Final Salary Transfer with reduced life expectancy

Stueyxx

Hi all

i am turning 55 in a few months and unfortunately was diagnosed with stage 4 cancer a few years ago with not a good prognosis though currently am stable

I have a Final Salary Pension from my previous job and have obtained a transfer value of approx £140k.  I have also looked at taking my pension as it is at age from them at 55 and its £6200 pa with approx £40k lump sum on top.

I am married and am concerned that my wife ( age 50 ) if i took the pension as it is would only get a 50% spouse pension when i die , therefore only around £3k per year.  

If i were to move to a drawdown ( via a personal pension if thats possible) i would have the £140k, could take around £35k Tax free cash and have just over £100k for drawdown.  In my mind this would be much better with a very likely much reduced life expectancy.  In the event of my death my wife would get all the remaining fund, rather than the £3k a year. I could also take a bigger pension than £6200 pa in the meantime to top up my salary or if i have to stop work due to illness.  I have gone part time since my illness on around £20k per year. 

I know if i live to 80 this would be the wrong way to go but that just isnt going to happen as things stand. 


I will also have a Civil Service pension ( my current job)  valued at around £2k per year with £16k lump sum at age 55. As public sector cant transfer this. 

I know i have to have advice for this and am also aware that there are enhanced rate annuities out there but they massively reduce my pension if i add a spouses pension and the same issue remains of no pot left for my wife.

Am i doing the right thing and also whats the likely cost for this please.

Help appreciated

Marcon

Stueyxx said:

Hi all

i am turning 55 in a few months and unfortunately was diagnosed with stage 4 cancer a few years ago with not a good prognosis though currently am stable

I have a Final Salary Pension from my previous job and have obtained a transfer value of approx £140k.  I have also looked at taking my pension as it is at age from them at 55 and its £6200 pa with approx £40k lump sum on top.

I am married and am concerned that my wife ( age 50 ) if i took the pension as it is would only get a 50% spouse pension when i die , therefore only around £3k per year.  

If i were to move to a drawdown ( via a personal pension if thats possible) i would have the £140k, could take around £35k Tax free cash and have just over £100k for drawdown.  In my mind this would be much better with a very likely much reduced life expectancy.  In the event of my death my wife would get all the remaining fund, rather than the £3k a year. I could also take a bigger pension than £6200 pa in the meantime to top up my salary or if i have to stop work due to illness.  I have gone part time since my illness on around £20k per year. 

I know if i live to 80 this would be the wrong way to go but that just isnt going to happen as things stand. 


I will also have a Civil Service pension ( my current job)  valued at around £2k per year with £16k lump sum at age 55. As public sector cant transfer this. 

I know i have to have advice for this and am also aware that there are enhanced rate annuities out there but they massively reduce my pension if i add a spouses pension and the same issue remains of no pot left for my wife.

Am i doing the right thing and also whats the likely cost for this please.

Help appreciated

I'm sorry to read of your health issues, and it always feel heartless to put this in print, but...

Do you know what your life expectancy is? If medical evidence confirms that it is 'no more than 12 months', it's worth checking if your DB scheme offers something called 'serious ill health commutation'. In English, that means you can take the whole of your own benefits tax free in one lump sum at any age (no minimum), AND your wife would still get a spouse's pension (it's only your 'own' pension you would be taking as cash).

That might not ultimately be your preferred route (and I hope that you don't currently qualify in any case), but it is worth finding out the facts in case it proves relevant/to your advantage.

