Final Salary- Freeze or Transfer?

NellyG_2

All,

Would really appreciate some advice please. I am pretty financially savvy but clueless when it comes to pensions and how they work.

I currently have a Final Salary pension with 4.5 years of employee (@ 5% of salary) and employer contributions (currently 16% of salary) plus about four years that I transferred in from another pension with previous employer.

I have just been made redundant but fortunately have found another job straight away. Only one down side- the new employer does not offer an FS scheme any more. What should I do with my existing pension- leave it where it is (presumably frozen from my leave date) or transfer the balance out to the scheme of my new employer? My new scheme would pay in contributions of 9% of salary if I contribute 6%

Thanks in advance

liverpoolcarl

Hi NellyG,

I have a Final Salary pension which is deferred. For the past four years I have spoke to various people/IFA's and they have all told me not to transfer under any circumstances as te pension is based on your final salary when you left and also inflation linked.

There are alot more people on here who will advice you more, just wanted to share the answers I have had with you.

EdInvestor

It's not frozen: it's uprated annually by inflation or 5% until you retire and now protected against corporate failure by the Govt's protection fund.Leave it where it is.

Retired_I.F.A.

Liverpool carl...They all gave you bad advice then.

Not including the others who were neither competent or authorised (such as Ed Investor) how many of the IFA's you spoke to were G60 qualified and how many of them conducted a TVA having compiled a full fact find?

liverpoolcarl

Two out of the four I have spoken to conducted the TVA. The two that never where just giving general advice. The two that did have been at new employers when setting up new pension schemes (not final salary).

EdInvestor

Retired_I.F.A. wrote: »

Not including the others who were neither competent or authorised (such as Ed Investor)

Speak for yourself, Retired IFA, at least my info is not out of date.

....how many of the IFA's you spoke to were G60 qualified and how many of them conducted a TVA having compiled a full fact find?

Obviously you are not aware that since the PPF was set up it's effectively now a complete no-no for any IFA to recommend a transfer of a final salary scheme.

AFAIK the "G60" qualification is also now obsolete.

bigbloke45

NellyG you say that your employer is contributing 16% of salary. This isn't strictly true, he may be making an overall contribution of 16% of payroll, but that is to cover all members' pensions. What you are getting is a promised benefit relating to your service and pensionable salary at your leaving date for which you have contributed 5% of you salary. I agree with EdInvestor, leave it where it is.

As for your new employer's scheme, remember you will get tax relief on your 6%. If you wish to save for retirement, take what's on offer as apposed to going it alone; you don't often get a free lunch!

"I currently have a Final Salary pension with 4.5 years of employee (@ 5% of salary) and employer contributions (currently 16% of salary) plus about four years that I transferred in from another pension with previous employer."

Good luck!

Retired_I.F.A.

Liverpoolcarl...Then you should know that "not to transfer under any circumstances " is wrong.

Actuaries have a number of variables from which they calculate a transfer value and a fair amount of leeway to make assumptions. What they use today can be totally different tomorrow. A 1% different assumption to inflation or expected returns can make a transfer value alter by thousands. Besides which the so called critical yield (the annual growth rate required of a transfer plan needed to provide similar benefits to the final salary scheme) is but one of many factors that need considering. Unfortunately many IFA's look no further than that sole figure.

Imagine an IFA without knowing all the facts telling a bloke not to transfer his retained benefits out of a perfectly good well funded final salary scheme because the critical yield is considered high. Then the guy dies a few months later. Turns out he was gay and has died leaving no wife or children and the final salary scheme does not recognise partners of the same sex. Thus they will pay out not one penny. The deceased's male partner would then successfully sue the IFA for £500,000 that which he would be entitled had a transfer been done.

Bottom line, Nelly G go seek out a G60 qualified IFA and get a proper analysis done, and throw as many "what if" questions as you can think of his way.
The transfer value is yours and there are many options available to you which your unlikely to know about. Whether it's advisable to transfer or not is irrelevant you should at least be aware of those options. And if it's still a no go on a transfer look and your IFA fails to convince the actuary to increase the transfer value look into it again periodically it could well be best to transfer at some future point in time.

Retired_I.F.A.

EdInvestor wrote: »

Speak for yourself, Retired IFA, at least my info is not out of date.

Neither is mine and neither do I break the law in advising people not to transfer unlike you.

Obviously you are not aware that since the PPF was set up it's effectively now a complete no-no for any IFA to recommend a transfer of a final salary scheme.

Total rubbish.

AFAIK the "G60" qualification is also now obsolete.

That may well have been replaced I dont know. If so tell me seeing as your such an expert what is it's equivelent and I'll amend my post.

bigbloke45

Retired I.F.A and EdInvestor, when you two have stopped your "handbags at dawn" stuff, shouldn't we remember that NellyG is asking for some help?

RIFA, you talk about actuaries' assumptions as if they are of use; they are not. The gay thing is a red herring unless NellyG is gay.

NellyG you can get a "proper" analysis done as many times as you like, but none of them will tell you what to do as they are, once again, actuarial assumptions. There was a court case many years ago when the Judge said "I would rather trust an Astrologer than an Actuary"

In the end, it comes down to a "judgement call". You have the choice to gamble as to whether you think a guaranteed benefit from your final salary scheme will do better or worse than a transfer to the investment market. In the first instant, your previous pension scheme takes the investment risk (as they are making you a pension promise) in the second case, you take all of the investment risk and gamble that your emerging benefits will be better than leaving them with you final salary scheme.

Tell me, NellyG, Do Yo Feel Lucky?

NellyG_2

Guys,

Really appreciate everyone's advice and I am sure, or at least hope, that EdInvestor and Retired IFA will not fall out in the long term.

Two things for the record, I do feel lucky and I was not gay the last time I checked. I will get some specific advice based on my circumstances- gut feel is that, based on the advice given so far, I will leave it where it is but will weigh up my options first.

Thanks again all!
NellyG