Pension, CETV, retiring Oct 22

Kamsi

Hi

My husband is going through some pension advice at the moment. He has one large pension pot with Tesco at£276k, and 3 small one at £4k,7k and 18k.

Tesco is a final salary pension and he was looking at transfering this out due to some limitations mainly security for a family in case anything happens to him.

He is awaiting a cashflow for all from the independt advisor and recently we had to ask Tesco for new CETV. Between April 22 and July 22 it has gone down from £276k to £246k-I understand this is due to intrest rates rises.

He is unsure on what to do:
1.continue to transferring out
2.retiring in October(he will be 55 in October) and continue workimg part time earning around £9kpa from his work plus pension
3.keep working and see what the pot value os next year and so on

Has anyone had similar situation? What things shood consider? 

Will the pot value go up again? 

Any advise is much appreciated as we are not very knowledgable regarding pension other than basic staff. 

Kim1965

Has the IFA indicated he will give a positive recommendation to transfer?
By the way the Tesco pension is not a pot of money, what are the benefits of the final salary scheme, how old is hubby, whsts the retirement age for the scheme?? 

Kamsi

We haven't asked for advise yet we are doing cashflow first for all pensions and all options. Not sure what do you mean about what are the benefits of the final salary? He is 54 and will be 55 this October.

What do you mean what is the retirement for the scheme? 

Albermarle

He has one large pension pot with Tesco at£276k, Tesco is a final salary pension 

He does not have a pension pot with Tesco. He has a promise of a guaranteed income when he retires. As a secondary issue they have offered him a sum of money ( CETV) to buy him out of the scheme and reduce their future liabilities. It is good to be clear on this point.

he was looking at transferring this out due to some limitations mainly security for a family in case anything happens to him.

He wants security for his family by giving up a guaranteed ( presumably inflation linked ) pension for life, in exchange for hoping the transferred pot will do the same ( it may do better or worse) ?? Is he  experienced in investing sums of money of this size ?

This explains the pros and cons quite well

Five good reasons to transfer out of your company pension....and five good reasons not to - Royal London

He is awaiting a cashflow for all from the independt advisor

He should be aware that any request to transfer is likely to be refused anyway. The financial authorities strongly discourage people giving up guaranteed pensions.

Albermarle

Kamsi said:

We haven't asked for advise yet we are doing cashflow first for all pensions and all options. Not sure what do you mean about what are the benefits of the final salary? He is 54 and will be 55 this October.

What do you mean what is the retirement for the scheme? 

It means what pension will he get if he stays with the scheme? In other words what will he be giving up if he transfers out?

Dazed_and_C0nfused

He has one large pension pot with Tesco at£276k

He doesn't have a pension pot with Tesco.

He has a promise from Tesco to pay £X per year from the schemes normal pension age.  And this will have some form of inflation protection.

It may well also provide you with a pension if he dies before you and is likely to offer the opportunity for reduced pension from an earlier age without any penalty.  For example instead of say £5k/year from age 67 he might be able to take £3k/year from age 60.

With all due respect I don't think you fully understand what you are getting involved in and why this would be such a bad idea for an awful lot of people.

xylophone

https://www.usdaw.org.uk/CMSPages/GetFile.aspx?guid=a5c63cee-6d05-4eea-ae65-0ee8e93f18d0

Could you clarify, will your husband be age 65 (Tesco DB Scheme Normal Retirement Age)  in October or age 55?

The Tesco DB Scheme was closed in 2015 - was your husband working for Tesco then and did he go on to join the Tesco Defined Contribution Scheme?

Does your husband have a copy of the Scheme Guide which will give details of the benefits offered by the scheme?

Is the Adviser being consulted by your husband qualified to give advice on the transfer of a DB to a DC pension?

Has your husband obtained a State Pension Forecast?

https://www.gov.uk/check-state-pension

Marcon

Kamsi said:

He is awaiting a cashflow for all from the independt advisor and recently we had to ask Tesco for new CETV. Between April 22 and July 22 it has gone down from £276k to £246k-I understand this is due to intrest rates rises.

He is unsure on what to do:
1.continue to transferring out
2.retiring in October(he will be 55 in October) and continue workimg part time earning around £9kpa from his work plus pension
3.keep working and see what the pot value os next year and so on

Has anyone had similar situation? What things shood consider? 

Will the pot value go up again? 

If he's taking financial advice (and it's mandatory to go through the full advice process before he can transfer - expect to pay around £5K), then the adviser will be the one explaining what he needs to consider.

The CETV value could well drop further, given the expected future rises in interest rates, but impossible to say.

His pension will be reduced because he is taking it before the scheme's normal retirement age, so unless he actually needs the cash, might be better to delay taking his pension.

A DB scheme is far more secure than a DC arrangement...

dunstonh

Tesco is a final salary pension and he was looking at transfering this out due to some limitations mainly security for a family in case anything happens to him.

CETVs have broadly dropped 15-25% year to date.   That trend is likely to continue.       It has made a lot of cases that may have scraped by last year more likely to be fail.

Will the pot value go up again? 

Crystal ball job.  However, these drops will likely continue.   It would require interest rates to not go above 3% and then have no further expectation that they will increase further.     

C_Mababejive

It is commonly stated that IFAs and the industry will generally not recommend a DB transfer . Are IFAs still minded to process insistent transfers or is that door closing? Where i work this seems to be the complete opposite and DB transfers are being operated seemingly without any opposition. This might be to do with the fact that the company have a contract/business arrangement with a certain financial company who are offering a free service for potential DB transferees. I wonder if this relationship is a bit close for comfort? Do companies routinely arrange free or low cost DB transfer assessments for employees using financial companies that they have hired in for that purpose? I wonder if Tesco provide this too?

Marcon

C_Mababejive said:

It is commonly stated that IFAs and the industry will generally not recommend a DB transfer . Are IFAs still minded to process insistent transfers or is that door closing? Where i work this seems to be the complete opposite and DB transfers are being operated seemingly without any opposition. This might be to do with the fact that the company have a contract/business arrangement with a certain financial company who are offering a free service for potential DB transferees. I wonder if this relationship is a bit close for comfort? Do companies routinely arrange free or low cost DB transfer assessments for employees using financial companies that they have hired in for that purpose? I wonder if Tesco provide this too?

There has been considerable pressure from well-respected sources, including many within the pensions industry, for trustees/employers to help members find quality financial advice rather than letting them try and source it themselves - a stance which makes a lot of sense, albeit the shortage of such advisers makes it difficult for many schemes, especially smaller ones, to implement.

Sometimes employers pay/subsidise, or members benefit from lower costs because a particular adviser is already fully informed about the scheme in question.

That advice should still be wholly independent of the employer/scheme, even if some employers are using tied advisers either because they can't get an IFA who is willing to take on the role, or they simply don't understand the different between FAs and IFAs.

IFAs have never been keen on insistent clients and that door has been difficult to prise open for some years!

If the advice is free, then probably more people will take up the option to explore a transfer, which will in turn result in more transfers simply because more people are considering the possibility, whereas they would never have done so if they'd had to pay for the advice themself.  Possibly you are only hearing about people who do transfer, rather than the many who don't? Without knowing the full facts/statistics, it's hard to comment meaningfully. If, for instance, there are concerns about the viability of the employer, that could impact on the advice.