Final Salary Pension scheme - leave or not?
Discussion
I've been approached by a mob offering advice on my pension. I think they've used my LinkedIn profile to figure out I'm an ex-pat, which annoys me a bit so I'm tempted to string them along for a while. However it has got me thinking.
I suspect they are going to suggest that I pull the funds out of my final salary scheme and put it in another fund. The final salary scheme is the usual: 50% to my spouse if I die once I start taking the pension, can take a lump sum and reduced pension etc etc.
Having done a bit of checking I think the options for taking a lump sum out now and putting it elsewhere are a SIPPS or a QROPS. I'm not sure where overseas because in Australia (which is where I am) none of the big pension funds are QROPS. That means you have to set up your own scheme, get it QROPS certified (which is only possible if all the scheme members are over 55, which I'm not) and then move the money. You also get taxed at 15% on the lump sum when you move it.
I'm wondering what they are going to suggest.
If the health of the scheme is important then my only answer to that is I'm not sure - it does have some issues with funding shortfalls. I haven't even checked if I can pull funds out.
Apart from the mechanics of whether or not I can actually get paid out and then move the money, is leaving a final salary scheme a good idea? I've read good and bad online but the balance seems to be that staying is a better option.
Does anyone have any experience of this, or any advice to offer?
I suspect they are going to suggest that I pull the funds out of my final salary scheme and put it in another fund. The final salary scheme is the usual: 50% to my spouse if I die once I start taking the pension, can take a lump sum and reduced pension etc etc.
Having done a bit of checking I think the options for taking a lump sum out now and putting it elsewhere are a SIPPS or a QROPS. I'm not sure where overseas because in Australia (which is where I am) none of the big pension funds are QROPS. That means you have to set up your own scheme, get it QROPS certified (which is only possible if all the scheme members are over 55, which I'm not) and then move the money. You also get taxed at 15% on the lump sum when you move it.
I'm wondering what they are going to suggest.
If the health of the scheme is important then my only answer to that is I'm not sure - it does have some issues with funding shortfalls. I haven't even checked if I can pull funds out.
Apart from the mechanics of whether or not I can actually get paid out and then move the money, is leaving a final salary scheme a good idea? I've read good and bad online but the balance seems to be that staying is a better option.
Does anyone have any experience of this, or any advice to offer?
Jader1973 said:
I've been approached by a mob offering advice on my pension. I think they've used my LinkedIn profile to figure out I'm an ex-pat, which annoys me a bit so I'm tempted to string them along for a while. However it has got me thinking.
I suspect they are going to suggest that I pull the funds out of my final salary scheme and put it in another fund. The final salary scheme is the usual: 50% to my spouse if I die once I start taking the pension, can take a lump sum and reduced pension etc etc.
Having done a bit of checking I think the options for taking a lump sum out now and putting it elsewhere are a SIPPS or a QROPS. I'm not sure where overseas because in Australia (which is where I am) none of the big pension funds are QROPS. That means you have to set up your own scheme, get it QROPS certified (which is only possible if all the scheme members are over 55, which I'm not) and then move the money. You also get taxed at 15% on the lump sum when you move it.
I'm wondering what they are going to suggest.
If the health of the scheme is important then my only answer to that is I'm not sure - it does have some issues with funding shortfalls. I haven't even checked if I can pull funds out.
Apart from the mechanics of whether or not I can actually get paid out and then move the money, is leaving a final salary scheme a good idea? I've read good and bad online but the balance seems to be that staying is a better option.
Does anyone have any experience of this, or any advice to offer?
You've come to the right place - plenty of expertise on final salary pensions in this sub-forum.I suspect they are going to suggest that I pull the funds out of my final salary scheme and put it in another fund. The final salary scheme is the usual: 50% to my spouse if I die once I start taking the pension, can take a lump sum and reduced pension etc etc.
