Anyone know about transferring pension funds here?

[Draeger]

I'm thinking about withdrawing my accrued pension from my employers current scheme and taking it elsewhere. As far as I know I can move it into :-

• Commercial Property
• Forestry
• Farmland
• Land for development
• Nursing homes
• Garages
• Hotels

Currently have 23.5 years service so I've accrued a fairly substantial amount over that time. Just wondering what the basic idea behind this was and how it all works?. I don't know if I have any other options to transfer my current pension value either?.

Ta.

 

[RoyMi6]

Having just done this it's fairly straight forward for yourself.

You just need to approach whoever you want to transfer it to and they'll send you through the relevant information.

Usual steps will be:
Get in touch with new scheme and say you want to transfer
They tell you ok and to approach you current scheme to get a transfer request form
You fill that in and send it to your new scheme who seem to issue a the request
Old scheme then will inform you how much your current pension is worth and what you can do with it.

Some schemes will let you cash it out and others will only let you transfer it. Some do both.

Any quoted value of your scheme is usually only valid for a couple of days.

Roy

 

[Orch]

Woah woah woah, go and see a professional please whatever you do. Sooo many factors to consider here.

Firstly, are you in a defined benefit (final salary) scheme or a defined contribution (money purchase) scheme?

Pension can invest into those arears yes, but it doesn't mean it's sensible to do so and the costs can be huge.

Why do you want to transfer? What's the goal and trigger for this?

 

[Orch]

'Cashing out' is nonsense too.

 

[jamief]

Having just done this it's fairly straight forward for yourself.

You just need to approach whoever you want to transfer it to and they'll send you through the relevant information.

Usual steps will be:
Get in touch with new scheme and say you want to transfer
They tell you ok and to approach you current scheme to get a transfer request form
You fill that in and send it to your new scheme who seem to issue a the request
Old scheme then will inform you how much your current pension is worth and what you can do with it.

Some schemes will let you cash it out and others will only let you transfer it. Some do both.

Any quoted value of your scheme is usually only valid for a couple of days.

Roy

You can't "cash out" a pension. You can transfer it to another pension provider, dependant on the type of scheme you are currently in. A defined benefit scheme may not let you transfer out at all.

 

[RoyMi6]

Sorry yeah, should maybe point out that the ONLY reason I transfer my old pension to my new pension was that my old pension was worth about £200 as that's all I had put in when I started one before knowing that my company was going to give me one (they changed their mind)

It made perfect sense in my circumstances just to add the money to my new pension rather than just sitting there doing nothing.

Regarding the cashing out though, I don't know what my friend had exactly but that's exactly what he did with his old "pension". Bought a boat with it...

EDIT: Bah, sorry, must have misremembered - just talked to said friend and it wasn't "cashing out" a pension he got the money from it was just from a bonus he got when he started the job.

 

[KingOfTheDaves]

You can't "cash out" a pension. You can transfer it to another pension provider, dependant on the type of scheme you are currently in. A defined benefit scheme may not let you transfer out at all.

+1

'cashing out' is a fairly undefined term, but generally any company offering to put a cash lump sum in your hand (other than a retirement lump sum) is on a hiding to nothing as they involve tax evasion.

To be honest a lot final salary schemes actually want you to transfer once you have left the company as they are getting cippled by the unknown future liabilities that they have to account for in the pension scheme.

However if a scheme is particularly underfunded the Trustees can decide to stop or reduce transfer values if there is little prospect of the scheme getting back to assets equalling liabilites.

 

[Theophany]

+1

'cashing out' is a fairly undefined term, but generally any company offering to put a cash lump sum in your hand (other than a retirement lump sum) is on a hiding to nothing as they involve tax evasion.

To be honest a lot final salary schemes actually want you to transfer once you have left the company as they are getting cippled by the unknown future liabilities that they have to account for in the pension scheme.

However if a scheme is particularly underfunded the Trustees can decide to stop or reduce transfer values if there is little prospect of the scheme getting back to assets equalling liabilites.

Trustees can just switch a DB scheme to a DC scheme. A number of water companies did it a few years back (Cambridge Water is the one I remember best, but IIRC Severn Trent may have done too?).

