Transferring my Final Salary Pension

[pauljdh]

IF, and I mean if, I decide to take control of my final salary pension pot from my company and take it as cash, I assume it has to be to a government approved scheme provider?

Is there a list I could use for starters? Who provides drawdown products

Pot is worth nominally 900K and Id envisage taking 25% as a lump sum with the balance held in a manned drawn-down product.

My hunch is that Ill leave it as this but my company are beginning to show an interest in the fund and are parting off some existing obligations to a third party so I want to explore all options in case eventually they pass me on.

Many thanks

[Stay in Bed Instead]

It will need to be to an HMRC Registered pension arrangement. There is no central database that I am aware of, there are hundreds.

Due to the value of the transfer you are lawfully required to seek qualified independent financial advice before transferring. That is getting more and more difficult and you can easily be locked into the defined benefit arrangement against your wishes.

[pauljdh]

Thanks - we're allowed a £500 consultation with an approved adviser before anything can happen and subject to having a business case (there's pension wise as well) and a good reason for opting out we can. 4 out of 6 of recent early retirees in my business have opted for a cash transfer to another provider, and as I say the firm have started to divest them self of risk and have hived off a huge number of existing pensioners to elsewhere with zero consultation (Trustess discretion)

Thanks again for your reply.

Paul

[CarlosFandango11]

pauljdh said:

Thanks - we're allowed a £500 consultation with an approved adviser before anything can happen and subject to having a business case (there's pension wise as well) and a good reason for opting out we can.

Are you still an active member of the final salary scheme, accruing future benefits?

pauljdh said:

the firm have started to divest them self of risk

Reducing risk sounds sensible for both the company and scheme members

[pauljdh]

I am yes (plus AVCs)

[CarlosFandango11]

pauljdh said:

I am yes (plus AVCs)

I would be very surprised if you could get an IFA to advise you to leave your final salary scheme when you could remain an active member of it.

When you finish working at your company is another matter.

You mention your pot is worth around 900k. Assuming that this is a Cash Equivalent Transfer Value, then if you stay working and accruing pension benefit, any future transfer could be in excess of the Lifetime Allowance and hence have tax implications. Not transferring, or if you could transfer some of your final salary benefits, would avoid this problem.

[anonymous-user]

Also worth considering the CETV might be inflated at the moment compared to the actual benefit the OP would take in retirement. Massively inflated CETVs can be tempting to take if they're hundreds of thousands more than they normally would be.

OP needs advice and shouldn't struggle too much to get it.

I'd ask any financial advisor the minimum DB fund size they're prepared to work with and the number of cases they do a year. Ironically, I'd argue the larger the former and lower the latter the better, as it would tend to suggest they're cautious around DBs and therefore less likely to advise to leave for the sake of getting the AUM, regardless of wisdom.

[Stuart70]

I am interested in this for a chunk of DB scheme that I have from a past role.

Would anyone recommend an IFA with whomthey have had good experience of advice, ideally in the South East / Kent?

Thank you for any recommendations

[CarlosFandango11]

Stuart70 said:

I am interested in this for a chunk of DB scheme that I have from a past role.

Would anyone recommend an IFA with whomthey have had good experience of advice, ideally in the South East / Kent?

Thank you for any recommendations

I used Tideway: https://www.finalsalarytransfer.com/

I found them to be very good, quick and efficient, and there was no requirement for my transferred DB pension to be managed by them. They’re based in London, but I didn’t have any face-to-face contact with them. I think there’s a minimum CETV that they’ll look at, possibly around 300k.

Edited by CarlosFandango11 on Saturday 8th June 16:59

[Stuart70]

CarlosFandango11 said:

I used Tideway: https://www.finalsalarytransfer.com/

I found them to be very good, quick and efficient, and there was no requirement for my transferred DB pension to be managed by them. They’re based in London, but I didn’t have any face-to-face contact with them. I think there’s a minimum CETV that they’ll look at, possibly around 300k.

Edited by CarlosFandango11 on Saturday 8th June 16:59

Thanks chap, I will make contact next week.

In best PistonHeads fashion, I think I will be over the de minimus limit, despite not being in any way powerfully built

[Armitage.Shanks]

I aways thought Final Salary pensions couldn't be bettered? With a LTE value of £900k will that not give £35kpa pension if you don't take max tax free lump? The lump must be worth £200k+ tax free?

[CarlosFandango11]

Armitage.Shanks said:

I aways thought Final Salary pensions couldn't be bettered? With a LTE value of £900k will that not give £35kpa pension if you don't take max tax free lump? The lump must be worth £200k+ tax free?

What’s a LTE value?

900k in a Personal pension won’t give you an annuity of 35k pa increasing with inflation from age 60.

Any final salary pension can easily be bettered by a sufficiently large amount of cash. Just how large will depend on the individual concerned and their situation.

[Testaburger]

CarlosFandango11 said:

What’s a LTE value?

900k in a Personal pension won’t give you an annuity of 35k pa increasing with inflation from age 60.