Having done a bit of checking I think the options for taking a lump sum out now and putting it elsewhere are a SIPPS or a QROPS. I'm not sure where overseas because in Australia (which is where I am) none of the big pension funds are QROPS. That means you have to set up your own scheme, get it QROPS certified (which is only possible if all the scheme members are over 55, which I'm not) and then move the money. You also get taxed at 15% on the lump sum when you move it.
I'm wondering what they are going to suggest.
If the health of the scheme is important then my only answer to that is I'm not sure - it does have some issues with funding shortfalls. I haven't even checked if I can pull funds out.
Apart from the mechanics of whether or not I can actually get paid out and then move the money, is leaving a final salary scheme a good idea? I've read good and bad online but the balance seems to be that staying is a better option.
Does anyone have any experience of this, or any advice to offer?
There are always exceptions, but generally Final Salary schemes are hugely valuable and hence staying is the best and normally lowest risk option. However it does depend on the scheme details (and sponsor) and of course how much they would pay if you took your benefits away!
No No No...
final salary pension you stay in, even a bad final salary is much much better than any outside a company, your in a scheme that will probably have the company directors in so they will be ensuring that its performing as best as it can.
Also take proper advice on this and ensure that you are not talking to sharks that are trying to get you out of a scheme to their own where they get commission etc...
Also is it a non contributory pension ? are you getting the benefit of their contributions boosting your own ?
sooooo much in pensions that you really really need to be aware of
final salary pension you stay in, even a bad final salary is much much better than any outside a company, your in a scheme that will probably have the company directors in so they will be ensuring that its performing as best as it can.
Also take proper advice on this and ensure that you are not talking to sharks that are trying to get you out of a scheme to their own where they get commission etc...
Also is it a non contributory pension ? are you getting the benefit of their contributions boosting your own ?
sooooo much in pensions that you really really need to be aware of
ruggedscotty said:
No No No...
final salary pension you stay in, even a bad final salary is much much better than any outside a company, your in a scheme that will probably have the company directors in so they will be ensuring that its performing as best as it can.
Also take proper advice on this and ensure that you are not talking to sharks that are trying to get you out of a scheme to their own where they get commission etc...
Also is it a non contributory pension ? are you getting the benefit of their contributions boosting your own ?
sooooo much in pensions that you really really need to be aware of
I'm always suspicious of anyone offering "free" financial advice because there is no such thing final salary pension you stay in, even a bad final salary is much much better than any outside a company, your in a scheme that will probably have the company directors in so they will be ensuring that its performing as best as it can.
Also take proper advice on this and ensure that you are not talking to sharks that are trying to get you out of a scheme to their own where they get commission etc...
Also is it a non contributory pension ? are you getting the benefit of their contributions boosting your own ?
sooooo much in pensions that you really really need to be aware of
. It appears there are fees involved if I do decide to move (and no doubt commissions as well).The fact it seems impossible for me to move the funds (assuming I could get them) to Aus anyway has already got my alarm bells ringing - I'm expecting a "we'd recommend this fund based in the Cayman Islands" type discussion.
I'm not sure what you mean by "non-contributory" - I left 9 years ago (forgot to mention that bit) so haven't contributed anything since then. However the "final salary" portion is index linked so is going up every year by around 2.7% so far (as far as I can work out).
ruggedscotty said:
No No No...
final salary pension you stay in, even a bad final salary is much much better than any outside a company, your in a scheme that will probably have the company directors in so they will be ensuring that its performing as best as it can.
Not necessarily true. As I said, it depends, final salary schemes normally worth staying in. But there are plenty of reasons why this might not be the case for a particular scheme.final salary pension you stay in, even a bad final salary is much much better than any outside a company, your in a scheme that will probably have the company directors in so they will be ensuring that its performing as best as it can.
ruggedscotty said:
Also take proper advice on this and ensure that you are not talking to sharks that are trying to get you out of a scheme to their own where they get commission etc...
Agreed.ruggedscotty said:
Also is it a non contributory pension ? are you getting the benefit of their contributions boosting your own ?
