Final Salary Pension - Transferring ?

Page may contain affiliate links. Please see terms for details.
...........It's worth remembering that if you die before the age of 75, and any all of your remaining SIPP pot can be transferred to a family member's pension pot totally tax free. Once you get above age 75, only then relevant taxes apply in the event of your death, but the pot still doesn't disappear like FS and annuity schemes........
If you die before you reach 75 then the remaining pot is paid as a tax free lump sum to the deceased estate, however if the deceased is over 75 then the lump sum is taxed at the relevant inheritance tax rate.
 
Did mine a few years back for the same reasons , I pop my clogs she gets half , we both die , it simply disappears ...Fruck that , it's my money.

It's quite a big lump by some standards . The whole thing had to go through IFA and was 'underwritten' by a separate company (Grove). There were a LOT of questions , numerous phone interviews and it took six months to complete.

I am happy ( so far) , I guess there are risks but I can log on and see the value of my fund any time I like . I do wish I had not looked when Covid struck as the fund fell like a stone - but not to less than I started with - It recovered well.

I will admit to being a bit dense when it comes to 'money' but the bit about 50% of it disappearing if I die and all of it going if we both die swung it for me.

Recurring charges are as follows.

Fund manager 0.15%
Advice 0.13%
Old mutual wealth (now Quilter) Charges 0.08%

Total of 0.36%

I can't remember the 'one off ' fees , which means they were not high , otherwise I would have remembered !

From what I can gather talking to others wanting to do the same a lot of IFA's are not interested in 'small' pension pots. An acquaintance of mine had real trouble getting someone to handle £67K of his . My IFA hinted that his lower limit was £100K.

Have I done the right thing ? Who knows 🤷‍♂️ At the time I did it I was advised to go 'medium' risk and my IFA keeps an eye on it and advises me accordingly. There is a fair bit more in the pot than when I started out so something must be going right .

At this point people who work in finance are screaming at me via their computer screens , telling me what a huge mistake I have made and I should invest in _ _ _ _ _ _ _ _ _ (insert fund name here) . My IFA said 'never try to catch a falling knife' , and If I don't need it , leave it alone . Seems to be working.

Despite Brexit/Covid/Ukraine/Trump etc etc there is still a fair bit more in there than when I took 'control' . It's not for everyone , we all have different circumstances.

Someone once said Astrology was invented to make Financial advisers look like they know what the are doing........ :)
My IFA also used grove, wasn’t cheap
😤 and also came back with more information needed which means you’ve got to commit to the next stage and have to pay wether you then want to proceed or not, and even if they recommend against a transfer 🤷‍♂️
 
This is something that I have done, what you have to remember is that to get a guaranteed transfer value, which does only last for twelve weeks is that you have to become a deferred member ( leave the scheme ) which was my hardest decision, all values change daily, so you can only go on previous ones as a ball park figure, the new one may be more or less, but then your out of the scheme won’t get back in, and you could be advised against doing it, I was lucky my value went up, one guys went down 40K, so for me the big decision was wether to get the guaranteed value.
 
My IFA also used grove, wasn’t cheap
😤 and also came back with more information needed which means you’ve got to commit to the next stage and have to pay wether you then want to proceed or not, and even if they recommend against a transfer 🤷‍♂️
No different to taking your Mercedes Benz in to a main dealer for a complete scan and health check . They might recommend you spend £10K fixing the car or scrapping it.

Your choice...they are still going to charge you for the health check no matter what you decide......
 
If you die before you reach 75 then the remaining pot is paid as a tax free lump sum to the deceased estate, however if the deceased is over 75 then the lump sum is taxed at the relevant inheritance tax rate.

That's not my understanding exactly, although 75 is important for several reasons not least the automatic test against the lifetime allowance.

Death before the age of 75, there is no tax to pay on the payment of death benefits from the SIPP, whether this is taken as income or the whole fund is withdrawn as a lump sum.