The likely cost of advice if you wish to consider transferring is likely to be £5K+. An independent financial adviser is best placed to advise you on whether your would be 'doing the right thing', although they can't stop you from transferring if you conclude that, whatever they say, you want to do that. If the advice is not to transfer, then probably the only scheme which would accept the transfer is a stakeholder pension. Taking this from something I posted from someone asking a few weeks ago about transferring if the adviser recommends staying put:

Facts:

1. Advisers have never been the spoilsport 'gatekeepers' as they have often been portrayed, particularly on this site. They have been hamstrung by increasingly onerous FCA strictures and crippling PI insurance costs, which is why so many of them have relinquished their FCA permissions to advise on transfers from DB schemes.
2. When full advice has been given, the adviser must sign the necessary confirmation they have done so - known as a Section 48 certificate.
3. If someone has received full (as opposed to abridged) advice, and they have a statutory right to a transfer from a scheme with safeguarded benefits (a 'promise' of some description), the transfer can normally proceed whatever the advice says, provided the receiving scheme will accept the transfer. The exception is where the trustees of the ceding (paying) scheme identify certain risk factors in the proposed receiving scheme, in which case the transfer may be delayed or blocked to help protect members from falling victim to a scam.
4. Stakeholder pensions must accept any transfer from a UK registered pension scheme. That has been the position since stakeholders were introduced over 20 years ago, was confirmed in the 2015 Treasury consultation and remains the case still. Advice is still mandatory where the transfer value is at least £30K and the scheme has 'safeguarded benefits' (a DB scheme always has safeguarded benefits), because the ceding scheme cannot make a transfer payment without confirmation this has been given.
5. At the time of writing there are stakeholder providers open to new retail business. An individual can therefore apply direct to the provider to open one - easy to do by post, with a cheque for £16. They can then arrange their own transfer (with no adviser involvement beyond the provision of a Section 48 certificate, which enables the DB scheme to pay out the transfer - so no need for any 'insistent client' process). Given the tight timeframes involved with DB transfers, it makes sense to have the stakeholder pension set up before beginning the process.
6. You can then transfer on from the stakeholder pension to your SIPP with no further advice required (it's become a DC to DC transfer), and little chance the SIPP provider will decline it now that you aren't trying to transfer from a scheme with safeguarded benefits.

None of the above is to suggest that transferring is necessarily a good idea...if you've paid for advice (think upwards of £5K), it might make sense to pay heed to it!

How recently did you last get a CETV?

LHW99

Realistically, £100k would only give around a £3k pa income if you want it to last for your wife's lifetime (assuming she is a similar age to you).

You are then relying on the invested money / income keeping up with inflation, which is not guaranteed. Whereas the spouse's pension would likely have some built in annual increases, which wouldn't rely on the stock market (do you know what level).

Also, would your wife be happy dealing with investments by herself in due course?

DullGreyGuy

How old is your wife? The normal assumption would be she is a couple of years younger than you.

Does the pension have any guarantee period? Once in payment does it escalate and how if so? 

Haven't dealt with annuity sales in a long time but in principle your wife doesn't have to be limited to 50% but inevitably the more she gets the less you get whilst still with us and so the less impact the enhancement gives

wjr4

DullGreyGuy said:

How old is your wife? The normal assumption would be she is a couple of years younger than you.

Does the pension have any guarantee period? Once in payment does it escalate and how if so? 

Haven't dealt with annuity sales in a long time but in principle your wife doesn't have to be limited to 50% but inevitably the more she gets the less you get whilst still with us and so the less impact the enhancement gives

It’s a final salary pension currently…

Stueyxx

Marcon said:

Stueyxx said:

Hi all

i am turning 55 in a few months and unfortunately was diagnosed with stage 4 cancer a few years ago with not a good prognosis though currently am stable

I have a Final Salary Pension from my previous job and have obtained a transfer value of approx £140k.  I have also looked at taking my pension as it is at age from them at 55 and its £6200 pa with approx £40k lump sum on top.

I am married and am concerned that my wife ( age 50 ) if i took the pension as it is would only get a 50% spouse pension when i die , therefore only around £3k per year.  

If i were to move to a drawdown ( via a personal pension if thats possible) i would have the £140k, could take around £35k Tax free cash and have just over £100k for drawdown.  In my mind this would be much better with a very likely much reduced life expectancy.  In the event of my death my wife would get all the remaining fund, rather than the £3k a year. I could also take a bigger pension than £6200 pa in the meantime to top up my salary or if i have to stop work due to illness.  I have gone part time since my illness on around £20k per year. 

