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I'll Handle it

Switching over a pension.

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I've been paying into an Abbey Life pension ( Phoenix Life Limited) for about 30 yrs. I've been causally advised ie not in any professional capacity that the fees with Abbey are high (I literally have no clue) and that I should think about transferring the pension. I don't know where to start and I don't know if it's worth paying someone to look over it ie have I been ripped off with the charges/fees ?

 

Any advice would be greatly appreciated - thank you in advance.

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On 27/03/2019 at 15:25, I'll Handle it said:

I've been paying into an Abbey Life pension ( Phoenix Life Limited) for about 30 yrs. I've been causally advised ie not in any professional capacity that the fees with Abbey are high (I literally have no clue) and that I should think about transferring the pension. I don't know where to start and I don't know if it's worth paying someone to look over it ie have I been ripped off with the charges/fees ?

 

Any advice would be greatly appreciated - thank you in advance.

A previous colleague had a pension expert review his pensions and advise him; he said it was worth every penny.

You really need somebody like that with the market expertise.

I will be stopping work at 54 with most pensions set to kick in at 65 and I will be paying an expert to advise me as to whether the amount I lose by taking them early will be so punitive that it would be better to wait until 65 to take them.  I have the option as I have sufficient investments to live on in the meantime. It's a question of how do I achieve my best lifetime return: taking them at 55, 60 or 65.

I have about six pensions of different types so the answer may be different for each.  If I do nothing I get them at 65 but that may not be the best choice even if it isn't an active choice.

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Re fees as a marker:

Trackers have particularly low fees and are ideal for long term holding in pensions for just this reason, e.g.:

HSBC FTSE 250 tracker: 0.18% but 0.08% after HL saving so with this tracker in a SIPP you would be paying 0.53% annual fees on the first £250k.  That's about as low as you can get in a SIPP.

To give a marker for Abbey's fees I would regard over 1% as high and over 1.5% as very high.  This matters because if you're getting 4% gross return a year then that's 3.5% in the tracker in the HL SIPP or 2.5% with high fees. That's a 40% higher return so tot that difference up over thirty years.

https://www.hl.co.uk/funds/fund-discounts,-prices--and--factsheets/search-results/h/hsbc-ftse-250-index-class-s-accumulation

Hargreaves Lansdown charges:

Value of funds Charge
On the first £250,000 0.45%
On the value between £250,000 -£1m 0.25%
On the value between £1m - £2m 0.1%
On the value over £2m No charge

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On 29/03/2019 at 12:24, Frank Hovis said:

A previous colleague had a pension expert review his pensions and advise him; he said it was worth every penny.

You really need somebody like that with the market expertise.

I will be stopping work at 54 with most pensions set to kick in at 65 and I will be paying an expert to advise me as to whether the amount I lose by taking them early will be so punitive that it would be better to wait until 65 to take them.  I have the option as I have sufficient investments to live on in the meantime. It's a question of how do I achieve my best lifetime return: taking them at 55, 60 or 65.

I have about six pensions of different types so the answer may be different for each.  If I do nothing I get them at 65 but that may not be the best choice even if it isn't an active choice.

Thank you - I will seek professional advice. It's quite confusing to put it mildly ! I'll report back in the near future - thank you again.

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On 31/03/2019 at 17:08, I'll Handle it said:

Thank you - I will seek professional advice. It's quite confusing to put it mildly ! I'll report back in the near future - thank you again.

I had an interesting chat with someone in the office who was retiring early with several different pensions and didn't know what to take as cash and when to take each pension.  Similar to my situation but may also help you.

His pension advice cost £1,500 a pop but he had to do it twice because some (most?) advisors will not let you instruct against their advice; he thought for insurance reasons.

One he would which he used and with whom he was very happy was Pension Help.

This is a clever chap so he would know what he's talking about.

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On 29/03/2019 at 12:24, Frank Hovis said:

A previous colleague had a pension expert review his pensions and advise him; he said it was worth every penny.

You really need somebody like that with the market expertise.

I will be stopping work at 54 with most pensions set to kick in at 65 and I will be paying an expert to advise me as to whether the amount I lose by taking them early will be so punitive that it would be better to wait until 65 to take them.  I have the option as I have sufficient investments to live on in the meantime. It's a question of how do I achieve my best lifetime return: taking them at 55, 60 or 65.

I have about six pensions of different types so the answer may be different for each.  If I do nothing I get them at 65 but that may not be the best choice even if it isn't an active choice.

Two considerations you have to make here...

1 if its a DB pension are you better taking the pension early (with a penalty) whilst you can rather than finding they move the goalposts as `there isn't enough in the fund to do what we originally planned...at least this way you can reinvest to recuperate some of the penalty whilst being in control.

2. If its a DC why pay someone their cut when you could put it in an index and get similar results without the risk of a British Steel scenario.