Death after the age of 75, any death benefits paid from the SIPP are taxed at the recipient’s marginal tax rate not the inheritance tax rate

SIPPS are not subject to inheritance tax and do not count towards the Inheritance allowance . That makes them a useful tool if you are likely to breach the inheritance tax allowance. In that case it makes sense to spend everything else first before you draw down from your SIPP.

The above is my understanding as an amateur.
 
Wheelnut58, I may have read a lot into your post #22, if so, I apologise. However…

If you saw the hoops any adviser has to jump through to be able to give appropriate advice, you would see why so much information, some of it seemingly irrelevant to the current question, is requested. He has no other way of determining all the facts. He doesn’t know, without asking, if you haven’t told him something that might affect his advice - e.g. state of health of affected parties, or have you made a will (or are you relying on the Rules of Intestacy) etc. It’s part of applying due diligence.

If you are objecting to paying for the advice which recommends against a transfer, may I ask why? He’s done the same amount of work whatever his conclusion. (Or do you expect the adviser only to get paid if they effect the transfer - that’s entering the realms of commission, which is now against the rules)

Hope these comments add a bit of perspective.
 
Wheelnut58, I may have read a lot into your post #22, if so, I apologise. However…

If you saw the hoops any adviser has to jump through to be able to give appropriate advice, you would see why so much information, some of it seemingly irrelevant to the current question, is requested. He has no other way of determining all the facts. He doesn’t know, without asking, if you haven’t told him something that might affect his advice - e.g. state of health of affected parties, or have you made a will (or are you relying on the Rules of Intestacy) etc. It’s part of applying due diligence.

If you are objecting to paying for the advice which recommends against a transfer, may I ask why? He’s done the same amount of work whatever his conclusion. (Or do you expect the adviser only to get paid if they effect the transfer - that’s entering the realms of commission, which is now against the rules)

Hope these comments add a bit of perspective.
I have no objection to the fee the advisor charges, but after he has looked at everything and as you say is very extensive, he recommends it, he has then to pass that on to a government appointed independent third party who then have to look it over, and after looking over the same information as the advisor they say that they need more information, so up to this point the third party don’t charge but I’m no further forward, they need more info so to proceed I have to agree to their charges, which I might add were almost 5 times the amount of the advisor, they then gather more info and can still advise against a transfer but you have to pay their fees also, all the time this is going off your battling a fixed deadline, which if not met means you’ll have to pay for another guaranteed value, which may have gone up or down, so I’m not against my advisor fees, but the rest of the process where I had to leave the final salary scheme to get a guaranteed value, which you won’t get back in to as it’s closed and then be potentially refused a transfer, doesn’t seem right ?
 
Just an update to my first post :

Went through the comprehensive questionnaire with regards to withdrawing my "pot" , the final part of part one of the process was to request my transfer value from the companies scheme which arrived this morning.

Over the last year my ring fenced "pot" from 2010 has devalued by £90k , if i do go ahead with the move my pension the company is withholding 19% of said devalued pot which is another £90k .

So bottom line is unless i am prepared to take a £180k kick in the nuts ,this year, the pension is being left where it is for the time being.

Forgive my naivety but if a "pot" is part of a closed scheme (12 years ago) how can it get or be devalued ?

K
 
Just an update to my first post :

Went through the comprehensive questionnaire with regards to withdrawing my "pot" , the final part of part one of the process was to request my transfer value from the companies scheme which arrived this morning.

Over the last year my ring fenced "pot" from 2010 has devalued by £90k , if i do go ahead with the move my pension the company is withholding 19% of said devalued pot which is another £90k .

So bottom line is unless i am prepared to take a £180k kick in the nuts ,this year, the pension is being left where it is for the time being.

Forgive my naivety but if a "pot" is part of a closed scheme (12 years ago) how can it get or be devalued ?

K
You have my sympathy
I have a number of relatively small pots which have been transferred to zombie companies which take the funds & invest for safety - i.e. they loose money .
I'm in the process (with a financial advisor) of trying to secure a future retirement, moving smaller pots (where the loss isn't stupid) & transferring business funds to avoid corporation tax.
The financial advisor does very well out of it - enough to send me wine at Christmas & birthday.
 
