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  • FIRST POST
    • pensionnovice
    • By pensionnovice 19th Jun 18, 9:53 PM
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    pensionnovice
    Should I Transfer My Final Salary Pension Fund?
    • #1
    • 19th Jun 18, 9:53 PM
    Should I Transfer My Final Salary Pension Fund? 19th Jun 18 at 9:53 PM
    Hi Everyone,


    I have a final salary Avesta Polarit (formerly British Steel) pension which has been frozen (deferred) since February 2006. I am 59 years old (60 on 30th Nov). I was made redundant before I was 50, so I did not receive my full pension. I will not get my full pension until I am 65 on 30/11/2023. I can access it when I want, but I will lose 5% for each year under 65 years old. For example, I would lose 25% if I was to access it when I'm 60. My last transfer valuation was on 28th June 2017 and was 406,407. My early retirement options on 14th Sept 2017 were: Option 1: A pension of 12,281 pa, a spouse pension of 6,140 pa without a lump sum payment. Option 2: A lump sum of 55,936, a pension of 8,391 pa and a spouse pension on death of 6,140. These figures would increase the longer I wait. I don't know what I would get when I'm 65.



    I know a few people who are in the same boat as me who have taken the decision to transfer their pension fund into either a private pension or an annuity scheme. I've heard conflicting opinions on whether or not you should do this. I have spoken to a financial advisor and she says I should definitely transfer it. She makes it seem like a no-brainer. I'm just worried that she could be telling me this so that she will get commission. I'm hoping that's not the case, but you can never be sure.


    I'm due to get another transfer value on 28th June this year and I've made arrangements to see her again when I get my transfer value. In the meantime, I would appreciate any feedback on this forum from anyone who can give an educated view on this. Thank you.


    David
Page 2
    • pensionnovice
    • By pensionnovice 20th Jun 18, 9:11 PM
    • 4 Posts
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    pensionnovice
    Sorry. A couple of things I forgot to mention. When I saw my financial advisor, I described my attitude to risk as "balanced" from the options she gave me. She works for a company called "True Potential". Before, she worked for Legal & General. She was recommended to me by a friend of a former colleague, who is also a former colleague. He tells me that he is delighted with what she has done for him. It still doesn't 100% reassure me though, even though it probably should. The decision is too massive.



    I am married to a foreign woman. We are currently in the process of trying to get a spouse visa for her to come to live with me in UK. I don't have any kids.
    • kidmugsy
    • By kidmugsy 20th Jun 18, 10:26 PM
    • 11,368 Posts
    • 7,889 Thanks
    kidmugsy
    https://www.ftadviser.com/Articles/2018/03/07/True-Potential-under-fire-for-failing-to-flag-pension-change

    http://citywire.co.uk/new-model-adviser/news/true-potential-distances-itself-from-inaccurate-db-transfer-promotion/a999319

    https://henrytapper.com/2016/05/31/true-potential-for-a-good-igc-report/

    https://www.telegraph.co.uk/finance/personalfinance/pensions/12136177/This-is-how-cold-callers-tried-to-persuade-me-to-move-my-company-pension.html

    http://www.financialreporter.co.uk/retirement/true-potential-approved-by-the-pensions-regulator.html
    Free the dunston one next time too.
    • sandsy
    • By sandsy 21st Jun 18, 7:48 AM
    • 1,362 Posts
    • 822 Thanks
    sandsy
    I know a few people who are in the same boat as me who have taken the decision to transfer their pension fund into either a private pension or an annuity scheme. I've heard conflicting opinions on whether or not you should do this.
    Originally posted by pensionnovice
    Just because it's right for your mate doesn't mean it's right for you...or vice versa.

    I have spoken to a financial advisor and she says I should definitely transfer it. She makes it seem like a no-brainer.
    Originally posted by pensionnovice
    It's rarely a no-brainer. Traditionally, there have been some people for whom it can be easier to justify a transfer. These include people with reduced life expectancy who wouldn't get full value out of the final salary pension. Also single people who don't have a spouse to benefit from the spousal benefits of a DB pension. More recently, it has become easier to recommend a transfer in some other circumstances. These might include when someone can comfortably cover there expected outgoings in retirement and so can readily cope with the investment fluctuations that could occur in a DC scheme. However, the regulator regards advice on pension transfers as high risk and suggest that advisers always start from the perspective that a transfer won't be a their client's best interests. They've also found that only about half of advice given can be clearly shown to be right.