`A bird in the hand is worth two in the bush`?

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1 hour ago, MrXxx said:

Two considerations you have to make here...

1 if its a DB pension are you better taking the pension early (with a penalty) whilst you can rather than finding they move the goalposts as `there isn't enough in the fund to do what we originally planned...at least this way you can reinvest to recuperate some of the penalty whilst being in control.

2. If its a DC why pay someone their cut when you could put it in an index and get similar results without the risk of a British Steel scenario.

`A bird in the hand is worth two in the bush`?

Fair points. 

My concern is primarly on DB; specifically are you so heavily penalised by taking it early that you would be mad to do so?  Is there perhaps a sweet spot at ten years, or five years before normal retirement date?

That requires knowledge of how the fund calculates the value which is the province of an expert.

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10 minutes ago, Frank Hovis said:

Fair points. 

My concern is primarly on DB; specifically are you so heavily penalised by taking it early that you would be mad to do so?  Is there perhaps a sweet spot at ten years, or five years before normal retirement date?

That requires knowledge of how the fund calculates the value which is the province of an expert.

I too have thought about this...logically all you need to do is take the annual sum offered at 55 and `reinvest` it in a compounding calculator returning say 4% pa, then do the same with the annual sum offered at 65. When the two compounded sums equal this will give you the `break even` age where if you live longer you are better taking later...does this sound correct?

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13 minutes ago, MrXxx said:

I too have thought about this...logically all you need to do is take the annual sum offered at 55 and `reinvest` it in a compounding calculator returning say 4% pa, then do the same with the annual sum offered at 65. When the two compounded sums equal this will give you the `break even` age where if you live longer you are better taking later...does this sound correct?

Yes.

Per the chap at work you have to go through a pension expert in order to access it early, I presume this is to stop people taking vast amounts out to buy the postulated Lamborghini and then finding themselves potless and claiming benefits.

This would tally with what he said about finding somebody who will give you advice but still sign off on your decisiosn if you don't take it.  

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On 31/03/2019 at 17:08, I'll Handle it said:

Thank you - I will seek professional advice. It's quite confusing to put it mildly ! I'll report back in the near future - thank you again.

If your pension pot is over £30k you have no choice but to pay for advice.

I'm currently doing it and it's costing £2,250 on a £120k transfer value. Most of the places I've tried wanted to handle the money when transferred and charge ongoing fees, then exit fees if you leave them. Found a place that will do a transfer report, accepting that the destination will be a SIPP. Either with HL if their advice is to move it, or AJ Bell if their advice isn't to move it. HL won't accept transfers against advice but AJ Bell will. The way I see it, DYOR etc. is that if I don't transfer, the £5k pension on a £120k pot is basically them paying me the income but then when I die, they keep grab the pot. In a SIPP the pot is inheritance tax free until I get to age 75.

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9 minutes ago, Democorruptcy said:

If your pension pot is over £30k you have no choice but to pay for advice.

I'm currently doing it and it's costing £2,250 on a £120k transfer value. Most of the places I've tried wanted to handle the money when transferred and charge ongoing fees, then exit fees if you leave them. Found a place that will do a transfer report, accepting that the destination will be a SIPP. Either with HL if their advice is to move it, or AJ Bell if their advice isn't to move it. HL won't accept transfers against advice but AJ Bell will. The way I see it, DYOR etc. is that if I don't transfer, the £5k pension on a £120k pot is basically them paying me the income but then when I die, they keep grab the pot. In a SIPP the pot is inheritance tax free until I get to age 75.

Not for a DC pension unless it's changed since last may. I moved a DC pension with a value of more than £30k to a SIPP and just had to sign a form.

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4 hours ago, Democorruptcy said:

If your pension pot is over £30k you have no choice but to pay for advice.

I'm currently doing it and it's costing £2,250 on a £120k transfer value. Most of the places I've tried wanted to handle the money when transferred and charge ongoing fees, then exit fees if you leave them. Found a place that will do a transfer report, accepting that the destination will be a SIPP. Either with HL if their advice is to move it, or AJ Bell if their advice isn't to move it. HL won't accept transfers against advice but AJ Bell will. The way I see it, DYOR etc. is that if I don't transfer, the £5k pension on a £120k pot is basically them paying me the income but then when I die, they keep grab the pot. In a SIPP the pot is inheritance tax free until I get to age 75.

This isn't true.

If you insist, they have to do it. 

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Are we all talking `cross purposes` here?...I was talking about any pension where you can start claiming it from 55  (rather than 65) but you pay  a reduction penalty I.e 5% for every year before 65. My understanding is that it just happens and that you don't have to take any financial advice as your pension has matured within the validity period I.e 55-65.

As for a DC pension, this may be different but I thought recent pension law meant that it was the same upon maturity hence the newspaper headlines about OAPs and Lambos.