Not really applicable for final salary schemes, only for defined contribution. He's left the scheme now so won't be paying any contributions. He doesn't really care about the size of employer contributions as long as the fund is able to fund the benefits he has been promised!.ruggedscotty said:
sooooo much in pensions that you really really need to be aware of
Agreed.I agree with sidicks.
Generally, stick with a final salary pension. But that's not a hard rule and there can be good reasons to transfer out of it, particularly given the "pensions freedoms" which came in a year or so ago. If you are permanently overseas then it probably is worth investigating whether to transfer to the country you expect to retire to.
But that's complicated stuff - there's no way I would consider myself knowledgeable about overseas transfers.
And, perhaps most importantly, I would never dream of using someone who cold-called me. They might well be very good and competent, but the sums of money involved are too big to take that risk.
Generally, stick with a final salary pension. But that's not a hard rule and there can be good reasons to transfer out of it, particularly given the "pensions freedoms" which came in a year or so ago. If you are permanently overseas then it probably is worth investigating whether to transfer to the country you expect to retire to.
But that's complicated stuff - there's no way I would consider myself knowledgeable about overseas transfers.
And, perhaps most importantly, I would never dream of using someone who cold-called me. They might well be very good and competent, but the sums of money involved are too big to take that risk.
sidicks said:
You've come to the right place - plenty of expertise on final salary pensions in this sub-forum.
There are always exceptions, but generally Final Salary schemes are hugely valuable and hence staying is the best and normally lowest risk option. However it does depend on the scheme details (and sponsor) and of course how much they would pay if you took your benefits away!
The details of the scheme(s) are clearly important. Your personal circumstances - health, dependants, objectives, assets, income etc. are equally important.There are always exceptions, but generally Final Salary schemes are hugely valuable and hence staying is the best and normally lowest risk option. However it does depend on the scheme details (and sponsor) and of course how much they would pay if you took your benefits away!
As Sidicks allows, there are circumstances where taking a transfer from a DB scheme (particularly if you've stopped accruing benefits) is a great idea. For example, if you have substantial assets / passive income outside of your DB pension, and/or you have unfortunate health reasons to believe that your retirement won't be a long one. In such circumstances a transfer into a SIPP or similar can realise an asset that has greater value than the expected pension income, and that can be passed on - not lost - on your death.
Be careful of the quick responses saying "never transfer out of a DB scheme". This has become something of a mantra among those who know a little - but not a lot - about the topic. It's up there with other contemporary finance memes like "active management doesn't work", "you'll never lose money in property" and "rent is money down the drain"...
Professional advice on pension questions can be really valuable. Look for an adviser who is qualified to help and will work on a fee-paying basis where their interests are properly aligned with yours.
I would be nervous about anyone that:
1 Cold-called or
2 Suggested a QROPS straight away
I worked in offshore comp & ben for a number of years and whilst there are many good providers in this space, there are a number (increasing in 2014/15 as I stopped working in Comp & Bens) that were at the “sharper,” end of this spectrum (very opaque about where they’re based, etc)
If a QROPS could be of interest to you, I would suggest that you take independent advice and then work from the list of Recognised schemes by jurisdiction:
https://www.gov.uk/government/publications/list-of...
It’s worthy of note that this list is only a snapshot and schemes can have their approval revoked over time.
1 Cold-called or
2 Suggested a QROPS straight away
I worked in offshore comp & ben for a number of years and whilst there are many good providers in this space, there are a number (increasing in 2014/15 as I stopped working in Comp & Bens) that were at the “sharper,” end of this spectrum (very opaque about where they’re based, etc)
If a QROPS could be of interest to you, I would suggest that you take independent advice and then work from the list of Recognised schemes by jurisdiction:
https://www.gov.uk/government/publications/list-of...
It’s worthy of note that this list is only a snapshot and schemes can have their approval revoked over time.
