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  • FIRST POST
    • googler
    • By googler 12th Jan 19, 12:41 PM
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    googler
    Final Salary Pension -take as is, or look for alternative financial product?
    • #1
    • 12th Jan 19, 12:41 PM
    Final Salary Pension -take as is, or look for alternative financial product? 12th Jan 19 at 12:41 PM
    Received quotation from pension provider late last year, indicating levels of cash sum and pension / pension only etc.

    Haven't given my pension much thought up till this arrived, and I've heard tell that financial advisors can charge something of the order of 2% of the pension pot value for advising on alternatives, and/or carrying out process of switching to alternative investments; is this accurate/current?

    What have other folks done? Any recommendations?
Page 1
    • googler
    • By googler 12th Jan 19, 12:43 PM
    • 15,140 Posts
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    googler
    • #2
    • 12th Jan 19, 12:43 PM
    • #2
    • 12th Jan 19, 12:43 PM
    I'm off to look at the sticky at the top of this board ...
    • Dazed and confused
    • By Dazed and confused 12th Jan 19, 12:55 PM
    • 4,279 Posts
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    Dazed and confused
    • #3
    • 12th Jan 19, 12:55 PM
    • #3
    • 12th Jan 19, 12:55 PM
    Why do you think giving up the security of a final salary pension is something to be considered?

    There are sometimes valid reasons for this but often it's not a great idea. What makes you think it is something which might be better for you??
    • cloud_dog
    • By cloud_dog 12th Jan 19, 1:34 PM
    • 4,122 Posts
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    cloud_dog
    • #4
    • 12th Jan 19, 1:34 PM
    • #4
    • 12th Jan 19, 1:34 PM
    Received quotation from pension provider late last year, indicating levels of cash sum and pension / pension only etc.
    Originally posted by googler
    Does this mean a CETV quote or simply the TFLS you would be entitled to take in addition to an annual pension? If not, and you are serious you will need to request a CETV from your trustees.

    Without a CETV you cannot make even a simple assessment as the benefits one way or another.

    And, in order to offer some informed opinions you are going to need to confirm
    • The pension amounts (taking the TFLS (cash))
    • The pension amounts (without TFLS (cash)); therefore the commutation rate
    • What inflation rules will be applied to the pension
    • Is there a spouse payment in the event of your death (do you have a spouse; is this relevant to you?)
    • Do you have any life limiting medical conditions?
    • <<yada, yada, yada...>>
    Personal Responsibility - Sad but True

    Sometimes.... I am like a dog with a bone
    • googler
    • By googler 12th Jan 19, 1:50 PM
    • 15,140 Posts
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    googler
    • #5
    • 12th Jan 19, 1:50 PM
    • #5
    • 12th Jan 19, 1:50 PM
    Why do you think giving up the security of a final salary pension is something to be considered?

    There are sometimes valid reasons for this but often it's not a great idea. What makes you think it is something which might be better for you??
    Originally posted by Dazed and confused
    I don't have an opinion on whether or not this would be better. As I said, I've not given my pension much thought until the statement arrived.

    I'm looking for viewpoints on doing it, perhaps experiences from folks who have done this, or those who haven't (and the why in both cases)

    Clearly, you're in the 'haven't' camp
    • googler
    • By googler 12th Jan 19, 1:58 PM
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    googler
    • #6
    • 12th Jan 19, 1:58 PM
    • #6
    • 12th Jan 19, 1:58 PM
    It's not a Transfer Value quote. It details, mainly;

    The pension amounts (taking the TFLS (cash))
    The pension amounts (without TFLS (cash)) and
    Inflation rules (increases) which will be applied to the pension

    I'm in the dark as to what kind of financial product(s) the transfer value could be applied to / paid in to.

    Does anyone have a link to some kind of list or high-level guide to what the options could be?
    • kidmugsy
    • By kidmugsy 12th Jan 19, 2:01 PM
    • 12,480 Posts
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    kidmugsy
    • #7
    • 12th Jan 19, 2:01 PM
    • #7
    • 12th Jan 19, 2:01 PM
    Why don't you give us a clue? Age, sex, married, health, long or short lived family, other retirement income, other capital, any debt, ..........
    Free the dunston one next time too.
    • NoMore
    • By NoMore 12th Jan 19, 2:07 PM
    • 287 Posts
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    NoMore
    • #8
    • 12th Jan 19, 2:07 PM
    • #8
    • 12th Jan 19, 2:07 PM
    You need to back up and understand what pension you have at the moment before you even think about what to do with it.

