Pension advice sought!

Pension advice sought!

Author
Discussion

Onetrackmind

Original Poster:

813 posts

212 months

Wednesday 19th November 2014
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Hi all,

I have a meeting with a financial advisor tomorrow (who I'm not sure I trust) and I'm looking for some advice before I decide to proceed with any changes to my pension.

My wife and I both have approx ten years accumulated in the UK Teacher Pension Scheme. We now both work overseas in Dubai and can no longer contribute to the UK teacher pension scheme. We do not intend on returning to the UK to work as teachers as my wife is Irish and we will probably return there once we've had enough of Dubai. Therefore, we have been considering transferring our pension pot out of the UK TPS and into an offshore (QROPS) fund. We will then be able to continue to make contributions. We cannot "cash out" the UK teacher pension, hence the "transfer" idea. I suppose what I'd like to know is if I'm better off leaving our current UK teacher pension (which I believe is frozen) to tick along and start contributing to a new pension in addition or to transfer it into an offshore QROPS pension and continue to contribute?

I believe the UK gov are stopping the transfer of all UK TPS funds to offshore pensions soon so there is some urgency to what I decide to do.

Many thanks to anyone who can advise.

Matt

PurpleMoonlight

22,362 posts

156 months

Wednesday 19th November 2014
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You would be crazy to transfer your TPS benefit.

timbo999

1,287 posts

254 months

Wednesday 19th November 2014
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If you're paying the advisor he should give impartial advice (doesn't mean its good!) - if you don't trust him, I would find one you do trust...

Assuming the TPS scheme is a defined benefits scheme (i.e. you know what your pension will be up front) the transfer value is likely to be large - however it doesn't mean it would be sensible to transfer it!

Its essential a simple calculation - get a transfer value from the TPS then project your likely pension from any scheme your likely to put it into using that value.

If the new pension is more than that guaranteed by TPS then transferring may be sensible - but too be honest I doubt it would be!

I would expect your advisor to do this calculation for you and come back with hard figures - i.e. your TPS pension will be £xx, your projected pension if you transfer out is £yy and to give you some confidence level that he's projected the value using reasonable assumptions.

However the headline is as posted above - you are very unlikely to be better off come retirement if you transfer out of a defined benefits scheme into a defined contribution scheme...

However, I'm not an advisor so what do I know!

darreni

3,759 posts

269 months

Wednesday 19th November 2014
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PurpleMoonlight said:
You would be crazy to transfer your TPS benefit.
It's not that simple.

You need a more detailed understanding of the clients circumstances.

Op, with the TPS, ensure you have a through understanding of the benefits payable in the event of death before NRD while the pension is in deferment.

With QROPS, look at the scheme charges, adviser charges, investment charges (initial, amc, performance related- if the investment drops in value managers can still take a performance charge on some funds).
Also ask about trustee charges, admin charges, set up charges & transfer charges. As ever, the devil is in the detail.

Also be very clear & honest with yourself regarding risk / reward. All that glitters etc.

Ginge R

4,761 posts

218 months

Thursday 20th November 2014
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One track,

The information you both have to assimilate in order to make an informed decision will take you between now and April to consider anyway. Look on your discussion tomorrow as nothing more than the start, there is no right and wrong - remember that. That doesn't help I know, sorry.

Onetrackmind

Original Poster:

813 posts

212 months

Thursday 20th November 2014
quotequote all
Thanks all,

Most of what you've said is as I expected. If I leave my TPS sitting it will be worth X amount when I come to retire. If I transfer it out it still needs to pay me the same amount to make it worth it! It's the ability to add to it once transferred out that is what I need to find out about.

SunsetZed

2,234 posts

169 months

Thursday 20th November 2014
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When you talk about 'it needs to pay me out' make sure you factor in the tax you will pay on it, if you take QROPS in say Gibraltar (and you don't have to live there to do this) then the tax will be far less than the 20/40/45% charged in the UK (after allowance of course).

condor

8,837 posts

247 months

Thursday 20th November 2014
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I know next to nothing about pensions but think it obvious that you would keep your teachers pension frozen and start a new one.
One point to check on is what is the retirement age you'll be able to access your teachers pension as to a new pension. About 10 years ago I think women were still able to retire age 60 with a state pension so teachers pension would likely pay out then as opposed to new pension which might not pay out till age 67.