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1 hour ago, MrXxx said:

Are we all talking `cross purposes` here?...I was talking about any pension where you can start claiming it from 55  (rather than 65) but you pay  a reduction penalty I.e 5% for every year before 65. My understanding is that it just happens and that you don't have to take any financial advice as your pension has matured within the validity period I.e 55-65.

As for a DC pension, this may be different but I thought recent pension law meant that it was the same upon maturity hence the newspaper headlines about OAPs and Lambos.

I think you could be right. I've seen no mention of needing advice with the NHS pension if you take it early and quite the penalty is levied for doing so. Although when the time comes, perhaps it is forced or at least stressed that advice is sought. They do offer the ability to buy a few years so you can take it earlier with no penalty.

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20 hours ago, sam1994 said:

This isn't true.

If you insist, they have to do it. 

Do you know anyone who had a transfer to HL against IFA advice?

I don't think there's any legal reason why HL wouldn't accept a transfer, if advice was against it but everything I've read says they won't.
 

Quote

 

Sipp providers said their decision not to accept transfers without a positive opinion was a “business decision”, not a legal one.

Hargreaves Lansdown, Britain’s biggest broker, said it would not accept any transfers where an adviser had given anything other than a “positive recommendation”.

https://www.telegraph.co.uk/pensions-retirement/financial-planning/i-was-forced-to-waste-1k-on-advice-when-all-i-wanted-was-to-move1/

 

 

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10 minutes ago, Democorruptcy said:

Do you know anyone who had a transfer to HL against IFA advice?

I don't think there's any legal reason why HL wouldn't accept a transfer, if advice was against it but everything I've read says they won't.
 

 

Family member. Ask for formal complaints process. 

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On 10/04/2019 at 22:58, sam1994 said:

Family member. Ask for formal complaints process. 

I asked HL and this is their reply:

Quote

We'll only accept a transfer from a Defined Benefit scheme if the advice is in favour, this is a business decision and other SIPP providers may not require this. This is because your Defined Benefit scheme will contain valuable benefits, including the guarantee of secure income at retirement, which is often far superior to that of a money purchase pension scheme.

I wouldn't be able to say whether we would accept if it you raised a formal complaint. Even after a complaint is investigated the transfer could still be rejected.

 

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Democorruptcy is right on the transfer nightmare and HL will not take it unless its a yes.I control funds close to a seven figure sum (own investments,family and trust) and i threatened to transfer everything out,and they still wouldnt entertain without a yes.AJ bell will take as long as you have had advice.

A lot of good DB schemes also allow you to juggle the benefits.Mine i can take at 55 and if i dont keep the spouse pension and give that up i pretty much get the same amount at 55 as i would at 60.However that has a transfer value of 38x the pension,so im very tempted to transfer it to a SIPP,though the hoops to jump through are a nightmare.As Democorruptcy says most want the money invested through them so they can skim the fees,most IFAs these days are anything but.I bought shares recently in StandardLife and one reason is because i saw how much they could skim of pensions etc as some family friends moved theirs to them through an IFA.1% a year compounding makes a massive difference to long term wealth.

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56 minutes ago, DurhamBorn said:

Democorruptcy is right on the transfer nightmare and HL will not take it unless its a yes.I control funds close to a seven figure sum (own investments,family and trust) and i threatened to transfer everything out,and they still wouldnt entertain without a yes.AJ bell will take as long as you have had advice.

A lot of good DB schemes also allow you to juggle the benefits.Mine i can take at 55 and if i dont keep the spouse pension and give that up i pretty much get the same amount at 55 as i would at 60.However that has a transfer value of 38x the pension,so im very tempted to transfer it to a SIPP,though the hoops to jump through are a nightmare.As Democorruptcy says most want the money invested through them so they can skim the fees,most IFAs these days are anything but.I bought shares recently in StandardLife and one reason is because i saw how much they could skim of pensions etc as some family friends moved theirs to them through an IFA.1% a year compounding makes a massive difference to long term wealth.

38x!

That's mad.

You can swap a £10k indexed pension for £380k and then you need to make a return of 2.6% plus inflation annually to have full preservation of capital.  And as pensions don't offer any preservation of capital you can take a lot more.

As that's the going rate I am bringing forward my pension review as that's purely a product of the current low interest rates; so working for another ten years and retiring when rates are higher may actually leave me poorer than retiring now.

It's mad but I don't look a gift horse in the mouth.

 

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I have bitten the bullet and gone for a review. 

If I can seriously get anything like 38x I'm doing it since not to transfer it out when you can get this level of multiple is like ripping up several fifty pound notes before I go to bed each night; finally I get to benefit from ultra low interest rates!

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8 hours ago, Frank Hovis said:

I have bitten the bullet and gone for a review. 

