Barclays 'Afterwork' Transfer

dale_cotterill

Not exactly looking for 'advice' here, as I know it doesn't work that way, so more just considerations and whether I've thought of all of them.

My partner was going through her pension documents last night and it comprises of a couple of DC schemes, and the Credit Account element of the Barclays UKRF (Afterwork section).

She has around 20k in the two DC schemes, for the purposes of this, these can be ignored, and currently 17k in the Barclays UKRF. Still about 25 years before retirement age, but clearly well behind an ideal position at this point.

The Barclays scheme is essentially an inflation (RPI) linked cash account which will rise in line with inflation so will theoretically not gain or lose value in real terms so is a guaranteed sum at retirement. It does however have a DC Transfer Out value for c.24k if she were to remove it from the scheme. She is not longer an employee so there will be no new contributions. So there are some genuine points for consideration here;

- By leaving the scheme, she would be giving up a guaranteed sum and putting the capital at risk, even though right at this point in time, it is worth around 25% more.

- Given the relatively long period to retirement still, it might still be a valid option to take the DC transfer as there is a reasonable chance that Investment growth may outstrip inflation over time.

- It's not a massive amount, therefore would not contribute a material amount per annum as an income, therefore it is potentially worth the risk to invest it.

Have  I missed anything glaring. She seems fairly keen just to do it because the current value is a greater number, but obviously that doesn't consider the potential downsides of it, and there is clearly a reason why the scheme is happy to pay people more to get out.

Marcon

dale_cotterill said:

Not exactly looking for 'advice' here, as I know it doesn't work that way, so more just considerations and whether I've thought of all of them.

My partner was going through her pension documents last night and it comprises of a couple of DC schemes, and the Credit Account element of the Barclays UKRF (Afterwork section).

She has around 20k in the two DC schemes, for the purposes of this, these can be ignored, and currently 17k in the Barclays UKRF. Still about 25 years before retirement age, but clearly well behind an ideal position at this point.

The Barclays scheme is essentially an inflation (RPI) linked cash account which will rise in line with inflation so will theoretically not gain or lose value in real terms so is a guaranteed sum at retirement. It does however have a DC Transfer Out value for c.24k if she were to remove it from the scheme. She is not longer an employee so there will be no new contributions. So there are some genuine points for consideration here;

- By leaving the scheme, she would be giving up a guaranteed sum and putting the capital at risk, even though right at this point in time, it is worth around 25% more.

- Given the relatively long period to retirement still, it might still be a valid option to take the DC transfer as there is a reasonable chance that Investment growth may outstrip inflation over time.

- It's not a massive amount, therefore would not contribute a material amount per annum as an income, therefore it is potentially worth the risk to invest it.

Have  I missed anything glaring. She seems fairly keen just to do it because the current value is a greater number, but obviously that doesn't consider the potential downsides of it, and there is clearly a reason why the scheme is happy to pay people more to get out.

You can see the attraction: an apparent (and indeed actual) immediate 'gain' of £7K at a stroke so the difference is actually around 40%, not just 25%. Set against that is an immediate loss of any sort of guarantee.

If transferring is more attractive to her than the guarantees associated with the scheme (assuming she fully understands these), and she's happy to take a gamble, why not?

dale_cotterill

Good spot on the maths, I had the 25% figure stuck in my head as the theoretical capital loss buffer from the higher amount that used it for the gain!