I don't understand what happened to KennyN . I asked for the value of my pot (left the company that I worked for who's pension scheme it was some 20 years earlier) , I eventually got the figure (at least my IFA did) . Six moths later it was all mine....except the bit my IFA and his mates had , but all went pretty smoothly.
 
Over the last year my ring fenced "pot" from 2010 has devalued by £90k , if i do go ahead with the move my pension the company is withholding 19% of said devalued pot which is another £90k .
I can’t say for certain, but one of the reasons for the devaluation could be that the scheme provides a defined benefit, so as interest rates rise the size of pot required to provide that benefit (and hence the funds that can be transferred out) diminishes.

Regarding the 19% penalty for transferring out, that will have to be part of the scheme rules. It’s understandable (if unhelpful) as a mechanism to discourage the withdrawal of monies from an underfunded scheme, as such withdrawals make matters worse for those who remain scheme members.
 
I can’t say for certain, but one of the reasons for the devaluation could be that the scheme provides a defined benefit, so as interest rates rise the size of pot required to provide that benefit (and hence the funds that can be transferred out) diminishes.

Regarding the 19% penalty for transferring out, that will have to be part of the scheme rules. It’s understandable (if unhelpful) as a mechanism to discourage the withdrawal of monies from an underfunded scheme, as such withdrawals make matters worse for those who remain scheme members.
With regard to that, remember Equitable life. The higher the penalty went, the more nervous people were and the more that pulled it out. Investors are like sheep (or lemmings). Eventually that collapsed. Can't remember the exact reasons (fixed high levels of promised dividends rings a bell). There may well be more protection here, but please check what that protection will give you if the scheme goes bust. Inevitably, if lots of money leaves, the scheme will fail. Current chancellor not helping at the moment either...
 
Had a 30 min chat with a woman from the governments pension advisory service today who shed some light on the drop in my "pot" value over the last two years.

Basically the only guaranteed thing ,from a pension POV, is the annual stated figure at NRD which in my case has remained static even though the "pot" value differs.

The "pot" value is determined at the time of calculating a transfer value , and from the basic way is was explained to me , it is reverse calculated so they start with the annual guaranteed pension figure and based on many , many things at the time they arrive at whatever the pot value it would need to be to achieve this.

Also had a chat with the IFA i was using and we both agreed to shelf any plans to transfer my pension for at least a year , which is no surprise really.

Kenny
 
With regard to that, remember Equitable life. The higher the penalty went, the more nervous people were and the more that pulled it out. Investors are like sheep (or lemmings). Eventually that collapsed. Can't remember the exact reasons (fixed high levels of promised dividends rings a bell). There may well be more protection here, but please check what that protection will give you if the scheme goes bust. Inevitably, if lots of money leaves, the scheme will fail. Current chancellor not helping at the moment either...

The Equitable was caught out by overpromising returns with guaranteed annuities. The promise was not sustainable and it went to court. The liability of the court's decision to support the guaranteed annuities left other members of the Equitable at a disadvantage and the Equitable faced withdrawals - so they put in penalties - and some people left them and took the penalties - others delayed and lost years worth.

Your suggestion that those who left were 'lemmings' is unfair.
 
The Equitable was caught out by overpromising returns with guaranteed annuities. The promise was not sustainable and it went to court. The liability of the court's decision to support the guaranteed annuities left other members of the Equitable at a disadvantage and the Equitable faced withdrawals - so they put in penalties - and some people left them and took the penalties - others delayed and lost years worth.

Your suggestion that those who left were 'lemmings' is unfair.
Ok, I take it back. I have a lot of sympathy for the investors, but I took my money and ran. Once I was out I lost interest, but it was apparent that unsustainable returns would be just that, and a court saying they had to pay them was finishing it off as far as I could see. I think I took a 20% hit, but it was a long time ago.
 
As I recall a similar thing happened with Neil Woodford. People got twitchy, caused a liquidity issue quickly leading to disaster as everybody tried to pull out. Causes were different, effect the same - those left in suffered
 

Users who are viewing this thread

Back
Top Bottom