Transferring from DB after divorce.

scottyboy66

Hi everyone, 

I hope you can advise. I am soon to be divorced and will be allocated slightly over £100k from a DB scheme via the CETV. The pension is already in payment and the tax free element has been used as my other half is older than me. If I stay within the current scheme I believe I will take a reduction due to accessing my part of the pension some eight years before my state retiral age even although I am in extremely poor health. I thought about transferring out and spoke to an adviser and when I see charges for example 2% to set up  on a platform plus ongoing charges of 1% per year paid monthly etc and also scheme wrapper charges I think what is the point? The only benefit I see is that I can increase or decrease my pension amount as required in a flexible manner. Really confusing and unable to decide what is best moving forward. 

Any advice would be appreciated.

SB

Brie

Don't be surprised to hear that you'll need to pay £5k+ for an assessment for moving out of a DB scheme.  At least that's what normally happens.  And then the assessment usually says you can't transfer out.  

Since this is a divorce settlement though you may have more flexibility so I would suggest asking the DB pension admin team if they know if the value can be transferred to a SIPP or similar.  Or another work scheme if you are currently employed.  

Marcon

scottyboy66 said:

Hi everyone, 

I hope you can advise. I am soon to be divorced and will be allocated slightly over £100k from a DB scheme via the CETV. The pension is already in payment and the tax free element has been used as my other half is older than me. If I stay within the current scheme I believe I will take a reduction due to accessing my part of the pension some eight years before my state retiral age even although I am in extremely poor health. I thought about transferring out and spoke to an adviser and when I see charges for example 2% to set up  on a platform plus ongoing charges of 1% per year paid monthly etc and also scheme wrapper charges I think what is the point? The only benefit I see is that I can increase or decrease my pension amount as required in a flexible manner. Really confusing and unable to decide what is best moving forward. 

Any advice would be appreciated.

SB

Are you in England/Wales, or Scotland? If the former, the CETV will be recalculated (the guarantee will have expired) so any transfer could be on a lower or higher figure - you will have been awarded a %age of the CETV at the time of your settlement.

Are you sure you have the option of staying in the current scheme, and do you understand the terms of any 'pension credit' you will be awarded by doing so? From your post it sounds as if you might be a bit hazy on the detail, as are most people in such a situation.

Brie said:

Don't be surprised to hear that you'll need to pay £5k+ for an assessment for moving out of a DB scheme.  At least that's what normally happens.  And then the assessment usually says you can't transfer out.  

Since this is a divorce settlement though you may have more flexibility so I would suggest asking the DB pension admin team if they know if the value can be transferred to a SIPP or similar.  Or another work scheme if you are currently employed.  

Establishing the facts is crucial. If this is an unfunded scheme (one of the large public sector schemes), then transferring out isn't an option. If it's a private scheme, there may not be the option to remain within it - so OP will have no choice but to transfer out.

scottyboy66

Many thanks for your replies folks it is greatly appreciated. In answer to some questions asked:

The spilt from the CETV has been agreed in a pounds/pence amount and will not change even if the CETV valuation changes if that makes sense.

I am not currently employed and I am informed via the pension paperwork that I can transfer out to another qualifying pension arrangement as long as advice sought from an IFA as it is over £30k.

It states also that if I stay within the scheme that I can withdraw benefits from aged 55  (I am over this) but the figure will be actuarially reduced in accordance with guidance shown in the Government Actuary Department.

Staying within the scheme also has the benefits of telling me it will rise each year in line with the consumer price index.

What the paperwork does not say is whether I can get an increased pension amount due to extremely ill health thus reducing life expectancy. 

Any other thoughts would be greatly appreciated.

SB

Marcon

scottyboy66 said:

Many thanks for your replies folks it is greatly appreciated. In answer to some questions asked:

The spilt from the CETV has been agreed in a pounds/pence amount and will not change even if the CETV valuation changes if that makes sense.

I am not currently employed and I am informed via the pension paperwork that I can transfer out to another qualifying pension arrangement as long as advice sought from an IFA as it is over £30k.

It states also that if I stay within the scheme that I can withdraw benefits from aged 55  (I am over this) but the figure will be actuarially reduced in accordance with guidance shown in the Government Actuary Department.

