michaelc
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Post by michaelc on Dec 19, 2019 23:58:51 GMT
Hello All
I wonder if there is anyone on the forum who knows more about pensions than I do - hopefully that's not difficult!
Until recently a pension was a dull subject for me but now I'm getting a bit animated about it. I'm frustrated that apparently I can't move my pension to another provider due to a tiny "defined benefit" that is part of my current pension which is worth bugger all. At least I would need "advice" in order to do that. Is it true that I really do legally require this advice and how would I go about getting it? Would said advice cost me more than a tank of fuel?
This is a copy/paste from my current theives pension provider.
Regrettably the presence of even a small Defined Benefit underpin means that we fall into the DB camp and the requirement of appropriate financial advice is a legislative requirement and is compulsory - no receiving scheme will accept the transfer without advice being taken
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corto
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Post by corto on Dec 20, 2019 0:35:52 GMT
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macq
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Post by macq on Dec 20, 2019 7:55:08 GMT
have you tried the free Govt Pensions Advisory Service web site or if over 50 i think there is also Pension Wise and also free i believe (Both very old school in that you can even speak to a human if required)
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Post by dan1 on Dec 20, 2019 8:10:39 GMT
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sarahcount
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Post by sarahcount on Dec 20, 2019 19:11:55 GMT
On the subject of pensions I've come home from work to find a letter from a pension provider asking me to relinquish my guaranteed 4% annual growth and to throw myself at the mercy of the market for the chance to earn more.
They include lots of illustrations showing happy people cashing in early or transferring away.
Being cynical my initial reaction is what's good for the provider is not what's good for me.
Indeed I'm thinking that as this is an old pension from years ago and not my main pension I might be better off letting it grow at 4% after charges until I'm 75 never mind 65 when the guarantee crystallises.
For sure it seems like throwing away the guarantee would be foolish.
Any views or comments?
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adrianc
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Post by adrianc on Dec 20, 2019 19:36:04 GMT
On the subject of pensions I've come home from work to find a letter from a pension provider asking me to relinquish my guaranteed 4% annual growth and to throw myself at the mercy of the market for the chance to earn more. They include lots of illustrations showing happy people cashing in early or transferring away. Being cynical my initial reaction is what's good for the provider is not what's good for me. Indeed I'm thinking that as this is an old pension from years ago and not my main pension I might be better off letting it grow at 4% after charges until I'm 75 never mind 65 when the guarantee crystallises. For sure it seems like throwing away the guarantee would be foolish. Any views or comments? How near retirement are you? FTSE100 average over the last five years has been just under 4%, with dividends reinvested. Ten years, 8.3%; 25yrs 6.4% www.ig.com/uk/trading-strategies/what-are-the-average-returns-of-the-ftse-100--190318
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corto
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Post by corto on Dec 20, 2019 21:06:16 GMT
There have been many articles about this in the recent past. There are situations where it makes sense to transfer out (some lucky ones claim they get 50x their expected annual pension; combined with a reduced health, for example, that can be an incentive); but it also caused financial advisers to suggest the option too often as they can make a profit of it. That's one reason why the rules have been tightened.
My understanding is that if one is close to retirement and has a reasonable index-linked pension pot, better keep the fingers of it. Various factors make the future quite unpredictable at the moment and that in particular includes expected future stock (or any money) market returns. On the other hand, the country will always have an obligation to support their old and young and poor and homeless people, whatever brilliant government we have. That idea provides a certain buffer that protects benefits from free-range capitalism. Does it not?
For young people I fear the long-term uncertainties are so incalculable that no guidance is possible. In that case one advice may still hold, which is keep your options and diversify.
If it's only a relatively small amount, the 30k limit has already been mentioned. However, be aware that the receiving provider can still reject the transfer, so better call them.