I know if i live to 80 this would be the wrong way to go but that just isnt going to happen as things stand. 


I will also have a Civil Service pension ( my current job)  valued at around £2k per year with £16k lump sum at age 55. As public sector cant transfer this. 

I know i have to have advice for this and am also aware that there are enhanced rate annuities out there but they massively reduce my pension if i add a spouses pension and the same issue remains of no pot left for my wife.

Am i doing the right thing and also whats the likely cost for this please.

Help appreciated

I'm sorry to read of your health issues, and it always feel heartless to put this in print, but...

Do you know what your life expectancy is? If medical evidence confirms that it is 'no more than 12 months', it's worth checking if your DB scheme offers something called 'serious ill health commutation'. In English, that means you can take the whole of your own benefits tax free in one lump sum at any age (no minimum), AND your wife would still get a spouse's pension (it's only your 'own' pension you would be taking as cash).

That might not ultimately be your preferred route (and I hope that you don't currently qualify in any case), but it is worth finding out the facts in case it proves relevant/to your advantage.

The likely cost of advice if you wish to consider transferring is likely to be £5K+. An independent financial adviser is best placed to advise you on whether your would be 'doing the right thing', although they can't stop you from transferring if you conclude that, whatever they say, you want to do that. If the advice is not to transfer, then probably the only scheme which would accept the transfer is a stakeholder pension. Taking this from something I posted from someone asking a few weeks ago about transferring if the adviser recommends staying put:

Facts:

1. Advisers have never been the spoilsport 'gatekeepers' as they have often been portrayed, particularly on this site. They have been hamstrung by increasingly onerous FCA strictures and crippling PI insurance costs, which is why so many of them have relinquished their FCA permissions to advise on transfers from DB schemes.
2. When full advice has been given, the adviser must sign the necessary confirmation they have done so - known as a Section 48 certificate.
3. If someone has received full (as opposed to abridged) advice, and they have a statutory right to a transfer from a scheme with safeguarded benefits (a 'promise' of some description), the transfer can normally proceed whatever the advice says, provided the receiving scheme will accept the transfer. The exception is where the trustees of the ceding (paying) scheme identify certain risk factors in the proposed receiving scheme, in which case the transfer may be delayed or blocked to help protect members from falling victim to a scam.
4. Stakeholder pensions must accept any transfer from a UK registered pension scheme. That has been the position since stakeholders were introduced over 20 years ago, was confirmed in the 2015 Treasury consultation and remains the case still. Advice is still mandatory where the transfer value is at least £30K and the scheme has 'safeguarded benefits' (a DB scheme always has safeguarded benefits), because the ceding scheme cannot make a transfer payment without confirmation this has been given.
5. At the time of writing there are stakeholder providers open to new retail business. An individual can therefore apply direct to the provider to open one - easy to do by post, with a cheque for £16. They can then arrange their own transfer (with no adviser involvement beyond the provision of a Section 48 certificate, which enables the DB scheme to pay out the transfer - so no need for any 'insistent client' process). Given the tight timeframes involved with DB transfers, it makes sense to have the stakeholder pension set up before beginning the process.
6. You can then transfer on from the stakeholder pension to your SIPP with no further advice required (it's become a DC to DC transfer), and little chance the SIPP provider will decline it now that you aren't trying to transfer from a scheme with safeguarded benefits.

None of the above is to suggest that transferring is necessarily a good idea...if you've paid for advice (think upwards of £5K), it might make sense to pay heed to it!

How recently did you last get a CETV?

Many thanks marcon

Yes I have looked at the serious health option but I don’t currently qualify as it can’t be said I have less than 12 months to live.  If that changes then I’ll obviously look more into that

I last  got a CETV around 2 months ago.  Regrettably as you will be aware the value of final salary transfers has massively decreased in the last 2 years 
I did look at doing this 3 years ago when first diagnosed and had a value £100k more ! 