Why would you transfer out? There are a number of reason why it may work in your favour. Improved or alternative death benefits may give your spouse, unmarried partner and /or kids, or milkman even nowadays, the ability to inherit your entire unspent pension fund free of inheritance tax. An increased levels of tax free cash may allow something like a mortgage to be repaid early thus facilitating earlier retirement, change of career and lower interest costs and more disposable income whilst you are younger.
You say you’re worried about your current pension scheme in deficit – so you may be worried that you will not get all that is promised to you. We’ve seen the recent BHS and steel worker debacles, and Monarch Airlines too, may have more difficulty for its pension members on the horizon.
You can have greater flexibility when shaping your benefits; most final salary pensions include a spouse’s pension on death – even if you are not married or in civil partnership. But if you are single though, why on earth would you pay for benefits you don’t need? Final salary pensions may push you into higher rates of tax for life, especially if you’re in the public sector. A more flexible pension arrangement can enable you to avoid this.
You may want to take higher levels of income initially – for example, until the State or other pensions kick in, then reduce the income from your pension later. If you’ve had health issues and/ or are a regular smoker, then it may be possible to replicate the current pension benefits privately using guaranteed annuity rates and obtain a greater level of guaranteed pension. You might want to enjoy a shorter life expectancy, with higher levels of cash to hand too. Although that's always a dubious excuse!
Gilt yields at the moment are producing some outrageous transfer values, so you could be better off (potentially!). All of that is all well and good, but it still doesn’t mean it’s right for you. No one credible will cold contact you.. ever. Take advice from a properly regulated UK based adviser, and beware of shysters using UK patsies (I can think of a few). If you are working with a credible UK based adviser, he’ll walk away from any business rather than allow you to disadvantage yourself.
Watch out for scammers and rogues trying to put you into expensive, poorly performing and opaque rip-off schemes which could leave you worse off. Also, remember – you’re exposing yourself to market sentiment – you’re leaving behind certainty and peace of mind for all of those possibilities above.
You say you’re worried about your current pension scheme in deficit – so you may be worried that you will not get all that is promised to you. We’ve seen the recent BHS and steel worker debacles, and Monarch Airlines too, may have more difficulty for its pension members on the horizon.
You can have greater flexibility when shaping your benefits; most final salary pensions include a spouse’s pension on death – even if you are not married or in civil partnership. But if you are single though, why on earth would you pay for benefits you don’t need? Final salary pensions may push you into higher rates of tax for life, especially if you’re in the public sector. A more flexible pension arrangement can enable you to avoid this.
You may want to take higher levels of income initially – for example, until the State or other pensions kick in, then reduce the income from your pension later. If you’ve had health issues and/ or are a regular smoker, then it may be possible to replicate the current pension benefits privately using guaranteed annuity rates and obtain a greater level of guaranteed pension. You might want to enjoy a shorter life expectancy, with higher levels of cash to hand too. Although that's always a dubious excuse!
Gilt yields at the moment are producing some outrageous transfer values, so you could be better off (potentially!). All of that is all well and good, but it still doesn’t mean it’s right for you. No one credible will cold contact you.. ever. Take advice from a properly regulated UK based adviser, and beware of shysters using UK patsies (I can think of a few). If you are working with a credible UK based adviser, he’ll walk away from any business rather than allow you to disadvantage yourself.
Watch out for scammers and rogues trying to put you into expensive, poorly performing and opaque rip-off schemes which could leave you worse off. Also, remember – you’re exposing yourself to market sentiment – you’re leaving behind certainty and peace of mind for all of those possibilities above.
Whilst I think on, and I almost forgot - I was really pleased to be the petition sponsor for this the other day. If you want to stop investment cold calling, please feel free to sign and share it.
https://petition.parliament.uk/petitions/166980
https://www.ftadviser.com/pensions/2016/09/23/advi...
https://petition.parliament.uk/petitions/166980
https://www.ftadviser.com/pensions/2016/09/23/advi...
Zigster said:
I agree with sidicks.
Generally, stick with a final salary pension. But that's not a hard rule....
