up tbh, I want to have as simple a retirement as possible and there are risk factors for me


I'd run the risk of not finding the right people to manage it that I'd trust as I just don't know enough about investing and who to go to and have no interest or knowledge about funds.


My friend has no worries about running out of money in her later years as she feels the state will kick in for any needs she may have ( I don't think like this and want to have my own money and my own choices )


Investing on the back of someone who knows someone is the biggest red flag for me


I won't be brassic and need to squeeze very penny out of my funds and there is peace of mind knowing a guaranteed amount with an annual RPI increase.


In fact the more I think about it there is a lot to be said for a guaranteed income. Perhaps if I knew enough to make an informed investment or manage my own portfolio it would be different but I don't.