To transfer final salary pension or not?

rob3001

wjr4 said:

Have you actually received a written report with advice? As you’re leaving it really late as CETVs are usually only guaranteed for 3 months. 

How would you feel if your pension fund fell to say £250,000 after transferring (and after taking the tax-free cash)?

Yes I have had a written report. It says to stay where I am for the reason that it is guarenteed.  It also says that by transferring out there is a potential to substantially increase my retirement benefits but this depends on the future stock market performance.

If my pension fell by the amount that you say I would obviously be disappointed but do understand that investments do go down as well as up. I would hope that over the course of the following 15 years it would at least recover to where it is today.  That is the risk you take, and I suppose the question I am looking to answer is what are the chances of that happening, which nobody knows.


I have a couple of weeks left to make a decision.

Albermarle

I have another pension that is not final salary which will be worth around £8000 a year, plus a couple of properties that are rented out. I also have £200,000 of ISA’s.

So at the moment you have a pension that is ( will be ?) worth around £8Kpa , depending on financial performance I presume.

You have a couple of properties that could do well or badly in future 

You have £200K of ISA's ( stocks and shares ? )

All the above are assets are variable /not guaranteed, so is it wise convert  your guaranteed income and then all your assets are subject to market forces. Having a final salary pension and some flexible assets is a kind of nicely balanced sweet spot .

Thrugelmir

rob3001 said:

Yes, the CETV was given at the end of January just before the crisis hit.

On the 27th March the Pension Regulator published guidance allowing schemes to freeze transfers for 3 months. In light of the impact of the crisis on the valuation of assets in the underlying pension scheme. 

dunstonh

Prism said:

rob3001 said:

Forgot to say that if I do transfer out I can still take pension at 50

Are you sure about that. I was under the impression that if you transferred out of a scheme that allows early access like that you would lose those benefits once the money arrived in a SIPP or IFA managed pension.
Also you don't seem to be calculating future inflation into your calculations. You say for example you might take £16500 per year in around 15 years but that will likely be worth a fair bit less by then. Then you need to increase that amount each year in line with inflation. 
Also the markets have no longer dropped by 25-30% - a diversified fund is maybe around -7% this calendar year. Not that it should put off an investment, but its a very uncertain time.

A block transfer into a section 32 buy out bond could retain protected scheme age.  However, Section 32 buy out bonds do not support income drawdown (caveat: I haven't looked at product offerings on bulk S32s in a long time. There may have been movement on that front).  And if that was transferred into a PPP or SIPP to allow income drawdown, then the protected scheme age would be lost.

Sailtheworld

I'd snap their hands off.

elouise01296

What are you planning to do it you do choose to go ahead.  I don't think you would be able to transfer to a Section 32 so I too think your minimum age for taking benefits would revert to age 55 if you transfer out of the final salary scheme.

rob3001

I was planning to take the lump sum and leave the rest invested until 65.  I am not a financial person so don't understand the in's and out's of it.  All I can say is that the advisors at the pension company assigned to provide advice are saying that the pension can still be taken at 50 as long as it is transferred as part of a block transfer and it goes to either Aegon or Royal London 

dunstonh

I was planning to take the lump sum and leave the rest invested until 65.

That would require income drawdown to be utilised as it crystallises the fund.    So, it would require a pension plan that facilitates income drawdown. 

All I can say is that the advisors at the pension company assigned to provide advice are saying that the pension can still be taken at 50 as long as it is transferred as part of a block transfer and it goes to either Aegon or Royal London

A bulk transfer into a Section 32 buy out bond allows you to retain the protected scheme age.   And that would allow you to commence retirement benefits at 50 using an annuity. However, Section 32s do not support drawdown unless there has been a product change in the last few years (as I said, its been a while for me and I see the older s32 plans mainly - maybe one of the other advisers that posts here will know more about the current offerings on bulk transfer plans)

So, you need to specifically ask your adviser if the receiving schemes support flexi-access drawdown.  If not, your plan to use drawdown at age 50 could be derailed by being in a plan that does not support drawdown at all.    Although you may be able to use UFPLS and that could actually be better than using the 25% up front (as it will use some/all of your personal allowance and not use up your tax free cash in one go)

rob3001

I have just asked that question and flex-access drawdown are supported.  Using UFPLS is also an option.

Thrugelmir

When do intend making a decision as the 3 month window must be up shortly.