Onetrackmind

Original Poster:

813 posts

212 months

Thursday 20th November 2014
quotequote all
I spoke to the advisor today. They were obviously quite persuasive, as to be expected. They focused on the deficit of the UK TPS and proposed changes of pensionable age from 69 to 65. There were other arguments in favour of transfer to QROPS such as being able to receive the pension when I am much younger and avoiding inheritance tax should I pop my clogs. I can also transfer the full amount accumulated in the TPS to the QROPS.

In terms of returns, they stated that the current funds I have in the TPS are being invested by the TPS in quite low risk gov bonds etc that have had quite poor returns over the past ten years. Comparative returns from the QROPS fund have been much higher. However, there are some fees that depreciate the actual % return figures. They didn't advise to top up the QROPS and actually advised I take a seperate off shore pension! not quite sure why if the returns on the QROPS are so good! Maybe due to her getting a better fee off the new pension.

I'm meeting again in a month to compare actual figures for both the TPS and QROPS.

Still quite unsure about what to do. The returns off the QROPS look like they'll be better and there are many benefits such as the inheritance tax dodge.

darreni

3,759 posts

269 months

Thursday 20th November 2014
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You have to remember that you are not comparing like for like here:

TPS is a guaranteed benefit(subject to Government going bust.) QROPS is not, the returns are investment driven & not guaranteed.

If you want a truly independent comparison, seek out a Transfer value analysis from the likes of KPMG or PWC or someone that does not sell/offer QROPS/transfer services. It'll cost a couple of grand, but will give you an impartial view of the risk/benefit.

condor

8,837 posts

247 months

Thursday 20th November 2014
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It doesn't sound like you are speaking to an indipendant financial advisor but a saleswoman for the scheme she's promoting.

PurpleMoonlight

22,362 posts

156 months

Thursday 20th November 2014
quotequote all
darreni said:
PurpleMoonlight said:
You would be crazy to transfer your TPS benefit.
It's not that simple.

Well it is really.

Why would you give up essentially a no risk inflation proofed pension?

Pickled Piper

6,334 posts

234 months

Thursday 20th November 2014
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OP, did the advisor advise you how much they would charge you to make the transfer? Their charges should be very clear based on the latest guidelines. However, in my experience getting them to state or write down their fees is like pulling teeth. They make you feel like you are being petty for asking.


Onetrackmind

Original Poster:

813 posts

212 months

Thursday 20th November 2014
quotequote all
Pickled Piper said:
OP, did the advisor advise you how much they would charge you to make the transfer? Their charges should be very clear based on the latest guidelines. However, in my experience getting them to state or write down their fees is like pulling teeth. They make you feel like you are being petty for asking.
No, they did not. However, they did state the transfer was fee free. There are fees for the new QROPS pension though. I assume the pension advisor, whom I believe was more a salesperson rather than independent advisor, receives their fee from the new pension provider. I'm quite sceptical of the advisor/salesperson but they have come recommended by many of my colleagues, most of whom, have a brain between their ears and are certainly no fools.

The advisor/salesperson claimed the TPS had yielded minimal returns over the past ten years due to the funds having to be invested into gov bonds etc as a result of the poor perfmance of the UK economy. The QROPS had returned 11% PA over the past ten years,which was because the investment portfolio of the fund was not only limited to UK gov based investments. Therefore, the QROPS looks to have much better returns based upon the past ten years. This is what confuses me! Everyone I speak to seems to consider the TPS to be an excellent pension, but the QROPS has out performed it according to the advisor/salesperson!

Thanks again,

Matt



PurpleMoonlight

22,362 posts

156 months

Thursday 20th November 2014
quotequote all
The investment return of the TPS is not your concern as you are entitled to a defined benefit which is not dependent on the underlying investment return. 0% risk on you.

