Pension and Divorce

tabath

I have been awarded a large percentage of my partners large company pension on our divorce.

It is a final salary index linked pension. 4 years ago the  company wanted to buy her out. On consulting the independant company they had to appoint to give us advice it turned out it would cost 480k to buy a product that would give equivalent benefits and the company were only offereing 380k to buy her out. Obviously we turned this down.

My solicitor has now told me to get financial advice in order to advise the company where I want my pension credit from this going.

Since I assume I would get a similar offer that is lower than what would be needed to purchase similar benefits and more importsntly since I am 10 years from retirement it would not be index linked, do I have to take a pension credit? Could the pension not just be split and remain in the company scheme?

If I do indeed have to take pension credit I would like to look at something safe but flexible giving me the option to take some money out if I need as I am having to buy my wife out of the mortgage.

Is this something I could research myself and if so where. Or do I need to consult a financial advisor and what would this cost?
Thanks

xylophone

Could the pension not just be split and remain in the company scheme?

Surely the Scheme Administrator should be consulted on this point?

Re financial advice you might try link below.

You would tick confirmed independent. divorce planning  and pensions and retirement when the menu comes up.

https://adviserbook.co.uk/

dunstonh

Since I assume I would get a similar offer that is lower than what would be needed to purchase similar benefits and more importsntly since I am 10 years from retirement it would not be index linked, do I have to take a pension credit? Could the pension not just be split and remain in the company scheme?

It is up to the scheme trustees  and administrators as to whether that option exists.

Is this something I could research myself and if so where. Or do I need to consult a financial advisor and what would this cost?

You do not need an adviser with pension credit.

I would like to look at something safe but flexible 

May not exist.   It really depends on what your definition of safe is.

Albermarle

 Could the pension not just be split and remain in the company scheme?

As far as I know this is unlikely .

it would cost 480k to buy a product that would give equivalent benefits and the company were only offereing 380k to buy her out. 

This is more complicated than at first sight . As you know her pension is actually a promise to pay a guaranteed income when she retires . I am assuming the figure of £480K was what it would have cost to buy a similar guaranteed income by purchasing an annuity . Annuities are very expensive at the present time and not used very much anymore, so maybe not a fair comparison. Many people accept a lower amount ( £380K in this case ) because if this money is invested in a new different kind of pension ( known as a Direct contribution scheme) then it should be able to generate a larger income, and/or the same income but with a large sum left when they die to pass on . However this is not 100% guaranteed but a reasonably safe bet.

I am just explaining this as buying an annuity with the pension credit is unlikely to be the way forward, and and advisor you employ I think will say the same and advise you to invest the money in a DC pension.

tabath

Thanks for the responses. The differential in values may be because this pension is index linked?

I have rang the pension administrators and been told to email them with my details and they would give me a response as to whether I could become a pension credit member or would need to transfer out.

 In the meantime I rang TPAS for advice  and they showed me how to get details of advisors near me and advised me to get in touch with 3 and ask them for their scale of charges. However on doing this all 3 turned out to charge 3% rather than a fixed fee. Is this usual and do any advisers do fixed fee?

Thanks

Albermarle

tabath said:

Thanks for the responses. The differential in values may be because this pension is index linked?

I have rang the pension administrators and been told to email them with my details and they would give me a response as to whether I could become a pension credit member or would need to transfer out.

 In the meantime I rang TPAS for advice  and they showed me how to get details of advisors near me and advised me to get in touch with 3 and ask them for their scale of charges. However on doing this all 3 turned out to charge 3% rather than a fixed fee. Is this usual and do any advisers do fixed fee?

Thanks

In my comments I assumed index linking . The differences are the way the sums are calculated . For example an annuity charge includes a profit margin for the provider. 

Typical IFA charges are 1 to 3% initial charge and then they manage the investments for you on an ongoing basis for 0.5% to 1 % pa.
The larger the amount involved the lower the % charges ( in theory anyway ) For context £100K would be seen as 'small' and probably £500K as 'large '
Some ( but not all ) will just carry out the initial work and advise you what to do but then you have to go and do it yourself .
As you will know the sum involved you can work out what the actual fee will be pretty easily .

Most posters on this forum do not have advisors ( some do ) and DIY their investments , but of course you need some basic knowledge of investments, pension rules, tax issues etc to do that.

Thrugelmir

tabath said:

Thanks for the responses. The differential in values may be because this pension is index linked?

The pension scheme has yet to fund the future index linked pension. Hence the lower value. 

dunstonh

In the meantime I rang TPAS for advice  and they showed me how to get details of advisors near me and advised me to get in touch with 3 and ask them for their scale of charges. However on doing this all 3 turned out to charge 3% rather than a fixed fee. Is this usual and do any advisers do fixed fee?

Many adviser firms offer fixed fee.   Others offer a percentage with a cap and collar.  3% is high nowadays.   I wonder if they were wealth management firms (where that sort of fee is more common).  Remember that not all advice firms are the same.  Some operate different business models.  National/larger regional firms tend to be more expensive.

tabath

dunstonh said:

In the meantime I rang TPAS for advice  and they showed me how to get details of advisors near me and advised me to get in touch with 3 and ask them for their scale of charges. However on doing this all 3 turned out to charge 3% rather than a fixed fee. Is this usual and do any advisers do fixed fee?

Many adviser firms offer fixed fee.   Others offer a percentage with a cap and collar.  3% is high nowadays.   I wonder if they were wealth management firms (where that sort of fee is more common).  Remember that not all advice firms are the same.  Some operate different business models.  National/larger regional firms tend to be more expensive.

No, they were a mixture of national and local firms taken of tpas website. I am struggling to find anyone that does fixed fee. Considering I have to transfer the pension out and I know what I want. Ie: 25% draw down and the rest invested in a safe vehicle as I am 56 I really cant see why I shoukd have to pay around 4.5k.

Is there a reputable place I xan source FAs who do fixed fee?

Thanks

dunstonh

 I am struggling to find anyone that does fixed fee.

Strange as fixed fee is increasingly popular for larger investors.  Not so much for smaller ones and reports and studies suggest lots of firms offer a fixed fee option.

Considering I have to transfer the pension out and I know what I want. Ie: 25% draw down and the rest invested in a safe vehicle as I am 56 I really cant see why I shoukd have to pay around 4.5k.

Probably not far off what a fixed fee would be.  It is a pension transfer AND a drawdown case and you are aged 56 (which is early for accessing your pension and carries higher advice risk)    Although I suspect you could find it for £2500-£3000 with a bit of work.

Note, there is no such thing as safe.  All options have risks. Some low-risk options are actually higher high risk if you consider all risks.  i.e. they may have low investment risk but have higher shortfall/inflation risk.  Especially if you are 56.

Is there a reputable place I xan source FAs who do fixed fee?

Most directories do not show the available fee styles.   So, it's manual shopping around.   However, do not rule out percentage fees as it's possible that some of those equate well enough.    It's the bottom line that matters. Not how you got the bottom line.

Albermarle

e: 25% draw down and the rest invested in a safe vehicle as I am 56 

It is usually recommended not to take all the 25% tax free upfront unless you really need it for something.

Safe = getting 0.5% ( maybe 1% max ) so every year the value of your pot decreases as inflation is higher than that. Over 30 years it would cause some serious damage to your fund.

To beat inflation you have to take some investment risk . The risk can be partly mitigated by having  a balanced portfolio and by sticking to it long term . If all goes well , you could beat inflation + a few % but nothing guaranteed .