    I'm just worried that she could be telling me this so that she will get commission. I'm hoping that's not the case, but you can never be sure.
    Originally posted by pensionnovice
    There is no commission on pension transfer advice. Some advisers will levy a charge irrespective of whether they recommend a transfer. Others will only charge you (out of the transferred pot) if they recommend a charge. In the latter case, it could be argued there is an incentive to recommend a transfer as otherwise, they don't get paid. Don't forget, that if you will need to get advice every year after you transfer, there will be charges on that too and they'll probably add up to more than whatever you pay for the transfer in the first place.
    Last edited by sandsy; 21-06-2018 at 8:55 PM.
  • jamesd
    the OP said that the 12281pa option was for Sept 2017 last year when he was 59, so his pension at 65 must be in the region of 17k i.e. 12281 is approx 70% of 17k. So the pension multiple for age 65 is 23.9'ish.

    Is that still viewed as good for the OP?
    Originally posted by MrStanners
    The transfer value is affected by the actuarial reduction for taking it early, so it'd be more like 33 times the higher pension at 65. With high actuarial reduction and other money available it'll probably be best to defer a transfer for a while.

    Finally, the OP talks about transferring their pension into a pension fund or annuity. I don't think it's necessarily one or the other, or are annuities still very bad?. Why not have both where the annuity with state pension provides a basic guaranteed income, and part of the DB pension fund e.g. the 25% tax free, is invested.
    Originally posted by MrStanners
    It definitely isn't one or the other. I usually suggest state pension deferral to increase guaranteed income as a form of longevity insurance. Even where they don't seem to buy much income for the money spent, one or more annuities can make people happier. Perhaps to match minimal spending or to provide easy to manage income for a spouse. The mixture can be tailored for the individual.

    I fully expect to do both state pension deferring and annuity buying for myself.
    • Malthusian
    • By Malthusian 21st Jun 18, 9:43 AM
    • 4,473 Posts
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    Malthusian
    When I saw my financial advisor, I described my attitude to risk as "balanced" from the options she gave me.
    Originally posted by pensionnovice
    In itself that is a rubbish way to determine someone's attitude to risk. A proper approach consists of a questionnaire (which is fed into a computer and spits out a number between 1 in 10, or 1 in 7, or whatever scale the risk profiler uses), plus a conversation with the adviser about the stockmarket and how you would react to crashes, to ensure that you understand what the result of the questionnaire means and that it is in fact accurate.

    But the vast majority of people end up with a "balanced" risk profile so the result may have been accurate, albeit by accident.

    If you are describing her risk profiling process accurately - all you did was choose a risk profile from a menu - then she is behind the times by ten years and is asking for an unpleasant visit from the FCA. That isn't good enough anymore.

    She works for a company called "True Potential". Before, she worked for Legal & General.
    Check if she's independent. True Potential is a network, and I believe some of its advisers will be independent and others will be restricted salespeople.

    Any reputable adviser is extremely cautious about recommending defined transfers because of a) FCA advice that a defined benefit transfer is unsuitable until proven otherwise b) the vast, potentially career-ending cost if you later complain and the FOS rules against the adviser (professional indemnity insurers can't get away from this area fast enough) c) scandals like British Steel.

    We've already pointed out the reasons why a defined benefit transfer is very rarely a no-brainer. The above is why very few advisers would make it sound like a no-brainer even when it was.

    Unless you have enough guaranteed income to easily meet your retirement needs and the DB pension does little for you except create a tax problem, or there's some other reason that makes it objectively a no-brainer, I would be cautious about anyone who makes it seem like one.
    • MrStanners
    • By MrStanners 21st Jun 18, 5:15 PM
    • 34 Posts
    • 4 Thanks
    MrStanners
    The transfer value is affected by the actuarial reduction for taking it early, so it'd be more like 33 times the higher pension at 65. With high actuarial reduction and other money available it'll probably be best to defer a transfer for a while.
    Please can you explain this James? I must be thick because I don't understand why the transfer value is affected by age and would increase as you got older, apart from due to any inflation indexing included in a deferred pension.

    The company pension guarantees a defined pension at 65 and assumes it will pay out for x years based on average mortality. The transfer value should be to cover this guarantee? So if you take the pension early then the pension is reduced because you should be drawing it for longer but surely the transfer value is the same?

    So I agree with your point about deferring a DB pension but don't understand why it would increase the transfer value.
  • jamesd
    Please can you explain this James? I must be thick because I don't understand why the transfer value is affected by age and would increase as you got older, apart from due to any inflation indexing included in a deferred pension.
    Originally posted by MrStanners
    Because this is far more than inflation:
    I will not get my full pension until I am 65 on 30/11/2023. I can access it when I want, but I will lose 5% for each year under 65 years old. For example, I would lose 25% if I was to access it when I'm 60.
    Originally posted by pensionnovice
    That's a big cut in their payment obligation in the earlier years.
    • sandsy
    • By sandsy 21st Jun 18, 9:05 PM
    • 1,362 Posts
    • 822 Thanks
    sandsy
    Please can you explain this James? I must be thick because I don't understand why the transfer value is affected by age and would increase as you got older, apart from due to any inflation indexing included in a deferred pension.

