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Final Salary Pension Transfer
neil mcrorie
Posted: 29 September 2017 10:56:47(UTC)
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Hi Guys,

Looking for any advice or opinions around transferring from final salary pension. I have a deferred pension from the British Steel Pension Fund and currently I believe there are three available options as the fund is closing in Mar 2018. I am 46yrs old and my potential cash equivalent value is around £500k (inflated figure, but I'm told it will be at this figure, though waiting on confirmation).

Firstly, I can move it to the new Tata Steel fund with likely set max RPI rises (unknown penalties for early withdrawal) as yet, go into the PFF government fund or look at transferring out. With my age, potential CTV and i'm looking for availability to draw down at 55 if required.

I know it is a lot to ask, but do we consider transferring out which I believe would be best or are their valid reasons for not doing so. I am not pension savvy at all as you probably have guessed.

Obviously, if transferring out is the option, where would you suggest I go for unbiased advice, what companies should I be considering as examples. I am aware I need a FIA for transfer.
I have been told I should get someone who manages my account regularly (daily/weekly) is this a true option and what organisations would be the best for me?

Any advice would be appreciated so I can make some informed choices.

Thanks in advance

Neil
1 user thanked neil mcrorie for this post.
mohamed dellal on 27/10/2017(UTC)
Mark Abley
Posted: 29 September 2017 14:47:08(UTC)
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Joined: 29/09/2017(UTC)
Posts: 1

Was thanked: 1 time(s) in 1 post(s)
Hello

If you are considering transferring once you have your CETV you need to act quickly as time will be limited and the process is quite complex and lengthy. Make sure that the IFA you approach has the necessary qualifications and FCA permissions to transact the business on your behalf.

Your chosen IFA should take you through a process to understand your financial position and undertake some cash-flow modelling with you. This is to establish if you will be better off financially by transferring. You will be able to locate a suitably qualified IFA by searching on www.vouchedfor.co.uk or www.unbiased.co.uk.

Please only use an authorised adviser and don't be tempted by unregulated products or unrealistic projections of future returns.

You can check the IFA out on the FCA register https://register.fca.org.uk/

My firm are running clinics to guide members through their options. You are more than welcome to attend. The event is free with no obligation. You can register here:

www.thepensionreviewservice.com/steel

Mark



1 user thanked Mark Abley for this post.
mohamed dellal on 27/10/2017(UTC)
Rob L
Posted: 29 September 2017 15:52:41(UTC)
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Joined: 29/09/2017(UTC)
Posts: 1

Was thanked: 2 time(s) in 1 post(s)
Good afternoon Neil. - Firstly I think Mark has provided some very sound advice and highlighted some useful links. That said please also find below my own thought.

I would summarise your options as :
1. Remain in the DB scheme - this will either be to agree to move to BSSP2 (assuming that the new scheme meets the relevant criteria) or remain in BSSP - which in effect is agreeing to move to PPF. The option that best suits you should be clear in the info pack you will be receiving around early October.
2. Transfer out from DB scheme - this as you know requires an approved IFA advice. This will theoretically give you a number of options, although I would suspect the most appropriate would be some sort of drawdown. In my personal (non qualified ) view if you were seeking high levels of guarantee and limited/no risk and hence wanting some form of annuity - then I would say to remain in the DB scheme (whichever sub-option works out best for you).

I would just clarify that the DB scheme (BSSPS2 and PPF) utilise CPI rather than RPI as means of providing the increases in deferment and escalation once in payment.

What option you should go with will in many ways be a very personal choice - it is an important decision so don't feel pressurised into following what many of your colleagues may be doing - that CETV does look like a very large amount of money but its not a lottery win its there to look after you for a long time.

That said, because the factors have increased significantly since last valuation , whereas most "good" IFAs would have been sending you off with a flea in your ear if you had approached them last year, now the situation is different and is at least worth a detailed look . Note from what I have heard the factors ( ie x pension = CETV) offered whilst doubled and more dependent on age compared to last year they are not as good as those offered in some schemes (Rolls Royce for example).

On the assumption that the "buddy" block transfer(which could be of interest to you if you joined BSSP before April 2006) is not undertaken by the Trustees (they are resisting it strongly to date) then you will not be able to take your pension before 55 at least. I understand that depending on how young you are that could change to higher age 57 or 58 so not sure if you fall into that category?
The buddy transfer would allow maintaining "protected rights" that would allow you to access pension at 50+.

The DB schemes (even PPF) are pretty (very) good and will give you a semi-fixed pension for life - that will receive a level of increase in deferment (subject to a number of caps for different tranches of service years) and similarly escalation of pension in payment. NOTE if you have years of service before April 1997 - no escalation in payment. If this is a significant portion of your service that could be quite important. Taking that option also means don't have to worry about (generally) stock market changes and investment risks - they are all the responsibility of Trustees Investment team.

What taking this approach will do is give you a very reasonable income and you will probably get richer the older you get (as the State Pension kicks in). The pension will however die with you (or your spouse who would get 50%). Don't forget you can take a lumpsum and you can retire early as well (subject to various adjustments).

However if you
think you would rather weight your cash-flow profile to having more money when you are younger (lets say 60-75 rather than 75-85) and hopefully healthier
have flexibility to take up-to 25% cash tax free BUT but NOT take a pension income and perhaps keep working - eg you may wish to take lumpsum @ 55 but not retire until 60
would like to be able to leave some of your pension pot as an inheritance to your children
are aware of risks that your investment growth is NOT guaranteed - and could go down as well as up
have sufficient savings or some other means of coping for maybe upto 1 -2 years of hoped for pension income (could come from your tax-free lumpsum?) rather than try to drawdown from the fund when timing not good

Drawdown could be good option for you.

