Can i cash in a pension early?

vacheron

Between 1995 and 2003 I paid a total pension contribution of £6,600 into the Rolls-Royce pension scheme before it was deferred in 2003. That will now buy a £4,300 per year pension and has a transfer value today of £170K, (almost 40x), making this (unwittingly) by far the best financial investment I have ever made!

However, as others have said, if the transfer value is over £30K you MUST have professional independent financial advice (which will cost you), and I have already been told that the likelyhood of anyone recommending the transfer to someone with my personal circumstances is almost zero.

If you have a seriously reduced life expectancy, or if you can prove that the total loss of the fund would cause you no perceivable hardship (which I was told would mean that your other pensions and assets are worth at least 10-20x the transfer amount), you would stand a decent chance of the transfer being recommended.

So it is not so much a question of "Should I?", but "Can I?", and in many cases the answer will be a resounding "No!"  

As Marcon mentioned above, I am now happy to leave mine where it is which allows for a diversified pension portfolio not totally reliant on investment performance.

Also ask yourself, if they are willing to pay you a guaranteed 40 years of contributions just for you to go away, how much have they estimated you could hypothetically cost them in the future if they had to keep you on their books!

ffacoffipawb

vacheron said:

Between 1995 and 2003 I paid a total pension contribution of £6,600 into the Rolls-Royce pension scheme before it was deferred in 2003. That will now buy a £4,300 per year pension and has a transfer value today of £170K, (almost 40x), making this (unwittingly) by far the best financial investment I have ever made!

However, as others have said, if the transfer value is over £30K you MUST have professional independent financial advice (which will cost you), and I have already been told that the likelyhood of anyone recommending the transfer to someone with my personal circumstances is almost zero.

If you have a seriously reduced life expectancy, or if you can prove that the total loss of the fund would cause you no perceivable hardship (which I was told would mean that your other pensions and assets are worth at least 10-20x the transfer amount), you would stand a decent chance of the transfer being recommended.

So it is not so much a question of "Should I?", but "Can I?", and in many cases the answer will be a resounding "No!"  

As Marcon mentioned above, I am now happy to leave mine where it is which allows for a diversified pension portfolio not totally reliant on investment performance.

Also ask yourself, if they are willing to pay you a guaranteed 40 years of contributions just for you to go away, how much have they estimated you could hypothetically cost them in the future if they had to keep you on their books!

If you told the IFA in your example that you had £4M in shares which makes the transfer more likely?

Or lied about your life expectancy?

A bit of easy photoshop and you have your transfer sorted?

Hmm ... Very dodgy.

vacheron

ffacoffipawb said:

vacheron said:

Between 1995 and 2003 I paid a total pension contribution of £6,600 into the Rolls-Royce pension scheme before it was deferred in 2003. That will now buy a £4,300 per year pension and has a transfer value today of £170K, (almost 40x), making this (unwittingly) by far the best financial investment I have ever made!

However, as others have said, if the transfer value is over £30K you MUST have professional independent financial advice (which will cost you), and I have already been told that the likelyhood of anyone recommending the transfer to someone with my personal circumstances is almost zero.

If you have a seriously reduced life expectancy, or if you can prove that the total loss of the fund would cause you no perceivable hardship (which I was told would mean that your other pensions and assets are worth at least 10-20x the transfer amount), you would stand a decent chance of the transfer being recommended.

So it is not so much a question of "Should I?", but "Can I?", and in many cases the answer will be a resounding "No!"  

As Marcon mentioned above, I am now happy to leave mine where it is which allows for a diversified pension portfolio not totally reliant on investment performance.

Also ask yourself, if they are willing to pay you a guaranteed 40 years of contributions just for you to go away, how much have they estimated you could hypothetically cost them in the future if they had to keep you on their books!

If you told the IFA in your example that you had £4M in shares which makes the transfer more likely?

Or lied about your life expectancy?

A bit of easy photoshop and you have your transfer sorted?

Hmm ... Very dodgy.

True. I'm not sure how deeply they will delve as, lets be honest, they are only looking to indemnify themselves from any future claim you may bring against them. 

If you blatantly lied in the information you gave them, they would avoid any repurcussions as they made their decision based in good faith on the lies you told them. However I have no idea if they have a duty to verify the information and to what degree? Perhaps someone reading who has performed this role could shed some light?  

Thrugelmir

vacheron said:

That will now buy a £4,300 per year pension 

Doesn't buy a pension. The pension fund will pay you a pension at that level for the remainder of your life. The pension fund is effectively pooled risk with some member dying earlier and others becoming centenarians. The higher multiplier merely illustrates the cost of providing said benefit in the open market. 

ffacoffipawb

vacheron said:

ffacoffipawb said:

vacheron said:

Between 1995 and 2003 I paid a total pension contribution of £6,600 into the Rolls-Royce pension scheme before it was deferred in 2003. That will now buy a £4,300 per year pension and has a transfer value today of £170K, (almost 40x), making this (unwittingly) by far the best financial investment I have ever made!

