Preparing for an interview with an adviser

Yorkie1

A DB pension is a Defined Benefit pension. This is one where you will get a defined amount of money per month for the rest of your life. Essentially it's like salary. There may be a tax free lump sum as part of the pension (this is different to the 25% tax free lump sum which I'll come onto shortly).

It looks as though your Financial Assistance Scheme (FAS) pension will be a DB pension because you say how much you will get per year. The rules of the pension will set out how much it goes up by each year (or whether it doesn't go up at all).

A DC pension is a Defined Contribution pension. This is where you know how much you contributed (put into it) over the years, but because it's invested in the stock market or other types of investments, its value at any moment can vary.

Given that you say how much each "pot" is worth, and the ability to choose whether to take an annuity or not, it sounds as though both your Zurich and L&G pensions are likely to be DC pensions - although if you've checked with L&G and they have definitely told you it is a DB pension, then of course that would be the position.

This may be adding an extra piece of information to the equation, but don't forget that if you take a combination of 25% tax free and 75% taxable money from your pension, it does not automatically follow that you will actually pay tax on the taxable part. It will depend on your overall income levels.

If your annual income from the FAS pension is £970 per year (rounding for each of the maths), then the next £11600 of taxable income from a pension will be taxed at 0%. This means that you wouldn't actually pay tax on  it. (This assumes you have the standard £12570 band of 0% tax). For example, if you drew £10K from your DC pensions, of which £2500 was tax free and £7500 was taxable, none of this would actually have tax paid on it.

akwexavante

Thank you so much Yorlie1 for your contribution and this all makes sense to me in the way you've written things too. I like the short paragraphs with sizeable gaps too.

Yorkie1 said:

It looks as though your Financial Assistance Scheme (FAS) pension will be a DB pension because you say how much you will get per year. The rules of the pension will set out how much it goes up by each year (or whether it doesn't go up at all).

I don't know if it's a DB pension or not and info is very scant. My 1st Adviser says he can't get access to any more info about it than i can myself over the phone.  A phone call to them suggests any annual increase will be insignificant, so small it's best to accept it'll not increase at all.

Given that you say how much each "pot" is worth, and the ability to choose whether to take an annuity or not, it sounds as though both your Zurich and L&G pensions are likely to be DC pensions - although if you've checked with L&G and they have definitely told you it is a DB pension, then of course that would be the position.

My legal & General pot is a DB pension pot. My Zurich pension is a DC pension pot.

This may be adding an extra piece of information to the equation, but don't forget that if you take a combination of 25% tax free and 75% taxable money from your pension, it does not automatically follow that you will actually pay tax on the taxable part. It will depend on your overall income levels.

1st Adviser says if i go with True Potential moving my Zurich pot only i'll recieve two payments each month. Taxable part and a tax free part (75% / 25%)

If your annual income from the FAS pension is £970 per year (rounding for each of the maths), then the next £11600 of taxable income from a pension will be taxed at 0%. This means that you wouldn't actually pay tax on  it. (This assumes you have the standard £12570 band of 0% tax). For example, if you drew £10K from your DC pensions, of which £2500 was tax free and £7500 was taxable, none of this would actually have tax paid on it.

I like this explanation and i understand it, thank you so much.

1st Adviser tells me he's not even qualified to advise himself on what to do with his own DB pension pot!!!! He's not qualified to do so. So he can't give me advice on it.  However, wink wink! He does say that when he's ready, he will take the max 25% tax-free lump sum and what's left as an annuity, even though he knows that he can take it all as an annuity.   To consider doing anything else with it, it at all, it would have to have a value of no more than £30K or more than £150K. My DB Legal & General pot is worth £38K, between the two.

So i have just two options, leave it to slowly / poorly grow or take it either as (25% tax-free now, the rest as an annuity) or take (it all as an annuity).

The 1st adviser has left me with stuff to go through which includes a table of charges and costs etc with his proposed plan.  I was going to read through this today. But today is my only dry day this week, so i'm taking myself outdoors this afternoon and i'll go through it all tomorrow instead.

Marcon

akwexavante said:

Thank you so much Yorlie1 for your contribution and this all makes sense to me in the way you've written things too. I like the short paragraphs with sizeable gaps too.

Yorkie1 said:

It looks as though your Financial Assistance Scheme (FAS) pension will be a DB pension because you say how much you will get per year. The rules of the pension will set out how much it goes up by each year (or whether it doesn't go up at all).

I don't know if it's a DB pension or not and info is very scant. My 1st Adviser says he can't get access to any more info about it than i can myself over the phone.  A phone call to them suggests any annual increase will be insignificant, so small it's best to accept it'll not increase at all.

It'll be a DB pension or it wouldn't be in the FAS.

akwexavante said:

1st Adviser tells me he's not even qualified to advise himself on what to do with his own DB pension pot!!!! He's not qualified to do so. So he can't give me advice on it.  However, wink wink! He does say that when he's ready, he will take the max 25% tax-free lump sum and what's left as an annuity, even though he knows that he can take it all as an annuity.   

How on earth does it help you to know what someone else is going to do with their pension?

 akwexavante said:

To consider doing anything else with it, it at all, it would have to have a value of no more than £30K or more than £150K. My DB Legal & General pot is worth £38K, between the two.

You can consider doing something else with a pension of any value.

akwexavante

To consider doing anything else with it, it at all, it would have to have a value of no more than £30K or more than £150K. My DB Legal & General pot is worth £38K, between the two.

You can consider doing something else with a pension of any value.

Adviser said this is true.  He said that if it had a value of £30K or less i could take it / move it / do something with it without incurring high costs and charges, and therefore it would be worthwhile exploring options.

If it had been worth £150K or more and with time left in my lifetime the high costs and charges incurred to free it up to do something with it afterwards, it would be worthwhile. It would grow and recover those lost costs and charges fairly quickly.

He said the costs could be as much as £10K reducing it's value from £38K to £28K, it would take a very long time  to recover the £10K costs and charges.  I would have to leave it for quite a few years just to break even.

He said if it had been worth £150K, the costs and charges would reduce its value to £140K. Investing the £140K would fairly quickly recover the £10K costs and charges lost. It would have been worthwhile exploring options.

My 2nd adviser may have different advice when i get to that stage.

dunstonh

1st Adviser tells me he's not even qualified to advise himself on what to do with his own DB pension pot!!!! 

IFAs can advise on what to do with a DB pension in terms of taking benefits.   FAs should be able to do similar but their employer may restrict them from doing so.   However, only 1 in 10 advisers (of either type) can do DB transfers.   

However, wink wink! He does say that when he's ready, he will take the max 25% tax-free lump sum and what's left as an annuity, even though he knows that he can take it all as an annuity.  

That doesnt make sense.  DB pensions do not buy annuities, and you wouldn't buy an annuity with 100% of the fund (if it were a fund-based pension) unless there was a high guaranteed annuity rate that made the net of tax position worthwhile.     A DB pension uses a scheme pension rather than annuity.  And it can be beneficial in may cases to take less or no tax free cash.

To consider doing anything else with it, it at all, it would have to have a value of no more than £30K or more than £150K. My DB Legal & General pot is worth £38K, between the two.
So i have just two options, leave it to slowly / poorly grow or take it either as (25% tax-free now, the rest as an annuity) or take (it all as an annuity).

There is a lot of confusion in that bit of your post.   So, either you haven't taken it in or you were told duff info.