    You have a defined benefit pension. Basically you have a guaranteed inflation linked yearly income from this pension. You have a statement of these future benefits, not a valuation.

    Although the stance appears to be softening due to people getting large CETV valuation w.r.t. to the benefits, its usually not a good idea to give up a Defined Benefit Pension
    • Silvertabby
    • By Silvertabby 12th Jan 19, 2:11 PM
    • 3,898 Posts
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    Silvertabby
    • #9
    • 12th Jan 19, 2:11 PM
    • #9
    • 12th Jan 19, 2:11 PM
    It's not a Transfer Value quote. It details, mainly;

    The pension amounts (taking the TFLS (cash))
    The pension amounts (without TFLS (cash)) and
    Inflation rules (increases) which will be applied to the pension

    I'm in the dark as to what kind of financial product(s) the transfer value could be applied to / paid in to.

    Does anyone have a link to some kind of list or high-level guide to what the options could be?
    Originally posted by googler

    We're all the dark without the actual CETV (transfer value) which you would have to specifically reequests from your pension provider. Which scheme are you in? If it's public sector (with the exception of the LGPS) then a transfer out isn't an option - which cuts down your decision to just bigger pension/smaller lump sum or smaller pension/bigger lump sum.
    • Marcon
    • By Marcon 12th Jan 19, 5:34 PM
    • 834 Posts
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    Marcon
    Googling on 'transfer defined benefit pension' gets you lots of helpful links (and no sarcastic replies!). Try https://www.moneyadviceservice.org.uk/en/articles/transferring-out-of-a-defined-benefit-pension-scheme
    • cloud_dog
    • By cloud_dog 12th Jan 19, 8:41 PM
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    cloud_dog
    Does anyone have a link to some kind of list or high-level guide to what the options could be?
    Originally posted by googler
    I know you said you are in the dark about pensions but....You are completely missing the point.

    Without the CETV there is absolutely no way of understanding what may or may not be an appropriate option. Without knowing more about your DB pension (amounts, inflation increases, spouse pension (is that relevant), whatever is posted on this thread is meaningless (having no meaning or significance).

    As an example, I requested my CETV in Q1 last year and I wasn't 'hoping' for anything but I had undertaken some due dilligence with regards to expenditure, retirement age, etc, etc, and had CETV ratio (CETV amount divided by annual DB pension) of about 30 times. When I finally got my CETV (it can take up to 3 months), the ratio was 17. Now, this 'number' is only relevant to myself, my scheme, and the assumptions around future financial environment at the time the quote was provided. It didn't matter that this 17x was still a very large number, it was not enough to forsake the lifetime benefits for myself and my wife of the DB scheme.
    Personal Responsibility - Sad but True

    Sometimes.... I am like a dog with a bone
    • LHW99
    • By LHW99 12th Jan 19, 10:30 PM
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    LHW99
    And some DB pensions cannot be transferred because they are "unfunded public sector"......
    • Marcon
    • By Marcon 13th Jan 19, 12:05 AM
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    Marcon
    I know you said you are in the dark about pensions but....You are completely missing the point.
    Originally posted by cloud_dog
    Not really. OP has asked for a link which sets out the sort of options which might be possible - not whether they are 'suitable'. My link above does just that.
    • cloud_dog
    • By cloud_dog 13th Jan 19, 12:51 AM
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    cloud_dog
    I don't wish to be pedantic but the OP was.....
    Haven't given my pension much thought up till this arrived, and I've heard tell that financial advisors can charge something of the order of 2% of the pension pot value for advising on alternatives, and/or carrying out process of switching to alternative investments; is this accurate/current?
    by googler
    Which I think provides a clear indication of what the poster is considering.

    Your response and link address the posters follow up/ revised question of:
    Does anyone have a link to some kind of list or high-level guide to what the options could be?
    by googler
    Which is fine but the options for the OP are mute without knowing the facts at hand regarding the existing scheme and understanding the implications of the various options. The OP has stated they are in the dark about pensions

    Without the facts there is no context for utilising any information (Your link included).
    Personal Responsibility - Sad but True

    Sometimes.... I am like a dog with a bone
    • TBC15
    • By TBC15 13th Jan 19, 3:09 AM
    • 776 Posts
    • 426 Thanks
    TBC15
    I don't have an opinion on whether or not this would be better. As I said, I've not given my pension much thought until the statement arrived.