However, as others have said, if the transfer value is over £30K you MUST have professional independent financial advice (which will cost you), and I have already been told that the likelyhood of anyone recommending the transfer to someone with my personal circumstances is almost zero.

If you have a seriously reduced life expectancy, or if you can prove that the total loss of the fund would cause you no perceivable hardship (which I was told would mean that your other pensions and assets are worth at least 10-20x the transfer amount), you would stand a decent chance of the transfer being recommended.

So it is not so much a question of "Should I?", but "Can I?", and in many cases the answer will be a resounding "No!"  

As Marcon mentioned above, I am now happy to leave mine where it is which allows for a diversified pension portfolio not totally reliant on investment performance.

Also ask yourself, if they are willing to pay you a guaranteed 40 years of contributions just for you to go away, how much have they estimated you could hypothetically cost them in the future if they had to keep you on their books!

If you told the IFA in your example that you had £4M in shares which makes the transfer more likely?

Or lied about your life expectancy?

A bit of easy photoshop and you have your transfer sorted?

Hmm ... Very dodgy.

True. I'm not sure how deeply they will delve as, lets be honest, they are only looking to indemnify themselves from any future claim you may bring against them. 

If you blatantly lied in the information you gave them, they would avoid any repurcussions as they made their decision based in good faith on the lies you told them. However I have no idea if they have a duty to verify the information and to what degree? Perhaps someone reading who has performed this role could shed some light?  

People desperate for the TV may well lie to get their hands on it, that is my point.

How do you police this?

vacheron

Thrugelmir said:

vacheron said:

That will now buy a £4,300 per year pension 

Doesn't buy a pension. The pension fund will pay you a pension at that level for the remainder of your life. The pension fund is effectively pooled risk with some member dying earlier and others becoming centenarians. The higher multiplier merely illustrates the cost of providing said benefit in the open market. 

Apologies if you feel I used the wrong word. However I hope most people reading this would have understood what I meant.

I guess based on your interpretation that I can no longer say "I "buy" car insurance" either, but: 

"I - pay an amount to an insurance company who exchange this for a guarantee of underwriting for the remainder of the policy, (generally 1 year) from a fund which is effectively pooled risk with some members claiming for large accidents while some do not claim at all, the policy value being determined by the cost of providing said benefit to someone of my specific personal and driving history and vehicular cuscumstances as detwermined by the open market"... car insurance" is a tad long winded for me!   

Howeve if there is a concise word I can use in future do describe the transaction more appropriately then I am happy to use it in future.  

ffacoffipawb

vacheron said:

Thrugelmir said:

vacheron said:

That will now buy a £4,300 per year pension 

Doesn't buy a pension. The pension fund will pay you a pension at that level for the remainder of your life. The pension fund is effectively pooled risk with some member dying earlier and others becoming centenarians. The higher multiplier merely illustrates the cost of providing said benefit in the open market. 

Apologies if you feel I used the wrong word. However I hope most people reading this would have understood what I meant.

I guess based on your interpretation that I can no longer say "I "buy" car insurance" either, but: 

"I - pay an amount to an insurance company who exchange this for a guarantee of underwriting for the remainder of the policy, (generally 1 year) from a fund which is effectively pooled risk with some members claiming for large accidents while some do not claim at all, the policy value being determined by the cost of providing said benefit to someone of my specific personal and driving history and vehicular cuscumstances as detwermined by the open market"... car insurance" is a tad long winded for me!   

I think they mean that the benefit is valued as a CETV of x, not that x buys you that benefit.

vacheron

ffacoffipawb said:

vacheron said:

ffacoffipawb said:

vacheron said:

Between 1995 and 2003 I paid a total pension contribution of £6,600 into the Rolls-Royce pension scheme before it was deferred in 2003. That will now buy a £4,300 per year pension and has a transfer value today of £170K, (almost 40x), making this (unwittingly) by far the best financial investment I have ever made!

However, as others have said, if the transfer value is over £30K you MUST have professional independent financial advice (which will cost you), and I have already been told that the likelyhood of anyone recommending the transfer to someone with my personal circumstances is almost zero.

If you have a seriously reduced life expectancy, or if you can prove that the total loss of the fund would cause you no perceivable hardship (which I was told would mean that your other pensions and assets are worth at least 10-20x the transfer amount), you would stand a decent chance of the transfer being recommended.

So it is not so much a question of "Should I?", but "Can I?", and in many cases the answer will be a resounding "No!"  

As Marcon mentioned above, I am now happy to leave mine where it is which allows for a diversified pension portfolio not totally reliant on investment performance.

Also ask yourself, if they are willing to pay you a guaranteed 40 years of contributions just for you to go away, how much have they estimated you could hypothetically cost them in the future if they had to keep you on their books!