It's a dick move, but they can do it and sooner or later the most underfunded schemes will have little choice but to do so.

 

[KingOfTheDaves]

Trustees can just switch a DB scheme to a DC scheme. A number of water companies did it a few years back (Cambridge Water is the one I remember best, but IIRC Severn Trent may have done too?).

It's a dick move, but they can do it and sooner or later the most underfunded schemes will have little choice but to do so.

Yes a large number have done this, a few have swapped to CARE but the cost reductions aren't as great as swapping to DC.

The trend has been in that direction for a while now, and the financial meltdown has just accelerated this.

 

[Orch]

Regarding 'cashing out' you can:

1. Have a refund of contributions if you have been in the scheme for less than 2 years. However you will lose any employer contributions, and the tax you reclaimed with the original contributions.

2. Receive a triviality payment once over 60 age instead of taking a pension, providing your total pension funds do not exceed £18,000. It will be taxed as earned income.

Seriously, this is not something you take advice on via a forum. See a independent financial adviser. A little information from the wrong people can be a dangerous thing.

 

[The_Abyss]

Being pedantic, you can cash out. It is a taxable event and will be subject to an unauthorised payment charge and a scheme sanction charge. More than half the fund will be depleted by tax charges.

The pension liberation firms that have sprung up recently claim to be able to release your pension early using this mechanism. Usually the fees are immense and then you'll get tax charges later long after they've disappeared.

OP - if you have a defined benefit scheme think long and hard about what you're giving up before you do. Normal advice in 9/10 cases would be to stick with what you have, but that doesn't mean you're not in the minority.

 

[Draeger]

Seriously, this is not something you take advice on via a forum.

Agreed. I am about to seek professional advice but was at a loose end this afternoon and thought I'd bung a thread up here just to get some ideas.

Why do you want to transfer? What's the goal and trigger for this?

It's one of those 'Gold plated public sector' schemes , Fire & Rescue Service to be precise. The 'trigger' is I simply want to look at what options I have before the scheme I signed up to 23.5 years ago is changed beyond all recognition with the new scheme that comes into force in 2015.

 

[The_Abyss]

Your existing benefits will be protected though.

Good that you're taking advice. Ping me an e-mail on trust if you want to know more about the options with the SIPP later on - I work for a SIPP provider that specialises in commercial property and have some general information that may be useful.

But, as said before, I'd be very surprised if the recommendation is to move your pension. The only justifications for doing this normally would be:

- your firm is about to go bankrupt and your benefits exceed those protected by the PPF; or
- you have a strong vested interest in the investment you want to make, i.e. you're going to be buying new business premises with your pension that your future business will operate from

Good luck with whatever route you decide to take!

 

[Orch]

Your existing benefits will be protected though.

Good that you're taking advice. Ping me an e-mail on trust if you want to know more about the options with the SIPP later on - I work for a SIPP provider that specialises in commercial property and have some general information that may be useful.

But, as said before, I'd be very surprised if the recommendation is to move your pension. The only justifications for doing this normally would be:

- your firm is about to go bankrupt and your benefits exceed those protected by the PPF; or
- you have a strong vested interest in the investment you want to make, i.e. you're going to be buying new business premises with your pension that your future business will operate from

Good luck with whatever route you decide to take!

Thumbs up to all of that.

Also, I worked for a SIPP provider for 6 years too.

 

[grumpysculler]

That is probably the best pension scheme in the country.

To transfer out, you will need an IFA to sign off on it. Transfers out of a DB pension is automatically a mis-sale unless proven otherwise.

99 time out of 100, the IFA will tell you it is a stupid idea and refuse to do it (they will be liable for the mis-sale).

It would only be a half-sensible idea if you did not need most of the provision - no dependents might push it in that direction, although maybe not far enough. Sometimes, if you have a medical condition that is life-shortening you can get a better deal by transferring and taking an impaired life annuity.

But 99% of the time, what you are proposing would be the worst financial decision you ever made.

 

[KingOfTheDaves]

That is probably the best pension scheme in the country.

To transfer out, you will need an IFA to sign off on it. Transfers out of a DB pension is automatically a mis-sale unless proven otherwise.

99 time out of 100, the IFA will tell you it is a stupid idea and refuse to do it (they will be liable for the mis-sale).