I wish i had done it then but hindsight and all that plus other things more on my mind at the time and with a £240k value it would definately have been more the right thing to do

a lump sum of around £100k (minus anything we spend ) would be a lot more use to my wife than £3k a year on the drip and would give her options in the event of my death 
whilst I can still work I’m going to do so and as she works as well we can afford to leave any pension fund alone for now to hopefully grow a bit more but I’d rather get it moved 

is there any form of advisers that work online that you would recommend to me please ? 

Marcon

Stueyxx said:

Marcon said:

Stueyxx said:

Hi all

i am turning 55 in a few months and unfortunately was diagnosed with stage 4 cancer a few years ago with not a good prognosis though currently am stable

I have a Final Salary Pension from my previous job and have obtained a transfer value of approx £140k.  I have also looked at taking my pension as it is at age from them at 55 and its £6200 pa with approx £40k lump sum on top.

I am married and am concerned that my wife ( age 50 ) if i took the pension as it is would only get a 50% spouse pension when i die , therefore only around £3k per year.  

If i were to move to a drawdown ( via a personal pension if thats possible) i would have the £140k, could take around £35k Tax free cash and have just over £100k for drawdown.  In my mind this would be much better with a very likely much reduced life expectancy.  In the event of my death my wife would get all the remaining fund, rather than the £3k a year. I could also take a bigger pension than £6200 pa in the meantime to top up my salary or if i have to stop work due to illness.  I have gone part time since my illness on around £20k per year. 

I know if i live to 80 this would be the wrong way to go but that just isnt going to happen as things stand. 


I will also have a Civil Service pension ( my current job)  valued at around £2k per year with £16k lump sum at age 55. As public sector cant transfer this. 

I know i have to have advice for this and am also aware that there are enhanced rate annuities out there but they massively reduce my pension if i add a spouses pension and the same issue remains of no pot left for my wife.

Am i doing the right thing and also whats the likely cost for this please.

Help appreciated

I'm sorry to read of your health issues, and it always feel heartless to put this in print, but...

Do you know what your life expectancy is? If medical evidence confirms that it is 'no more than 12 months', it's worth checking if your DB scheme offers something called 'serious ill health commutation'. In English, that means you can take the whole of your own benefits tax free in one lump sum at any age (no minimum), AND your wife would still get a spouse's pension (it's only your 'own' pension you would be taking as cash).

That might not ultimately be your preferred route (and I hope that you don't currently qualify in any case), but it is worth finding out the facts in case it proves relevant/to your advantage.

The likely cost of advice if you wish to consider transferring is likely to be £5K+. An independent financial adviser is best placed to advise you on whether your would be 'doing the right thing', although they can't stop you from transferring if you conclude that, whatever they say, you want to do that. If the advice is not to transfer, then probably the only scheme which would accept the transfer is a stakeholder pension. Taking this from something I posted from someone asking a few weeks ago about transferring if the adviser recommends staying put:

Facts:

1. Advisers have never been the spoilsport 'gatekeepers' as they have often been portrayed, particularly on this site. They have been hamstrung by increasingly onerous FCA strictures and crippling PI insurance costs, which is why so many of them have relinquished their FCA permissions to advise on transfers from DB schemes.
2. When full advice has been given, the adviser must sign the necessary confirmation they have done so - known as a Section 48 certificate.
3. If someone has received full (as opposed to abridged) advice, and they have a statutory right to a transfer from a scheme with safeguarded benefits (a 'promise' of some description), the transfer can normally proceed whatever the advice says, provided the receiving scheme will accept the transfer. The exception is where the trustees of the ceding (paying) scheme identify certain risk factors in the proposed receiving scheme, in which case the transfer may be delayed or blocked to help protect members from falling victim to a scam.
4. Stakeholder pensions must accept any transfer from a UK registered pension scheme. That has been the position since stakeholders were introduced over 20 years ago, was confirmed in the 2015 Treasury consultation and remains the case still. Advice is still mandatory where the transfer value is at least £30K and the scheme has 'safeguarded benefits' (a DB scheme always has safeguarded benefits), because the ceding scheme cannot make a transfer payment without confirmation this has been given.
5. At the time of writing there are stakeholder providers open to new retail business. An individual can therefore apply direct to the provider to open one - easy to do by post, with a cheque for £16. They can then arrange their own transfer (with no adviser involvement beyond the provision of a Section 48 certificate, which enables the DB scheme to pay out the transfer - so no need for any 'insistent client' process). Given the tight timeframes involved with DB transfers, it makes sense to have the stakeholder pension set up before beginning the process.
6. You can then transfer on from the stakeholder pension to your SIPP with no further advice required (it's become a DC to DC transfer), and little chance the SIPP provider will decline it now that you aren't trying to transfer from a scheme with safeguarded benefits.