Any final salary pension can easily be bettered by a sufficiently large amount of cash. Just how large will depend on the individual concerned and their situation.

An annuity wouldn’t, but a 4% drawdown might.

I’m no expert, but these days, I suspect that the number of people for whom an annuity is the best option must be very small.

Final salary schemes were the gold standard when the only other option was to buy an annuity. Nowadays, reading about 25-multiple transfer values and similar, it’s not quite so clear cut.

[Helicopter123]

Not one for us but a couple of pointers

1. A good IFA is there to protect the OP rather than frustrate him.
2. £500 won't touch the sides in terms if likely Fee for the (very complex) work and potential risk involved with any IFA.

For peace of mind, I would be talking with one of the Nationals. This (presumably) represents a significant chunk of your wealth and I would want to be dealing with a firm who have the ability to put things right should the need arise in the future.

As things stand with our regulator, only around 50% of final salary transfers that have happened are suitable. The balance should not have happened and will require some form of remediation. Access to redress is an important consideration.

[anonymous-user]

Testaburger said:

An annuity wouldn’t, but a 4% drawdown might.

I’m no expert, but these days, I suspect that the number of people for whom an annuity is the best option must be very small.

Final salary schemes were the gold standard when the only other option was to buy an annuity. Nowadays, reading about 25-multiple transfer values and similar, it’s not quite so clear cut.

20x was the traditional benefit/CETV multiple. Some are offering 40x and more for people to leave.

I'd expect the OP to pay a fee around 1% or more for the transfer, assuming he went with an advisor who operates contingent charging.

[darreni]

If the OP is still an active member of the DB scheme, he wont be permitted to transfer until he leaves employment, retires or the scheme closes & becomes a preserved benefit.

As mentioned, £500 on advice for a 900k DB transfer won't get you far. 1-3% of the TV would be the norm for anyone who knows their stuff.

[CarlosFandango11]

Testaburger said:

CarlosFandango11 said:

What’s a LTE value?

900k in a Personal pension won’t give you an annuity of 35k pa increasing with inflation from age 60.

Any final salary pension can easily be bettered by a sufficiently large amount of cash. Just how large will depend on the individual concerned and their situation.

An annuity wouldn’t, but a 4% drawdown might.

I’m no expert, but these days, I suspect that the number of people for whom an annuity is the best option must be very small.

Final salary schemes were the gold standard when the only other option was to buy an annuity. Nowadays, reading about 25-multiple transfer values and similar, it’s not quite so clear cut.

A draw down of 4% would in the first year, but thereafter there’s a significant risk on the individuals part (such as investment, inflation and longevity), hence drawdown isn’t comparable to a final salary scheme. 4% is quite a large amount to draw down, and there’s a significant risk of running out of money before you die.

I suspect that an annuity is a good option for more people than you think.

With low transfer value multiple of 25, a final salary scheme is certainly the best option for most individuals. Many transfer value multiples recently have been well in excess of 25.

[Testaburger]

janesmith1950 said:

0x was the traditional benefit/CETV multiple. Some are offering 40x and more for people to leave.

I'd expect the OP to pay a fee around 1% or more for the transfer, assuming he went with an advisor who operates contingent charging.

Forty times! Surely that’s a no-brainer

If my DB was going to provide 25k a year, a 40x would give me a million quid, and then a 40k drawdown at 4%. Statistically speaking, there would still be a million quid left when I died.

Out of curiosity, who is making money on transactions like this? Or is it just a cost of getting the liabilities off company books?

[CarlosFandango11]

Testaburger said:

Forty times! Surely that’s a no-brainer

If my DB was going to provide 25k a year, a 40x would give me a million quid, and then a 40k drawdown at 4%. Statistically speaking, there would still be a million quid left when I died.

Out of curiosity, who is making money on transactions like this? Or is it just a cost of getting the liabilities off company books?

40 times is definitely not a no-brainer. There’s a significant risk transfer to the individual which I think you don’t appreciate.

A 4% drawdown rate is high. Stochastically speaking, it puts you at a significant risk of running out of money before you die.

The IFA makes money on the transfer, but takes a significant mis-selling risk. The scheme off-loads liabilities, whether or not this makes them money would depend on how you choose to value the liabilities transferred

[Testaburger]

CarlosFandango11 said:

40 times is definitely not a no-brainer. There’s a significant risk transfer to the individual which I think you don’t appreciate.

A 4% drawdown rate is high. Stochastically speaking, it puts you at a significant risk of running out of money before you die.

The IFA makes money on the transfer, but takes a significant mis-selling risk. The scheme off-loads liabilities, whether or not this makes them money would depend on how you choose to value the liabilities transferred

If your pot didn’t generate any growth, you’d be able to draw 4% a year for 25 years. That would take you to 90 years old from age 65.

A 40x multiple would only require a 2.5% drawdown to achieve the same income as the DB.

Risk? Some, naturally, but the stats support it. It’s simply enormously unlikely that your pot wouldn’t grow over such a timeframe.