It would only be a half-sensible idea if you did not need most of the provision - no dependents might push it in that direction, although maybe not far enough. Sometimes, if you have a medical condition that is life-shortening you can get a better deal by transferring and taking an impaired life annuity.

But 99% of the time, what you are proposing would be the worst financial decision you ever made.

If he is still an active member of the scheme which both his employer and himself contributing then I would agree that 99% of the time it would be a bad idea to transfer.

However if he has left the company and is making no further contributions it is less clear cut. As a deferred member all his pension is doing is increasing with inflation and so not actually making any money. If he were to transfer to a personal pension such as a SIPP mentioned above he could be better off, but that involves a whole heap of caveats that only a IFA will be able to recommend.

I suppose it boils down to whether in a new scheme would the returns be consistantly greater than Fees + Inflation?

99 time out of 100, the IFA will tell you it is a stupid idea and refuse to do it (they will be liable for the mis-sale).

I have worked in pensions administration for the last 10 years and I can say that this couldn't be further from the truth. Between a third and a half of all transfer quote request we receive actually go through with the transfer.

 

[platypus]

Does it make sense to have more than one pension?

Eg I have a private pension that I've been paying into since I was 18, and a very good work pension with employer contributions that whilst currently smaller of the two pots is growing considerably faster due to the salary sacrifice and contributions made. Should I just keep both going?

 

[grumpysculler]

I suppose it boils down to whether in a new scheme would the returns be consistantly greater than Fees + Inflation?

And how much final salary entitlement has been built up versus what annuity can be purchased with the CETV + growth (plus an adjustment for risk - FS is guaranteed, growth and annuity rates are not)

I suppose it boils down to whether in a new scheme would the returns be consistantly greater than Fees + Inflation?

What fees? There are no fees charged to deferred final salary pensions. You get your entitlement at date of leaving plus an annual inflation uplift.

Between a third and a half of all transfer quote request we receive actually go through with the transfer.

From defined benefit schemes?

Most IFAs I have come across view transfer-out (or even opt-out) from DB schemes as a bad idea. The only two situations I have seen it justified are where there are life impairments or LTA issues.

 

[KingOfTheDaves]

And how much final salary entitlement has been built up versus what annuity can be purchased with the CETV + growth (plus an adjustment for risk - FS is guaranteed, growth and annuity rates are not)

If you read my post I state that quite clearly

"If he were to transfer to a personal pension such as a SIPP mentioned above he could be better off, but that involves a whole heap of caveats that only a IFA will be able to recommend."

I am stating the risks and recommending the judgement of an IFA. I also quite clearly use the word could as all of this is based on hypotheticals and will vary for every persons individual circumstances.

What fees? There are no fees charged to deferred final salary pensions. You get your entitlement at date of leaving plus an annual inflation uplift.

This sentence came immediately after mentioning personal pension plans such as SIPPs, so I was clearly referencing the fees that are due upon joining a personal pension plan, not a DB scheme.

From defined benefit schemes?

Most IFAs I have come across view transfer-out (or even opt-out) from DB schemes as a bad idea. The only two situations I have seen it justified are where there are life impairments or LTA issues.

Yes 90% of the work I do deals with private sector final salary schemes (with the occasional CARE and DC). A lot of people don't like having half a dozen different pensions spread all over the place and prefer it in one location and is often the reason for transfer. If (and this is a big IF) you can get decent investment returns it can potentially be a good idea, but it depends a whole heap on factors and every single person has a different attitude to risk. Personally I like DB schemes and would leave it, but some people will willingly risk more to see greater gains.

It is common practice which IFAs recommend all the time and not the shocking minority you seem to claim.

 

[KingOfTheDaves]

Does it make sense to have more than one pension?

Eg I have a private pension that I've been paying into since I was 18, and a very good work pension with employer contributions that whilst currently smaller of the two pots is growing considerably faster due to the salary sacrifice and contributions made. Should I just keep both going?

I would certainly recommend keeping with your work pension as a good work scheme, with employer contributions is pretty much free money for you.

With regards to your private pension it is a much more personal question depending on whether you feel the works pension would provide 'enough' at retirement or how you currently are financially as not everyone can afford to pay into 2 schemes.