Transferring Civil Service Alpha Pension

whitehartal

I recently left the Civil Service after a short period of time working for them. I was enrolled in the Alpha scheme.

I received a letter from the Civil Service, advising that as I had less than 2 years of employment, I am not eliguble to draw the pension, so I now have 2 options:

1) Receive a refund of the amount I put in (about £1000), LESS tax.

2) Transfer my pension balance (about £7000) to another pension provider.

Clearly, option 2 would be my preferred option.

I have a personal pension with Scottish Widows, so I'd like to transfer the funds into that. However - I've asked my IFA to kick-start the process, and he's telling me that in reality you can no longer move funds from a final salary scheme unless it’s over £500,000….and even then it’s still almost impossible.

He's said that pension rules state that ‘technically’ a client can transfer a DB under £30,000 without needing any financial advice - however the reality is that pension providers (including Scottish Widows) will not accept them.

Is that correct? It seems odd that the Civil Service would specify an option that's not actually possible.

Marcon

whitehartal said:

I recently left the Civil Service after a short period of time working for them. I was enrolled in the Alpha scheme.

I received a letter from the Civil Service, advising that as I had less than 2 years of employment, I am not eliguble to draw the pension, so I now have 2 options:

1) Receive a refund of the amount I put in (about £1000), LESS tax.

2) Transfer my pension balance (about £7000) to another pension provider.

Clearly, option 2 would be my preferred option.

I have a personal pension with Scottish Widows, so I'd like to transfer the funds into that. However - I've asked my IFA to kick-start the process, and he's telling me that in reality you can no longer move funds from a final salary scheme unless it’s over £500,000….and even then it’s still almost impossible.

He's said that pension rules state that ‘technically’ a client can transfer a DB under £30,000 without needing any financial advice - however the reality is that pension providers (including Scottish Widows) will not accept them.

Is that correct? It seems odd that the Civil Service would specify an option that's not actually possible.

I'm not sure your IFA has grasped the position. With under two years of membership, you don't have the option of keeping a DB pension with the Civil Service - and plenty of pension providers will accept your transfer of around £7,000 without advice and without any problem. You don't need to involve your IFA and pay them to add nothing much to the process.

Don't pay an IFA to do a simple task you can do for yourself. Contact SW and check they will accept the transfer, ensuring they understand that it relates to a short period of employment which did NOT give you a right to a deferred pension with Alpha, and ask them how to set the wheels in motion.

If for some reason they say no (they are entitled to), open a stakeholder pension for yourself and transfer the £7K to that (DB to DC transfer), and then on to SW (DC to DC transfer, so issue has already disappeared) if that's what you want the final destination to be.

Standard Life and Aviva are open to new stakeholder business from retail customers - it'll cost you a £16 contribution (they'll add basic rate tax relief to bring it up to their £20 minimum contribution) and you are guaranteed acceptance of the transfer, since a stakeholder pension must accept a transfer from any UK registered pension scheme.

You might do a bit of IFA education by pointing out that the reality is that moving a DB pension of any value isn't a problem if you have a stakeholder pension to which it can be transferred, since they can't refuse the transfer. Advice is still needed if the transfer value is £30K+, because otherwise the DB pension can't realise the transfer funds.

Dazed_and_C0nfused

whitehartal said:

I recently left the Civil Service after a short period of time working for them. I was enrolled in the Alpha scheme.

I received a letter from the Civil Service, advising that as I had less than 2 years of employment, I am not eliguble to draw the pension, so I now have 2 options:

1) Receive a refund of the amount I put in (about £1000), LESS tax.

2) Transfer my pension balance (about £7000) to another pension provider.

Clearly, option 2 would be my preferred option.

I have a personal pension with Scottish Widows, so I'd like to transfer the funds into that. However - I've asked my IFA to kick-start the process, and he's telling me that in reality you can no longer move funds from a final salary scheme unless it’s over £500,000….and even then it’s still almost impossible.