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sarahcount
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Post by sarahcount on Dec 20, 2019 21:15:23 GMT
On the subject of pensions I've come home from work to find a letter from a pension provider asking me to relinquish my guaranteed 4% annual growth and to throw myself at the mercy of the market for the chance to earn more. They include lots of illustrations showing happy people cashing in early or transferring away. Being cynical my initial reaction is what's good for the provider is not what's good for me. Indeed I'm thinking that as this is an old pension from years ago and not my main pension I might be better off letting it grow at 4% after charges until I'm 75 never mind 65 when the guarantee crystallises. For sure it seems like throwing away the guarantee would be foolish. Any views or comments? How near retirement are you? FTSE100 average over the last five years has been just under 4%, with dividends reinvested. Ten years, 8.3%; 25yrs 6.4% www.ig.com/uk/trading-strategies/what-are-the-average-returns-of-the-ftse-100--190318Well maybe 10 years away. Maybe sooner if my international trade (mainly Europe) employer goes pop - but let's not get into that. Arguably the stats that show good FTSE returns are also indicative of a strong bull run. So perhaps the future of equities is more uncertain. I'm also facing my main pension provider starting to shift funds towards safer havens over a 10 year period at 1/10 a year so have to decide whether to opt out of that option and stay with equities throughout drawdown. Of course if I'd had more faith in equities a few years ago I wouldn't have decided that diversifying across fixed interest platforms sounded like a smart move. Needless to say my Vanguard funds have gone up 60% in four years. Which marginally outperforms my 'investments' in Lendy, Collateral and some others. As with many people I'm coming to the pensions party late and am trying to salary sacrifice myself inside out which is really what I should have done years ago rather than focus on ISAs and P2P.
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michaelc
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Post by michaelc on Dec 20, 2019 21:29:35 GMT
Thanks for the suggestions. I've looked back and my defined benefit is almost certainly worth a lot less than 30K but the pension as a whole is a lot more. If they've told me I need financial advice to move any part of the pension out is there nothing I can do?
I'm particularly annoyed because my pension represents about 1% of the entire value of the fund it is invested in and the fees are high. There is also virtually no choice over what funds I can invest in. Cash, an equities fund and a couple of other funds and thats it.
So frustrating they can use a tiny part of the pension to stop me transferring any of it out !
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corto
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Post by corto on Dec 20, 2019 22:16:03 GMT
Thanks for the suggestions. I've looked back and my defined benefit is almost certainly worth a lot less than 30K but the pension as a whole is a lot more. If they've told me I need financial advice to move any part of the pension out is there nothing I can do? I'm particularly annoyed because my pension represents about 1% of the entire value of the fund it is invested in and the fees are high. There is also virtually no choice over what funds I can invest in. Cash, an equities fund and a couple of other funds and thats it. So frustrating they can use a tiny part of the pension to stop me transferring any of it out ! Not that I understand your situation (your pension should be separate of any other non-pension fund investments) but do some more research (eg, look into your pension terms and conditions), call them (or better write) and tell them you want a written response confirming on what base they are claiming they can't follow the 30k rule. From there you may see clearer what you can do.
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michaelc
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Post by michaelc on Dec 20, 2019 23:36:01 GMT
Looks like they charge even for a single quote but in any case if that CETV includes the full pension pot it will be more than 30k. This quote is from the same email/letter as above.
Its always been a single pension with two elements. Its starting to sound like there is nothing I can do other than pay an IFA for advice I don't want? They do though seem to imply it would be the receiving pension provider that would insist on me receiving "advice". Given the relatively tiny portion of the pension that is a defined benefit (less than 1% I think) perhaps the receiving platform would accept all of it without advice?
If you wish to consider a transfer, you can request a Cash Equivalent Transfer Value (CETV) from Mercer (administrators) via @x.com or <telephone>. Members get one free CETV per 12 month period and they are valid for 3 months. From experience, transfers are not particularly expedient, so its best not to order one until you are organised with an IFA. (If the CETV expires, the cost is c£324 for a second calculation).