If I can seriously get anything like 38x I'm doing it since not to transfer it out when you can get this level of multiple is like ripping up several fifty pound notes before I go to bed each night; finally I get to benefit from ultra low interest rates!

On my deferred pension transfer value it states my contributions totalled £2.6k ending 1994. The transfer value is £119k.

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1 minute ago, Democorruptcy said:

On my deferred pension transfer value it states my contributions totalled £2.6k ending 1994. The transfer value is £119k.

Surely this is a once in a lifetime opportunity?

I could be being unduly optimistic here but the risk seems to be that i will hit my £1m pension limit rather than being disappointed as some quite ludicrous transfer values are being offered as in your case.

Transfer them all out, into SIPP in low fee tracker funds.  Start taking them out of the SIPP in big chunks at 55 whilst avoiding tax by investing in whatever is then giving tax relief.

I'll see what the results are but as I said above it looks highly likely that I will have a far better pension by retiring at 55 than by working to 65 owing to the current mental transfer values on index-linked defined benefit pensions which will fall away steeply as interest rates rise.

I have had zero interest in pensions but as soon as these mad transfer values started floating about I suddenly became interested.

 

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21 hours ago, DurhamBorn said:

Democorruptcy is right on the transfer nightmare and HL will not take it unless its a yes.I control funds close to a seven figure sum (own investments,family and trust) and i threatened to transfer everything out,and they still wouldnt entertain without a yes.AJ bell will take as long as you have had advice.

A lot of good DB schemes also allow you to juggle the benefits.Mine i can take at 55 and if i dont keep the spouse pension and give that up i pretty much get the same amount at 55 as i would at 60.However that has a transfer value of 38x the pension,so im very tempted to transfer it to a SIPP,though the hoops to jump through are a nightmare.As Democorruptcy says most want the money invested through them so they can skim the fees,most IFAs these days are anything but.I bought shares recently in StandardLife and one reason is because i saw how much they could skim of pensions etc as some family friends moved theirs to them through an IFA.1% a year compounding makes a massive difference to long term wealth.

Not sure if I have this right DB, but you are saying that your DB pension gives a higher weekly sum if you relinquish the option of passing it on to a spouse on your death OR is it just the buy out/transfer value that allows this option?

Hovis, think you make a good point about current low IR and their eroding potential on the weekly  pension sum if they raise in the future (and especially if the T&C have limits I.e .5% increased indexing above 5%) BUT there are unknowns to a buy out. Would a better compromise (to account for the unknowns) be taking the pension early and investing the sum in S&S?...that way you are not paying the pension company their management sum but still have the guarantee of a fixed income for the rest of your lifetime to fall back on?

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11 hours ago, MrXxx said:

Not sure if I have this right DB, but you are saying that your DB pension gives a higher weekly sum if you relinquish the option of passing it on to a spouse on your death OR is it just the buy out/transfer value that allows this option?

Hovis, think you make a good point about current low IR and their eroding potential on the weekly  pension sum if they raise in the future (and especially if the T&C have limits I.e .5% increased indexing above 5%) BUT there are unknowns to a buy out. Would a better compromise (to account for the unknowns) be taking the pension early and investing the sum in S&S?...that way you are not paying the pension company their management sum but still have the guarantee of a fixed income for the rest of your lifetime to fall back on?

We'll see how it goes but if the multiple is right and I can get £380k cash for a £10k annual pension then I'm biting their hand off.  What's the FTSE yield - 4%?  So £15.2k in dividends whilst retaining the inflation proofing of shares and actually having the capital rather than it being blown upon an annuity.

That would go into equities in the SIPP which I will then drain into my ISA given the £20k annual limit.  I wouldn't be taking anything like the 25% tax free lump sum unless I had something I wanted to do with it like buy a bigger house.

Anyway 'tis all academic for now as I might not get it or there may be some other problem but if I can get something like that multiple and transfer it then I regard that as the opportunity of a lifetime to actually use the massively low interest / annuity rates in my favour by selling the income stream for a huge wodge of capital.

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2 minutes ago, Frank Hovis said:

We'll see how it goes but if the multiple is right and I can get £380k cash for a £10k annual pension then I'm biting their hand off.  What's the FTSE yield - 4%?  So £15.2k in dividends whilst retaining the inflation proofing of shares and actually having the capital rather than it being blown upon an annuity.

That would go into equities in the SIPP which I will then drain into my ISA given the £20k annual limit.  I wouldn't be taking anything like the 25% tax free lump sum unless I had something I wanted to do with it like buy a bigger house.

Anyway 'tis all academic for now as I might not get it or there may be some other problem but if I can get something like that multiple and transfer it then I regard that as the opportunity of a lifetime to actually use the massively low interest / annuity rates in my favour by selling the income stream for a huge wodge of capital.

Are you married?  o.O

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