The QROPS is a defined contribution pension scheme where your benefit is totally dependent on the investment return. 100% risk on you.

For an adviser to compare the returns this way would constitute mis-selling in the UK.

darreni

3,759 posts

269 months

Thursday 20th November 2014
quotequote all
Onetrackmind said:
No, they did not. However, they did state the transfer was fee free. There are fees for the new QROPS pension though. I assume the pension advisor, whom I believe was more a salesperson rather than independent advisor, receives their fee from the new pension provider. I'm quite sceptical of the advisor/salesperson but they have come recommended by many of my colleagues, most of whom, have a brain between their ears and are certainly no fools.

The advisor/salesperson claimed the TPS had yielded minimal returns over the past ten years due to the funds having to be invested into gov bonds etc as a result of the poor perfmance of the UK economy. The QROPS had returned 11% PA over the past ten years,which was because the investment portfolio of the fund was not only limited to UK gov based investments. Therefore, the QROPS looks to have much better returns based upon the past ten years. This is what confuses me! Everyone I speak to seems to consider the TPS to be an excellent pension, but the QROPS has out performed it according to the advisor/salesperson!

Thanks again,

Matt
You have to remember that you are not comparing like for like here:

TPS is a guaranteed benefit(subject to Government going bust.) QROPS is not, the returns are investment driven & not guaranteed.

Without wishing to sound rude, if you are struggling with this bit, don't go any further with your options until you do.

darreni

3,759 posts

269 months

Thursday 20th November 2014
quotequote all
PurpleMoonlight said:
Well it is really.

Why would you give up essentially a no risk inflation proofed pension?
Consider the benefits payable in the event of death in deferment, along with the clients personal circumstances (& there is not enough information presented here to consider them).

DB schemes are by & large, great schemes that provide a superb, safe retirement benefit. Assuming you live long enough to claim it.



Sheepshanks

32,517 posts

118 months

Thursday 20th November 2014
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darreni said:
TPS is a guaranteed benefit(subject to Government going bust.)
From the "They focused on the deficit of the UK TPS and proposed changes of pensionable age from 69 to 65." comment it sounds like they were suggesting it might not be able to meet its obligations or the pension start date could keep moving away.

bqf

2,226 posts

170 months

Thursday 20th November 2014
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Heres some pension advice from your post - I think that these rules are immovable, no matter what anyone says:

1. Don't listen to someone you don't entirely trust
2. See Rule 1!
3. Defined benefit schemes are from the golden age of pensions - which is why they are rare for new contributors, in almost every circumstance (except very ill health before retirement age) they are worth holding onto
4. Defined Contribution schemes rely on investments and how successful they are, unlike defined benefit schemes, and so all the risk is with you, and the manager makes investment decisions, which may be completely st. He still gets paid, if he fks up, you won't.
5. Charges, charges, charges. When someone sells you an investment, they charge, One-off, up-front, for the life of the scheme, someone is getting paid. These charges can completely ruin projected investment performance
6. Get genuinely independent advice, usually from the country in which your scheme is domiciled. Plenty of pension advisors will take a call and discuss your options without you necessarly being in the UK/Ireland

For you, I'd look at rules 1 and 2 and cancel any further discussions....

timbo999

1,287 posts

254 months

Thursday 20th November 2014
quotequote all
Sheepshanks said:
From the "They focused on the deficit of the UK TPS and proposed changes of pensionable age from 69 to 65." comment it sounds like they were suggesting it might not be able to meet its obligations or the pension start date could keep moving away.
That pension age (rather than pensionable age, which is a different thing...) is moving closer not further away isn't it?

The deficit (imo) shouldn't affect the decision... the worst that can happen is that the fund goes into PPF and the OP will get 90% of the defined benefits...

OP - if TPS is a defined benefits scheme you should KNOW (i.e. not an estimate) what it will pay as a pension as its in deferment (I'm guessing?). As someone said get a professional (not a salesman) to project the pension the transfer value is likely to provide... not sure what is difficult about this? Agree the death benefits need to be considered as said...