He's said that pension rules state that ‘technically’ a client can transfer a DB under £30,000 without needing any financial advice - however the reality is that pension providers (including Scottish Widows) will not accept them.

Is that correct? It seems odd that the Civil Service would specify an option that's not actually possible.

Either you've got a poor IFA or you haven't explained it well enough to them.

Not really sure why you have even involved an IFA in this to be honest.  

Universidad

Marcon said:

You don't need to involve your IFA and pay them to add nothing much to the process.

I'd go further, the IFA has actually got in the way - though we don't know where the communication failure arose.

I've been happy with my IFA's advice to-date

But you're not happy with it this time... which is good, because for better or worse I don't think what you've been told is right (or perhaps you asked the wrong question, or understood their position wrong - no offence intended but that's at least as likely as an IFA being straight up incorrect on this).

AFAIK, the rule about not being able to transfer out a DB pension valued over 30,000 without advice probably wouldn't apply in this case, even if your pension was deemed to have that value (which, would be hard to achieve in under 2 years, but for the sake of argument). 

The reason is that it applies to situations where you give up safeguarded benefits. You do not have safeguarded benefits in this case, even though this is a DB scheme, because you are not entitled to a pension.

And even if you did get such advice I would imagine you would be one of the minority of clients for who the recommendation was positive, because it's hard to imagine that you'd be better off taking your contributions back, given that you lose the employer contribution value AND pay tax on it.

Separately, I believe that the unfunded public sector schemes now have a rule that you can't transfer out to a DC pension no matter what your package is "worth". But again, this doesn't apply until your pension has vested.

As a thought experiment, I wonder whether if you *had* to get advice you might still come out better paying for it than taking your contributions back. If, say, your contributions after tax were only worth about 1000 pounds, and you got a VERY cheap quote for the advice...

But that's just a thought experiment. This should be way easier than that.

Marcon

Universidad said:

Marcon said:

You don't need to involve your IFA and pay them to add nothing much to the process.

I'd go further, the IFA has actually got in the way - though we don't know where the communication failure arose.

I've been happy with my IFA's advice to-date

But you're not happy with it this time... which is good, because for better or worse I don't think what you've been told is right (or perhaps you asked the wrong question, or understood their position wrong - no offence intended but that's at least as likely as an IFA being straight up incorrect on this).

AFAIK, the rule about not being able to transfer out a DB pension valued over 30,000 without advice probably wouldn't apply in this case, even if your pension was deemed to have that value (which, would be hard to achieve in under 2 years, but for the sake of argument). 

The reason is that it applies to situations where you give up safeguarded benefits. You do not have safeguarded benefits in this case, even though this is a DB scheme, because you are not entitled to a pension.

And even if you did get such advice I would imagine you would be one of the minority of clients for who the recommendation was positive, because it's hard to imagine that you'd be better off taking your contributions back, given that you lose the employer contribution value AND pay tax on it.

Separately, I believe that the unfunded public sector schemes now have a rule that you can't transfer out to a DC pension no matter what your package is "worth". But again, this doesn't apply until your pension has vested.

As a thought experiment, I wonder whether if you *had* to get advice you might still come out better paying for it than taking your contributions back. If, say, your contributions after tax were only worth about 1000 pounds, and you got a VERY cheap quote for the advice...

But that's just a thought experiment. This should be way easier than that.

I was trying to avoid being too critical of the IFA's role, because this sounds very much like a communication failure. That said, if the IFA's comments have been accurately reported it doesn't sound as if they know too much about the reality of DB transfers: 

However - I've asked my IFA to kick-start the process, and he's telling me that in reality you can no longer move funds from a final salary scheme unless it’s over £500,000….and even then it’s still almost impossible. He's said that pension rules state that ‘technically’ a client can transfer a DB under £30,000 without needing any financial advice - however the reality is that pension providers (including Scottish Widows) will not accept them.

michaels

I hope you fully understand the level of risk on your investments if they are outperforming the markets.