If you told the IFA in your example that you had £4M in shares which makes the transfer more likely?

Or lied about your life expectancy?

A bit of easy photoshop and you have your transfer sorted?

Hmm ... Very dodgy.

True. I'm not sure how deeply they will delve as, lets be honest, they are only looking to indemnify themselves from any future claim you may bring against them. 

If you blatantly lied in the information you gave them, they would avoid any repurcussions as they made their decision based in good faith on the lies you told them. However I have no idea if they have a duty to verify the information and to what degree? Perhaps someone reading who has performed this role could shed some light?  

People desperate for the TV may well lie to get their hands on it, that is my point.

How do you police this?

Agreed, and I think it is almost certain that this will have happened, the question is who does the industry expect to police this and what (if any) fraudulent data submitted is detected and what (if any) are the repurcussions to the dishonest applicant?

Is this a CIFAS or fraud issue? Doubtful as you are effectively only "defrauding" your future self and paying the adviser out of your own pocket?  Interesting!

vacheron

ffacoffipawb said:

vacheron said:

Thrugelmir said:

vacheron said:

That will now buy a £4,300 per year pension 

Doesn't buy a pension. The pension fund will pay you a pension at that level for the remainder of your life. The pension fund is effectively pooled risk with some member dying earlier and others becoming centenarians. The higher multiplier merely illustrates the cost of providing said benefit in the open market. 

Apologies if you feel I used the wrong word. However I hope most people reading this would have understood what I meant.

I guess based on your interpretation that I can no longer say "I "buy" car insurance" either, but: 

"I - pay an amount to an insurance company who exchange this for a guarantee of underwriting for the remainder of the policy, (generally 1 year) from a fund which is effectively pooled risk with some members claiming for large accidents while some do not claim at all, the policy value being determined by the cost of providing said benefit to someone of my specific personal and driving history and vehicular cuscumstances as detwermined by the open market"... car insurance" is a tad long winded for me!   

I think they mean that the benefit is valued as a CETV of x, not that x buys you that benefit.

True, and while my response was light hearted and just throwing around semantics, I still feel that exchanging "X" (the amount I paid into my pension over the years) for the promise of "Y" (the annual pension) in the future falls under the definition of "buy" in my mind.

How the company finances and delivers "Y" is not really any of my concern, but they are free to propose an alternative "Y" (the CETV) should I wish to accept it.

Thrugelmir

vacheron said:

ffacoffipawb said:

vacheron said:

ffacoffipawb said:

vacheron said:

Between 1995 and 2003 I paid a total pension contribution of £6,600 into the Rolls-Royce pension scheme before it was deferred in 2003. That will now buy a £4,300 per year pension and has a transfer value today of £170K, (almost 40x), making this (unwittingly) by far the best financial investment I have ever made!

However, as others have said, if the transfer value is over £30K you MUST have professional independent financial advice (which will cost you), and I have already been told that the likelyhood of anyone recommending the transfer to someone with my personal circumstances is almost zero.

If you have a seriously reduced life expectancy, or if you can prove that the total loss of the fund would cause you no perceivable hardship (which I was told would mean that your other pensions and assets are worth at least 10-20x the transfer amount), you would stand a decent chance of the transfer being recommended.

So it is not so much a question of "Should I?", but "Can I?", and in many cases the answer will be a resounding "No!"  

As Marcon mentioned above, I am now happy to leave mine where it is which allows for a diversified pension portfolio not totally reliant on investment performance.

Also ask yourself, if they are willing to pay you a guaranteed 40 years of contributions just for you to go away, how much have they estimated you could hypothetically cost them in the future if they had to keep you on their books!

If you told the IFA in your example that you had £4M in shares which makes the transfer more likely?

Or lied about your life expectancy?

A bit of easy photoshop and you have your transfer sorted?

Hmm ... Very dodgy.

True. I'm not sure how deeply they will delve as, lets be honest, they are only looking to indemnify themselves from any future claim you may bring against them. 

If you blatantly lied in the information you gave them, they would avoid any repurcussions as they made their decision based in good faith on the lies you told them. However I have no idea if they have a duty to verify the information and to what degree? Perhaps someone reading who has performed this role could shed some light?  

People desperate for the TV may well lie to get their hands on it, that is my point.

How do you police this?

Agreed, and I think it is almost certain that this will have happened, the question is who does the industry expect to police this and what (if any) fraudulent data submitted is detected and what (if any) are the repurcussions to the dishonest applicant?

Is this a CIFAS or fraud issue? Doubtful as you are effectively only "defrauding" your future self and paying the adviser out of your own pocket?  Interesting!

The advisor (or indeed entire firm) is putting itself at risk. The FCA has been reviewing the sector since 2015. As much of the advice given has been regarded as of being of an unacceptable standard.