    I'm looking for viewpoints on doing it, perhaps experiences from folks who have done this, or those who haven't (and the why in both cases)

    Clearly, you're in the 'haven't' camp
    Originally posted by googler
    Im in the have camp, and have been for a year and a half. Im quite happy with the switch, but it was all based on my CETV value and my circumstances/requirements.
    • Bimbly
    • By Bimbly 13th Jan 19, 8:33 AM
    • 177 Posts
    • 166 Thanks
    Bimbly
    In general, you are better off leaving you final salary pension as it is. It will pay out a guaranteed amount every year from your scheme retirement date (typically age 60 or 65 or state retirement age). This will increase with inflation every year (in almost all schemes) and will usually have a spouse benefit which usually pays out 50% (often) of the pension every year to your other half if you die before them.

    This gives you a nice reliable "salary" for being retired. You don't need to worry about the stock market or any of that jazz. For most people, in general, they are better off sticking with this.

    Now, look at your statement. It will say how much pension you have built up in your scheme at current inflation levels, say X,000 per year. If you are still paying into it (working at the company) then it will forecast how much you will have built up at scheme retirement age, say, Y,000.

    Would Y,000 be enough for you to retire on? (or X,000 if you've stopped working there). If so, then in general you can leave it be.

    However, if it's not enough, you could consider paying extra into a different pension which gives you a pot of money to take at retirement, probably over the course of a few or many years. You can look at opening your own SIPP (self invested personal pension) or maybe your scheme has a good deal for an additional pension.

    You may also want to consider paying in extra if you want to retire earlier than your scheme retirement age.

    In general, most people would be better off leaving their final salary pension where it is. In some cases, transferring out may be appropriate, but I'm not going to go into those here. If you have a search in the forum you will lots of discussions from people asking about transferring out and you can get an idea from that. As said above, not all schemes will allow you to do this anyway.

    Of course, we don't know anything about you or your pension so not easy to say much more. But I hope that overview helps.
    • googler
    • By googler 17th Jan 19, 4:57 PM
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    googler
    I know you said you are in the dark about pensions but....You are completely missing the point.

    By asking questions? OK ...

    Without the CETV there is absolutely no way of understanding what may or may not be an appropriate option.
    Originally posted by cloud_dog
    I didn't think I was asking for appropriate options to my situation in particular, merely a high-level overview of what options could be available to me.
    • Linton
    • By Linton 17th Jan 19, 5:29 PM
    • 10,418 Posts
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    Linton
    A very high level overview.....

    The core option is to transfer the CETV value to another pension scheme. From this other pension scheme you could:
    1) choose to buy an annuity
    2) manage the money in an investment portfolio with or without an advisor and drawdown the money as and when you need it
    3) Withdraw the whole lot as cash in one go and potentially pay a very high rate of tax.
    4) Keep it untouched and it could all be inherited by a nominated family member when you die, free of IHT.

    Or some mixture of the above



    Note that you cannot buy an annuity or withdraw any money until you are 55.


    A DB pension guarantees your income in retirement for the whole of your life. Your income would also be guaranteed in an annuity, however it would probably be lower than from the DB pension unless you had life threatening ill health. If you hold the money in an investment portfolio nothing is guaranteed - if you run out of money before you die that's your bad luck or bad management.
    • cloud_dog
    • By cloud_dog 17th Jan 19, 5:47 PM
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    cloud_dog
    I didn't think I was asking for appropriate options to my situation in particular, merely a high-level overview of what options could be available to me.
    Originally posted by googler
    You can ask what you like, it is an open forum but, that certainly wasn't my understanding based on what and how you posted your question:

    Haven't given my pension much thought up till this arrived, and I've heard tell that financial advisors can charge something of the order of 2% of the pension pot value for advising on alternatives, and/or carrying out process of switching to alternative investments; is this accurate/current?

    What have other folks done? Any recommendations?
    Originally posted by googler
    It certainly gives the impression of a probable course of action present in your mind.

    I offered a course of action so that you could have the appropriate information in order to make an informed choice. Feel free to ignore it. I have gained lots from listening to opinions on this forum, and lost nothing.
    Personal Responsibility - Sad but True

    Sometimes.... I am like a dog with a bone
    • Mat P
    • By Mat P 17th Jan 19, 5:52 PM
    • 190 Posts
    • 107 Thanks
    Mat P
    at what point does the CETV multiple start to become worth serious consideration ?
    30x
    40x
    50x?
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