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r00lish67
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Post by r00lish67 on Dec 21, 2019 10:54:50 GMT
Well maybe 10 years away. Maybe sooner if my international trade (mainly Europe) employer goes pop - but let's not get into that. Arguably the stats that show good FTSE returns are also indicative of a strong bull run. So perhaps the future of equities is more uncertain. I'm also facing my main pension provider starting to shift funds towards safer havens over a 10 year period at 1/10 a year so have to decide whether to opt out of that option and stay with equities throughout drawdown. Of course if I'd had more faith in equities a few years ago I wouldn't have decided that diversifying across fixed interest platforms sounded like a smart move. Needless to say my Vanguard funds have gone up 60% in four years. Which marginally outperforms my 'investments' in Lendy, Collateral and some others. As with many people I'm coming to the pensions party late and am trying to salary sacrifice myself inside out which is really what I should have done years ago rather than focus on ISAs and P2P. Salary sacrifice into one's pension is an incredible tax break. Anyway, sarahcount is that 4% guaranteed in real terms or nominal? If an inflation adjustment is included i.e. 4% + CPI or whatever, then I think it's practically a no-brainer to stay. To gamble on receiving in excess of, say, 6% ish p.a. from equities with where we are now in valuations just does not seem worth it in the slightest to me. Sure you might conceivably 'lose out', but the potential downside is sooo much larger than the potential upside. If it doesn't include inflation (and we work on a 10-year basis), well that's slightly more debatable. If it was me, to those exact terms, I think I'd still go for the 4% guaranteed actually providing I was happy with the income that would provide when I retire in 10 years, for the certainty that would provide. If however I was willing to carry on working to recover from the market potentially working against me if it doesn't work out, then maybe the other option. But I don't really see it. 4% guaranteed sounds nice to me. Further thought - as you've already basically suggested, could you not use this pension as your "ballast" in your retirement, acting to smooth out returns against any other more volatile assets you might choose to have? Edit: I also think you're totally right to be sceptical. Financial service firms don't tend to be in the habit of proactively marketing anything that doesn't benefit them more than you. Strikes me that they're offering you this because they don't see the market delivering those returns.
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iRobot
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Post by iRobot on Dec 21, 2019 11:28:37 GMT
... Its always been a single pension with two elements. Its starting to sound like there is nothing I can do other than pay an IFA for advice I don't want? They do though seem to imply it would be the receiving pension provider that would insist on me receiving "advice". Given the relatively tiny portion of the pension that is a defined benefit (less than 1% I think) perhaps the receiving platform would accept all of it without advice? ... Has it been explained what constitutes proof of advice having been sought and received? If that's understood, it may make your route to a low-cost / no-cost solution more apparent. Sometimes it's easier - and ultimately better if benefits outweigh costs - to work within a requirement rather than trying to find ways to circumvent it; especially if fees are being incurred on a pro-rata time basis and delays will ultimately cost you even if a 'free' workaround is found.
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Godanubis
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Post by Godanubis on Dec 21, 2019 11:39:43 GMT
If you are just over the 30k DB threshold and have control over the fund it could be beneficial to reinvest to bring value to just below the 30K and withdraw without what could be a several thousand advice fee.
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michaelc
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Post by michaelc on Dec 21, 2019 16:13:28 GMT
If you are just over the 30k DB threshold and have control over the fund it could be beneficial to reinvest to bring value to just below the 30K and withdraw without what could be a several thousand advice fee. The problem is the DB bit isn't invested as such. It is a benefit that means the pension is guaranteed to be at least the value of the "basic state pension" which I thought was small. I'm now thinking its still small but possibly worth more than 30k ? Found this quote as well. There are no exit penalties to transfer out of the News International Pension Plan (NIPP) - however, because the scheme is hybrid in nature (meaning that you enjoy the higher of the Defined Contribution fund value or a minimum Defined Benefit underpin guarantee at retirement) then legislation requires financial advice to be taken, to ensure it is in your interests to do so.
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