Pension advice sought!

[Ginge R]

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

Matt,

HUGE ALARM BELLS RINGING.

'Funds'? Teachers’ Pension Scheme operates on a pay- as-you-go basis which means that employer and your contributions are paid to the Dept of Education (or whatever it's called these days) which pays out pension benefits, netting off the contributions received. It's notionally funded, which means that periodic valuations are carried out as though there was a fund. Contributions are set on the basis of these valuations. There are no funds, as they seem to have suggested.

Mate, I won't sell you anything, I promise. But message me your contact details and I'll talk you through the pros and cons. I work in a very insular final salary environment and out of 26 clients who have come to me with this idea, it has only been to the client's benefit in 2 instances. And even then, it took hours and weeks to arrive at that conclusion. Bottom line is, it's your money of course, but my offer is there.

[Ginge R]

PurpleMoonlight said:

Well it is really.

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

Problem these days, is that the risk is more regulatory and legislative, than investment. The revisions yesterday, to the latest draft of the Pensions Act is evidence of that. There are pros and cons.

[K12beano]

Ginge R said:

HUGE ALARM BELLS RINGING.

^^^ Wot 'e sed!


Now, it's possible that you haven't fully understood what the guy has said, but basically your interpretation would have him comparing apples with aubergines. It makes no sense!

[The Leaper]

Onetrack,

YHM

R.

[sidicks]

timbo999 said:

That pension age (rather than pensionable age, which is a different thing...) is moving closer not further away isn't it?

I'm guessing this was a typo and should be 60 to 65

timbo999 said:

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...

Why on earth would the government sponsored TPS be forced into the government sponsored PPF...?!

timbo999 said:

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...

Agreed...

[Onetrackmind]

OP here. Finally had our TPS valuations back. I've looked into the TPS vs QROPS in detail and based upon our situation, the only reason for us to transfer from our deferred TPS into QROPS is for the forecasted returns I've been presented with. As you know, our TPS growth is based upon CPI inflation. The QROPS growth forecasts presented to me quote rates of 3%, 5% and 7%. In recent year, growth if the TPS has been very small due to such low inflation.

Are these QROPS growth forecasts realistic?

[Zigster]

Onetrackmind said:

OP here. Finally had our TPS valuations back. I've looked into the TPS vs QROPS in detail and based upon our situation, the only reason for us to transfer from our deferred TPS into QROPS is for the forecasted returns I've been presented with. As you know, our TPS growth is based upon CPI inflation. The QROPS growth forecasts presented to me quote rates of 3%, 5% and 7%. In recent year, growth if the TPS has been very small due to such low inflation.

Are these QROPS growth forecasts realistic?

The TPS is not based on CPI inflation, at least not in the way you are comparing to a QROPS. That's a misunderstanding of the way in which defined benefit (e.g. TPS) and defined contribution (e.g. a QROPS) pension schemes work.

Don't compare the 3%/5%/7% returns with projected CPI.

What you need to consider is the investment return you might receive on the transfer value (i.e. cash sum) you have been offered in exchange for the benefits you have in the TPS. If you are very bullish on returns (i.e. optimistic that you will be able to achieve very good returns), you might think you will do better outside the TPS compared with inside the TPS.

I'll go out on a limb here (and potentially get challenged by other posters): if you don't understand what you are doing, don't do it. This is a big decision - by transferring you will be giving up some very valuable guarantees. If you don't understand these guarantees (and, to be blunt, it doesn't sound as if you do) then you probably shouldn't be transferring.

Out of interest, what return does your analysis suggest you need to achieve for the ROPS to beat the TPS pension?