    The company pension guarantees a defined pension at 65 and assumes it will pay out for x years based on average mortality. The transfer value should be to cover this guarantee? So if you take the pension early then the pension is reduced because you should be drawing it for longer but surely the transfer value is the same?

    So I agree with your point about deferring a DB pension but don't understand why it would increase the transfer value.
    Originally posted by MrStanners
    The transfer value is always based on the estimated cost now of providing the benefits normal retirement age. And that cost increases the nearer the member is to retirement age as there's less time to make investment returns on the money held.

    It's like if you need 10,404 in two years time. If you could earn a guaranteed 2% on your money each year, you would need 10,000 now. Or you would need 10,200 in a year's time.
  • jamesd
    I don't have any experience of investment.
    Originally posted by pensionnovice
    Then you probably are going to need financial advice, at least about investments and investing. We can make suggestions like 60%:40% mixture of global eqyuity tracker and global bond funnd that are decent, but that's not the same as personal advice. We can also give opinions on any investment recommendations an IFA makes and their approach to working out how much income to take.

    A lot of the info posted is news to me. In fact, pretty much all of it.
    Originally posted by pensionnovice
    That's normal, just take your time.

    My Dad passed away last year. I don't have any siblings, so he left everything to me. His house and enough money for me to live on for a few years, as long as I don't spend extravagantly. I could possibly last until I'm 65
    Originally posted by pensionnovice
    You have one of the higher reductions for each year taken early that I've seen, so whether you plan to take the pension income or transfer it's probably a good move to use this money to delay a few years. Not to the point of skimping on spending, but maybe spending what the pension or the pension plus your state pension will pay.

    My health is generally good. I keep myself fit, so I would like to think I'll live for a long time, but you never know what might be round the corner of course.
    Originally posted by pensionnovice
    One thing I did a few years ago was pay for a private health screening that used x-ray CT scanning to check out my heart and internal organs for problems. Nothing of great concern found but then I had actual data, not wondering.

    I don't like the idea of putting all my trust in a financial advisor. One of the comments was that I should find an INDEPENDENT financial advisor. Aren't they all supposed to be independent?
    Originally posted by pensionnovice
    They are all independent to some degree but those with independent in their title must:
    1. offer advice on the full range of issues
    2. consider all products on the market

    One without the word independent:
    1. can restrict the services they offer, perhaps to specialise
    2. doesn't have to consider all products and could just use own-brand products.

    So no independent could be a retirement specialist considering all products related to that or could in effect just sell their own firm's products, making it harder for you to know they are suitable.
    • pensionnovice
    • By pensionnovice 25th Jun 18, 12:30 AM
    • 4 Posts
    • 0 Thanks
    pensionnovice
    Thanks guys for all your posts. There's a lot for me to consider. My instinct tells me that if the decision to transfer or not is borderline and not clear-cut, then I might as well leave things as they are. I've clearly got a lot of thinking to do. Thanks for all your help.


    Regards from david
    • Malthusian
    • By Malthusian 25th Jun 18, 9:18 AM
    • 4,473 Posts
    • 7,105 Thanks
    Malthusian
    Thanks guys for all your posts. There's a lot for me to consider. My instinct tells me that if the decision to transfer or not is borderline and not clear-cut, then I might as well leave things as they are.
    Originally posted by pensionnovice
    Agreed. If you don't transfer out of the scheme, you can always transfer out later. (The CETV offered might be lower, but transferring out of the scheme because you're afraid of missing out on an inflated CETV is a terrible reason for transferring.) If however you do transfer out of the scheme, you can never go back.
  • jamesd
    Taking your time and doing it later if you do it is likely to be best. The gradually falling 5% a year reduction will increase the transfer value. Interest rate increases will decrease it. At the moment it appears that the 5% effect is likely to be bigger. Not something that can be guaranteed, just how it appears at the moment.
    • Dox
    • By Dox 25th Jun 18, 1:02 PM
    • 851 Posts
    • 627 Thanks
    Dox
    Thanks guys for all your posts. There's a lot for me to consider. My instinct tells me that if the decision to transfer or not is borderline and not clear-cut, then I might as well leave things as they are. I've clearly got a lot of thinking to do. Thanks for all your help.


