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M S E Refugee

Final Salary Transfer

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I have asked my Pension scheme to send me a figure of how much my Final Salary Pension is worth,apparently due to low interest rates the transfer values have gone through the roof.

Are there any Pensions experts on here?

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The conventional view has always been that final salary deals are so good that you should be very very wary of transferring out.

I've always accepted that and looked no further into it.l, but I'd be interested to know the figures when you get them if you're willing to share.

I've got two deferred final salary schemes but suspect I can't touch them anyway as they're both public sector.

 

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I didn't realise it worked like that.

I understand that low interest rates mean that

big pot = small annuity 

So don't take your pension at a time of low rates.

But I didn't appreciate that defined benefits then leveraged up into a big transfer value; I thought the assumption was that interest rates would rise and fall to smooth out the return on the fund assets.

I would be interested to know the outcome because if so then now would be a great time to convert defined benefits into a big cash sum and transfer it into a SIPP.

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I asked for a quote last week,I'm not to sure how long it will take to get my CETV figure from my Pension Scheme.

There's a company called Tideway that specialises in the transfer of Final Salary Pensions,not many companies want to do this kind of work after past mis-selling scandals.

Hargreaves Lansdown won't touch them but you can transfer it to Tideway then invest the funds into a SIPP through Hargreaves Lansdown etc.

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Their estimated figures seem very high so I'd be interested if you can give an indication of your outcome.

For a £1k benefit at age 65 they're saying that they'll pay c. £25k and in the range of  £19k - £27k.

This is far in excess of what these benefits are scaled up by the Revenue in caclulating how much of your £40k annual pension allowance gets swallowed up by your DB scheme; about 12 - 15 x was the guide.

And £25k now will pay out £1k if in the FTSE 100 so you get the income and on top of that the capital for free.

I've also checked my DB scheme and the combined cost of mine and the employer's contributions is near as damnit 10x the benefit.  So in theory each year I can (assuming I pay my employer's contributions as well) pay £10k for a £1k pension and immediately sell that to Tideway for £25k.  Instant £15k gain.

That just doesn't make sense.  My pension provider is promising me an income for a payment of 10x that income but Tideway will pay 25x.  Why don't they just go to a big pension provider direct with an offer and save themselves that 15x differential? 

https://www.finalsalarytransfer.com/l/calculator

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I'm also waiting to be notified of a transfer value. Asked mainly out of curiosity. I know it's generally a bad idea. I was asking them about some other stuff, so asked for a transfer figure at the same time. 

If the figure was so high, that I was tempted to take it, then have the issue of what to do with it. I'm 58. I could put it into current company scheme SIPP, and then watch it lose loads over the next few years. Leave it as cash, and then lose out to inflation. I'll probably leave it where it is. 

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17 hours ago, M S E Refugee said:

I have received a letter off my Pension Scheme and it could take up to 13 weeks to issue my CETV.

I haven't had a letter yet, but from what you say, I'd expect to hear a similar situation. 

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Note that you can expect to pay several thousand pounds in fees for DB transfers, if you can find an advisor who will sign it off.  Interested to hear how you get on.

Edited by GARCH

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After the initial chat of about 30 minutes, with a pensions transfer specialist, I'm not proceeding. No charge for the advice. Would cost around £2,200 if I proceed. Was made clear that it would probably not get approved. It's a possibility to transfer it, even with no approval, but not into the SIPP I want it in. 

I still think it would be the right thing to do, but I'm not prepared to spend £2,200 to get knocked back. 

So it'll stay where it is, and I'll carry on building the SIPP. 

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Ah well, at least you had a go.

That is an amazing ratio; whilst a nominal 4.5% that's not going to be paid out indefinitely so the buyer seems to be assuming that about 2%, or maybe less as I'm not an actuary, return is sufficient.

There's a firm going bust.

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12 hours ago, M S E Refugee said:

My CETV value came back at around £200000 for a pension that would pay me about £9000 a year.

I am not permitted to transfer out unfortunately.

Im not a pensions expert but i assume that you have to live 22 years after 65, so 87 to break even.  

Good luck!

Pensions always struct me a bloody dumb investment. Tax relief aint much use to you if youre dead....

 

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On 05/08/2017 at 07:48, Uptherebels said:

After the initial chat of about 30 minutes, with a pensions transfer specialist, I'm not proceeding. No charge for the advice. Would cost around £2,200 if I proceed. Was made clear that it would probably not get approved. It's a possibility to transfer it, even with no approval, but not into the SIPP I want it in. 

I still think it would be the right thing to do, but I'm not prepared to spend £2,200 to get knocked back. 

So it'll stay where it is, and I'll carry on building the SIPP. 

Interesting. Is it at the discretion of the pension trustees whether or not they would allow you to proceed? And does that depend mainly on their funding position?

Where could you transfer it to without approval, if not the SIPP you want it in?

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6 hours ago, BigV said:

Interesting. Is it at the discretion of the pension trustees whether or not they would allow you to proceed? And does that depend mainly on their funding position?

Where could you transfer it to without approval, if not the SIPP you want it in?

I think there are plenty of private pension schemes that will accept it. There would have been nothing in theory, stopping me transferring it to my virgin stakeholder pension, and then closing that, and moving it into the SIPP. 

Edited by Uptherebels

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On 24/09/2017 at 23:02, Green Devil said:

Im not a pensions expert but i assume that you have to live 22 years after 65, so 87 to break even.  

Good luck!

Pensions always struct me a bloody dumb investment. Tax relief aint much use to you if youre dead....

 

You can take your SIPP at 55 so living a while beyond that is a statistically reasonable expectation.

It also depends upon what your investments are for; mine are to give me an income until I get my actual pensions kicking in at 65 / 67.

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