Enhanced transfer value offer

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Katykat
Katykat Posts: 1,743 Forumite
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in Pensions, annuities & retirement planning
Daughter has received a letter regarding a pension that she was a member of for 20 yrs. She has a pot of £84500. The letter tells her that if she transfers this amount into another pension scheme in the next 3 months, they will enhance the pot ( ETV) by £31500, making her pension pot £116000, with a retirement age of 55. She is 43 & gets her state pension at 67.
The problem is, she is only temping right now & doesnt have a company pension. Even if she takes a permanent job, some companies have a minimum employment time before she could join their scheme ( although I know, some dont). Could she put this pot into a private pension? Do you have to be employed to take out a private pension? Would there be disadvantages if she did?
The letter advises her to take financial advice as this offer would not suit everyone, they have also included free impartial financial advice with a stated company but obviously not free if she chooses her own FA.
She would still be able to transfer her £84500 into another scheme in the future but would lose the £31500 if it was after the 3 months.
:smileyhea A SMILE COSTS ABSOLUTELY NOTHING

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  • Albermarle
    Albermarle Posts: 22,134 Forumite
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    Can you clarify to be sure what type of pension this is :
    Is it a DB ( Defined Benefit ) scheme , sometimes known as a Final Salary scheme ?
    In other words if she kept the pension would it pay out a guaranteed annual income each year ( from 55?)
    If it is then what is occurring is that the company is trying to buy her out of the scheme so they get rid of the obligation to pay this income until she dies.
  • Katykat
    Katykat Posts: 1,743 Forumite
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    Albermarle wrote: »
    Can you clarify to be sure what type of pension this is :
    Is it a DB ( Defined Benefit ) scheme , sometimes known as a Final Salary scheme ?
    In other words if she kept the pension would it pay out a guaranteed annual income each year ( from 55?)
    If it is then what is occurring is that the company is trying to buy her out of the scheme so they get rid of the obligation to pay this income until she dies.
    I will find this out for definate but off the top of my head, I dont think it is DB . I think its the other kind ( sorry cant remember the name )
    :smileyhea A SMILE COSTS ABSOLUTELY NOTHING
  • AnotherJoe
    AnotherJoe Posts: 19,622 Forumite
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    The other kind is DC, but on the face of it it makes no sense for them to pay her an extra £31.5k merely to avoid a small bit of admin managing her investments, so most likely there is a guarantee associated with it.

    This might be similar to a pension I have, in that whilst i have a "pot" there's also an assured payment they will make me, which I'd never get from an annuity or the standard 4% withdrawal rate. So i could imagine them offering me a buyout in this case which id never take unless it was unrealistically huge or my life span was looking dodgy.
    Such a transaction especially with a guarantee will require two things at least, (1) an adviser to produce a report stating what the advice is, eg take it or not, (which you should get her company to pay for) and (2) a SIPP company who will take the transfer even if the advice is not to take it (she may wish to take the transfer and give up the guarantee anyway. Such advice tends to be on the side of caution by a massive way)
    In the unlikely event it really is pure cash, no guarantees being lost, then obviously rip their arm off and take it by transferring it into a personal pension which she certainly can open to answer another of your questions.
  • cloud_dog
    cloud_dog Posts: 6,044 Forumite
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    As they are offering to enhance, there must be benefits (of some sort). Perhaps it is an older style S32 (buyout policy), which would have guarantees attached???
    Personal Responsibility - Sad but True :D

    Sometimes.... I am like a dog with a bone
  • Marcon
    Marcon Posts: 10,672 Forumite
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    This will be some sort of defined benefit arrangement - either final salary or CARE.

    Yes, it can be transferred to a private pension (no guarantee that if she joined a company scheme the scheme would accept transfers in, even if she did take up such employment). Whether it is in her interests to do so is quite another matter.

    Employers must pay for financial advice from a suitably authorised independent (i.e. impartial) financial adviser when they undertake this sort of exercise, so her next step is to take up that offer. It won't cost her anything and any decision about transferring or not transferring is ultimately up to her, whatever advice she is given. The general starting point is that it is not in the member's interest to transfer, but she may still want to pursue the possibility on a 'just in case' basis'.
    Googling on your question might have been both quicker and easier, if you're only after simple facts rather than opinions!  
  • Marcon
    Marcon Posts: 10,672 Forumite
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    Katykat wrote: »

    She would still be able to transfer her £84500 into another scheme in the future but would lose the £31500 if it was after the 3 months.

    Be aware that transfer values fluctuate. The £84,500 could go down as well as up!
    Googling on your question might have been both quicker and easier, if you're only after simple facts rather than opinions!  
  • Brynsam
    Brynsam Posts: 3,643 Forumite
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    cloud_dog wrote: »
    As they are offering to enhance, there must be benefits (of some sort). Perhaps it is an older style S32 (buyout policy), which would have guarantees attached???

    No. A S32 buyout policy is used to transfer benefits out of a company scheme to a policy in the name of the individual member, so any transfer would already have happened and be of no further interest to the sponsoring employer.
  • cloud_dog
    cloud_dog Posts: 6,044 Forumite
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    Brynsam wrote: »
    No. A S32 buyout policy is used to transfer benefits out of a company scheme to a policy in the name of the individual member, so any transfer would already have happened and be of no further interest to the sponsoring employer.
    Ok, but, unless I've missed something the OP hasn't specified that the communication has come from the (old) employer/scheme administrators, and they haven't confirmed (as yet) that it actually is a DB scheme so I don't think you can make that presumption just yet.
    Personal Responsibility - Sad but True :D

    Sometimes.... I am like a dog with a bone
  • xylophone
    xylophone Posts: 44,412 Forumite
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    A S32 is a buyout policy - a "one off".

    It only accepts a pension from another scheme and additional transfers or contributions are not permitted.
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