    Regards from david
    Originally posted by pensionnovice
    Have a read of this thread, especially the posts at the end: https://forums.moneysavingexpert.com/showthread.php?t=5859693
    • atilla
    • By atilla 30th Jun 18, 2:18 PM
    • 839 Posts
    • 711 Thanks
    atilla
    In fairness to the IFA consulted by OP, it sounds as if she was given a transfer value which was out of its guarantee period, so there would have been no merit in charging OP around 600 for a transfer value analysis.

    OP - once you get your new transfer value, send it straight on to the IFA. It is only guaranteed for 3 months and if you don't take a decision on whether or not to transfer out, and the scheme(s) to which you wish to transfer, the value will lapse and you will have to start again with an updated transfer value - which could be a year away.
    Originally posted by Brynsam
    The OP mentioned Financial Advissor. NOT an Independent advisor.
    With some of the horror stories coming out about the sharks circling the British Steel pension this may well be important.
    • STEVE PEACOCK
    • By STEVE PEACOCK 8th Aug 18, 3:48 PM
    • 3 Posts
    • 2 Thanks
    STEVE PEACOCK
    I am in a similar boat with my Final salary pension and also in a dilemma what to do. The financial advisers that are keen on my transferring out are quoting 2 - 3% fees. Seems quite small until you consider my CETV is close to 700k. So 21k (probably + VAT) and then they are looking to manage my account at a further yearly cost of 1%. In the event my SIPP value remained constant IFA would receive 56k in the 1st 5 years. Proceed with extreme caution would be my advice!! (And advise your kids to look into IFA as a career).
    • Teaandscones
    • By Teaandscones 8th Aug 18, 8:52 PM
    • 133 Posts
    • 115 Thanks
    Teaandscones
    If you have got enough to live on without transferring then why bother? Yes you might do better and leave more money for your heirs, but you may also spend time worrying about running out of money, particularly if you are not an experienced investor.

    There may be special situations why transferring is a good idea such as serious ill health or sufficient other independent sources of income, but these are not the norm. As such ask yourself what makes your position so special? If you can't come up with a good answer, then leave things alone.
    • C_Mababejive
    • By C_Mababejive 8th Aug 18, 9:59 PM
    • 10,539 Posts
    • 9,477 Thanks
    C_Mababejive
    This is only hearsay so treat it as such but i work in an industry where a lot of people have suddenly decided its a good time to transfer out their DB pensions. A small number of IFAs seem to have cornered most or all of them ,simply by word of mouth . I have heard of promises of 10% return a year. Now the people to whom these DB pensions belong, mostly have very little knowledge of financial matters . They are being charged around 1% management on pots of circa 600k to 800k.

    I have heard hearsay of one persons pot that has only increased by 0.5% in value in the first year.

    I strongly suspect there will be a lot of buyers remorse in the next few years ,especially when the current bull run ends.
    Feudal Britain needs land reform. 70% of the land is "owned" by 1 % of the population and at least 50% is unregistered (inherited by landed gentry). Thats why your slave box costs so much..
    • Turpinr
    • By Turpinr 9th Aug 18, 5:51 PM
    • 7 Posts
    • 0 Thanks
    Turpinr
    Mine is roughly similar. 17165 ish at 65 but only 11604 to retire at 60 years, 8 months (new year)
    Reduction factor at 60 was a whopping 36.9 % and then roughly 6%/annum after that.
    Transfer value was 339,000 which doesnt look great so I'll have to carry on working
    • kidmugsy
    • By kidmugsy 9th Aug 18, 11:16 PM
    • 11,368 Posts
    • 7,889 Thanks
    kidmugsy
    I strongly suspect there will be a lot of buyers remorse in the next few years ,especially when the current bull run ends.
    Originally posted by C_Mababejive
    Hardly one of them will admit to being a chump. They'll thceam and thceam until they are thick. They'll cry mis-selling. They'll demand compensation.
    Free the dunston one next time too.
    • C_Mababejive
    • By C_Mababejive 12th Aug 18, 11:46 AM
    • 10,539 Posts
    • 9,477 Thanks
    C_Mababejive
    Hardly one of them will admit to being a chump. They'll thceam and thceam until they are thick. They'll cry mis-selling. They'll demand compensation.
    Originally posted by kidmugsy

    They will indeed. Why only this very morning whilst enjoying a lite full English that i prepared for myself and the current Ms Mababejive, whilst listening to classic FM there was an advertisement for a claims firm punting for clients who felt they had been wrongly advised to transfer their DB pension to a SIPP or other vehicle.


    With a 1% AMC on a 700,000 pot,well that figure 1 looks small but magnify it over maybe 20 years and it looks frightening.

    The people that i speak of though are largely oblivious to it.
    Feudal Britain needs land reform. 70% of the land is "owned" by 1 % of the population and at least 50% is unregistered (inherited by landed gentry). Thats why your slave box costs so much..
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