+ another.Generally, stick with a final salary pension. But that's not a hard rule....
All you need now is a +1 from JulianPH and you'll have the full set!
It would be highly unusual, although not impossible, for it to make sense to transfer out from a final salary echeme. In UK very few pension providers are willing to receive a transfer out from a final salary scheme these days - simply because it so rarely makes sense (in UK) and there's a significant risk of it ending up as the next "bad advice" scandal.
Ozzie Osmond said:
+ another.
All you need now is a +1 from JulianPH and you'll have the full set!
It would be highly unusual, although not impossible, for it to make sense to transfer out from a final salary echeme. In UK very few pension providers are willing to receive a transfer out from a final salary scheme these days - simply because it so rarely makes sense (in UK) and there's a significant risk of it ending up as the next "bad advice" scandal.
Whilst not the full set mentioned I would, generally, think the final salary would be the better bet. Worth doing the sums, however...and not acting unless you're really certain!All you need now is a +1 from JulianPH and you'll have the full set!
It would be highly unusual, although not impossible, for it to make sense to transfer out from a final salary echeme. In UK very few pension providers are willing to receive a transfer out from a final salary scheme these days - simply because it so rarely makes sense (in UK) and there's a significant risk of it ending up as the next "bad advice" scandal.
ellroy said:
9/10 times stay in the FS scheme.
Bad health? No spouse? Never intending to draw on the fund for your income in retirement? All these, and more, muddy the waters potentially. However, your starting point should be to stay in.
I have dealt with five situations. The one for who it did make sense changed his mind. Even more ironically, he died a year of so later. His deferred pension wasn't huge, c.£70k or so, but it could have gone to his child (his partner already having died). Out of the four for whom if wasn't appropriate, three were later relieved they agreed with me, and two originally wanted to become insistent clients. I declined - one saw some sense and was later glad, and one sacked me*. Bad health? No spouse? Never intending to draw on the fund for your income in retirement? All these, and more, muddy the waters potentially. However, your starting point should be to stay in.
(*I was glad).
Ginge R said:
I have dealt with five situations. The one for who it did make sense changed his mind. Even more ironically, he died a year of so later. His deferred pension wasn't huge, c.£70k or so, but it could have gone to his child (his partner already having died). Out of the four for whom if wasn't appropriate, three were later relieved they agreed with me, and two originally wanted to become insistent clients. I declined - one saw some sense and was later glad, and one sacked me*.
(*I was glad).
Deferred pension fund or deferred pension p.a.??!(*I was glad).
sidicks said:
Deferred pension fund or deferred pension p.a.??!
Pot! Yesterday, I did my first online IP16, £54,000 pension.. pa. The process was simple. Too simple. You could do it late one night like you'd win an old Cosworth on eBay at midnight on Friday after a bottle of good malt.
......." my betting money knows whether it will be the approachers or the approachees in every case!Jader1973 said:
Thanks for all the replies.
My health is fine (AFAIK), I have an Aus superannuation, the OH works full time and also has super, and we're fine financially.
So I don't think it is worth it.
It will be interesting to see what they say (if I speak to them again
).
Let me know.. please, is it a UK based company? By DM if you like. I'm the guy in this piece (Al) who researched and gave this story to Laura. They're thieving carcinogenic bMy health is fine (AFAIK), I have an Aus superannuation, the OH works full time and also has super, and we're fine financially.
So I don't think it is worth it.
It will be interesting to see what they say (if I speak to them again
).
ds.http://www.professionaladviser.com/professional-ad...
Not sure Al. I was contacted earlier by a young girl who tried to convince me I had been involved in a car accident. Ch-Ching came to mind and we explored various scenarios that were very helpful and seemed to excite her.
It went a bit pear shaped when I declared I no longer owned a car and she put the phone down on me!!! Needless to say I shan't be using her company again.
It went a bit pear shaped when I declared I no longer owned a car and she put the phone down on me!!! Needless to say I shan't be using her company again.
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