Staying within the scheme also has the benefits of telling me it will rise each year in line with the consumer price index.

What the paperwork does not say is whether I can get an increased pension amount due to extremely ill health thus reducing life expectancy. 

Any other thoughts would be greatly appreciated.

SB

It will depend on the exact rules of the scheme in relation to 'pension credit' members - so the old refrain of 'check with the scheme' applies - but (sorry) is unlikely in the extreme.

DRS1

We had another thread on here about someone who wanted the pension credit following their divorce paid early (before 55) for ill health and they were told it was not permitted.  Schemes may differ but that rather suggests that the underlying law does not require them to have ill health provision for pension credit members.

What you might want to do is use an annuity quote service (eg Moneyhelper (or is it MoneyWise?) or Hargreaves Lansdown) to see what sort of annuity you would get with your health conditions for the amount which is available for transfer.  Then compare it to the reduced pension you would get from the scheme.  That should give you an idea whether it is worth looking into a transfer out

Marcon

DRS1 said:

We had another thread on here about someone who wanted the pension credit following their divorce paid early (before 55) for ill health and they were told it was not permitted.  Schemes may differ but that rather suggests that the underlying law does not require them to have ill health provision for pension credit members.

You are entirely correct - there is no legal requirement to offer pension credit members 'identical' terms to those offered to the person who is a member in their own right. The problem with ill health provision is that it almost invariably involves some sort of cost (or at least the risk of increased cost), and a pension credit member will only get what their pension credit 'buys' in the scheme, on the terms set by the scheme.

The thread to which you referred is here: https://forums.moneysavingexpert.com/discussion/6598907/early-access-to-pso-pension-credit-due-to-ill-health-any-experience/p1

The unusual (but not unique) feature is that the person with the pension credit was a member of the (Civil Service) scheme and had already been granted ill health retirement in respect of their own service but NOT the pension credit. The person posting who was 'helping' quite simply couldn't get their head round the fact that personal and pension credit membership are treated entirely differently under the Civil Service Regs. They just kept repeating the same thing time and again as several of us explained patiently but with an increasing sense of frustration that their friend was something the Civil Service Regs described as a 'dual capacity member' - a position they still wouldn't accept even when given the link to the actual Regs.

Short version of the above: make sure you know what you're getting if you become a Pension Credit member. It may not be what you fondly hoped!

hyubh

scottyboy66 said:

Many thanks for your replies folks it is greatly appreciated. In answer to some questions asked:

The spilt from the CETV has been agreed in a pounds/pence amount and will not change even if the CETV valuation changes if that makes sense.

I am not currently employed and I am informed via the pension paperwork that I can transfer out to another qualifying pension arrangement as long as advice sought from an IFA as it is over £30k.

It states also that if I stay within the scheme that I can withdraw benefits from aged 55  (I am over this) but the figure will be actuarially reduced in accordance with guidance shown in the Government Actuary Department.

Staying within the scheme also has the benefits of telling me it will rise each year in line with the consumer price index.

What the paperwork does not say is whether I can get an increased pension amount due to extremely ill health thus reducing life expectancy. 

Any other thoughts would be greatly appreciated.

SB

Different different schemes have different rules, is this LGPS...?

scottyboy66

Hi hyubh, 

Yes, it is a LGPS.

SB

Silvertabby

Then your pension credit benefits won't/can't  be enhanced due to ill health.  They could be paid as a one off lump sum (at any age) but only on the grounds of serious ill health, ie you have been given less than 12 months to live.

A transfer out to another scheme is possible but, subject to the appropriate financial advice, will be expensive and still may not give you the result you want.

Also consider that LGPS transfer out factors are set by GAD, and so are not generous.  

DRS1

This may be a stupid question (and may well not be what the OP would want to do anyway) but is it possible to make a direct transfer from a DB scheme to an immediate annuity.

Usually you would not want or need to do that but if the OP could get a better pension from an annuity provider than the LGPS could it be done by a direct transfer or would it have to go via a DC scheme?

If it can be done direct would that make the IFAs advice burden easier (and cheaper?) because the recipient would be paying a DB style benefit and it is just a case of saying A is bigger than B so you are better off making the transfer.