None of the above is to suggest that transferring is necessarily a good idea...if you've paid for advice (think upwards of £5K), it might make sense to pay heed to it!

How recently did you last get a CETV?

Many thanks marcon

Yes I have looked at the serious health option but I don’t currently qualify as it can’t be said I have less than 12 months to live.  If that changes then I’ll obviously look more into that

I last  got a CETV around 2 months ago.  Regrettably as you will be aware the value of final salary transfers has massively decreased in the last 2 years 
I did look at doing this 3 years ago when first diagnosed and had a value £100k more ! 

I wish i had done it then but hindsight and all that plus other things more on my mind at the time and with a £240k value it would definately have been more the right thing to do

a lump sum of around £100k (minus anything we spend ) would be a lot more use to my wife than £3k a year on the drip and would give her options in the event of my death 
whilst I can still work I’m going to do so and as she works as well we can afford to leave any pension fund alone for now to hopefully grow a bit more but I’d rather get it moved 

is there any form of advisers that work online that you would recommend to me please ? 

I'm sure you did have other things on your mind...so hardly surprising that thinking about transferring a pension was hardly top of the list of priorities.

Some snippets of info which might or might not be useful/relevant in due course:

1. a CETV is only 'guaranteed' for 3 months. Schemes are only required to provide one CETV, free of charge, in any 12 month period. Many will provide a second CETV during that period (normally only after the first one has 'expired'), and may charge for it - £500 or so is far from uncommon - but don't have to. If your scheme won't normally provide a second CETV, explain your health position, which should get you a sympathetic hearing. If you are dealing with the administrators and they still say no, go straight to the trustees and ask them to consider your request
2. if you are seriously going to look at transferring, make sure you have an independent financial adviser lined up ready to deal with your request - and let them ask for the CETV. That way the clock doesn't start ticking on the guarantee period until they do so, which gives them maximum time to ensure they can meet all the deadlines associated with such a transfer. They'll usually need the full 3 months to be sure of getting there in time
3. check if the DB scheme offers full commutation on grounds of serious ill health. This is only possible if a member hasn't started to draw their DB pension. What you'd be offered would be lower than a CETV, because it is only your own pension you are commuting - the scheme will (correctly) be keeping back funds to pay a spouse's pension
4. if you do transfer to a personal pension and have made some withdrawals from it, it is still possible to encash the whole lot if you do fall into the 'serious ill health' category, but the tax treatment will differ depending on whether you have taken (a) tax free cash from it already but no taxable cash, or (b) tax free cash and also taxable cash - probably easiest if you ask your financial adviser to explain during the transfer advice process. I don't imagine you are keen on a load of pension theorising at this stage of things - and the legislation might change in future.

In terms of advisers, the FCA register https://www.fca.org.uk/firms/financial-services-register is likely to be first choice for an independent financial adviser (IFA). You need to look for one with 'permissions' to act on pension transfers - and make sure they are independent. It isn't always easy to tell, so ask them if you aren't sure. Weasel words such as 'oh yes, we're independent of the pension scheme you're in' doesn't mean they are an IFA - IFAs can advise on a 'whole of market' basis (or nearly so), whereas anyone else is restricted (tied) to products offered by their own firm/employer.

STEP may also be a useful source - they aren't just about financial advice, but also law and other things relevant to those planning for the future : https://www.step.org/about-step/public