Timing : whilst it is important to seek and take advice as Paul mentioned you don't want to hang around. As you already have a CETV (not sure if that is before or after the revised deduction) you will have a deadline of around 11th December to have made the formal request (which will have had to be accompanied by right forms, IFA advice and identity checking documents). Dependent on IFA company level of resources not all will be able to turn-around in time. Note also some don't actually provide the advice themselves - they contact that work out to companies that have the relevant qualifications.

Regarding fees - you will (almost certainly) have to pay for the advice. I say almost certainly as I am aware that there are some IFAs who will cover the cost of the advice on basis that you will use them for financial management on ongoing basis (ie at a certain% per year).
Some companies will charge a fixed fee (nearly) for the formal advice but all should offer a basic free (30-60 min chat) that should enable in broad terms to make a judgement on whether it has strong potential to be a viable option (they will certainly be able to quickly tell you not to move if that is the right decision).
These fixed fee approaches may sound a little costly BUT at least you can be assured that its not influenced by wish to be looking after your money and investments.
I have heard numerous firms charging around 3% of the CETV for the advice and transfer- AVOID. A much more typical range of costs I would say would be around 1 to 1.5% - but as I said some will do cheaper.
Be aware and ask for clarity of all charges - as sometimes when quote % fee it doesn't include other fees that may be chargeable by the pension company that you are transferring into or possibly certain investment fund charges. Ongoing charges shouldn't necessarily cost anymore than between 0.5-1.0% but if you use some companies BUT also chase high returns you may be facing overall charges of over 2% - not an issue if getting high return but not great if you don't.

I think(?) by law they can quote 3 levels of growth something like 2 5 and 8% growth (?) BUT note these are before taking account of inflation. I am a rather conservative pessimist and I would tend to base my decisions on how the cashflows looked at Low growth end (which taking inflation into account would typically be zero actual growth). If figures look reasonable then that should give you more confidence that is a reasonable option to transfer. Again a personal view I would not wish to engage with anyone that spent their time promising 8% growth + it is likely to be unachievable long term growth - although in any year easily (and currently) achievable.

ps
I have 36 years service am 52 and have made the decision to transfer - low growth cash flow projections were all looking good. I would like to take lumpsum between 55-57 but not draw income until 60 however I will be planning on being able to source my "retirement income" from savings that would last for up to 2 years (just in case). Mind you I have a big mortgage that I would like to pay off at end of fixed deals .



2 users thanked Rob L for this post.
neil mcrorie on 21/10/2017(UTC), mohamed dellal on 27/10/2017(UTC)
Alan Selwood
Posted: 29 September 2017 17:15:10(UTC)
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neil mcrorie;51532 wrote:
Hi Guys,

Looking for any advice or opinions around transferring from final salary pension. I have a deferred pension from the British Steel Pension Fund and currently I believe there are three available options as the fund is closing in Mar 2018. I am 46yrs old and my potential cash equivalent value is around £500k (inflated figure, but I'm told it will be at this figure, though waiting on confirmation).

Firstly, I can move it to the new Tata Steel fund with likely set max RPI rises (unknown penalties for early withdrawal) as yet, go into the PFF government fund or look at transferring out. With my age, potential CTV and i'm looking for availability to draw down at 55 if required.

I know it is a lot to ask, but do we consider transferring out which I believe would be best or are their valid reasons for not doing so. I am not pension savvy at all as you probably have guessed.

Obviously, if transferring out is the option, where would you suggest I go for unbiased advice, what companies should I be considering as examples. I am aware I need a FIA for transfer.
I have been told I should get someone who manages my account regularly (daily/weekly) is this a true option and what organisations would be the best for me?

Any advice would be appreciated so I can make some informed choices.

Thanks in advance

Neil


Obviously you need to take professional advice on this.

Speaking purely about my own initial reaction to the choices, I would say that the Tata scheme may be theoretically good because of its RPI link (very useful if there is an uptick in inflation), but I am wary of Tata because it has not shown itself in a good light since it took over British Steel, and so if I were in your position I would be anxious that something would go wrong, or that you would at some point in the future have to move again.

The Government scheme is really just a 'last resort' option to my mind.

If I were in your shoes, and after listening very carefully to the IFA's reasoning in favour of whatever choice he suggests and also the pros and cons he lists for the other options that he does not favour, I could easily see myself opting for a transfer into a SIPP. I would then be thinking primarily about Hargreaves Lansdown and A J Bell as probable front runners for providing the SIPP platform, subject to investment choices, costs to set up, costs per year to run, dealing charges, costs to go into drawdown or to convert to an annuity in due course.

As for the investment choices, I believe that good diversification is sensible (typically covering some mix of equities, bonds, property and perhaps gold), because it tends to reduce volatility in the day-to-day fund value and may even improve performance.

If you do not intend to learn up any detail about investing, you will probably want to use tracker funds (covering some mix of equities, bonds, property and perhaps gold), but good stock-pickers can be found who have a track record of better results over extended periods, especially in equities, and you should be able to glean enough detail from assiduous searches through earlier posts on this forum, and by reading magazines like Investors Chronicle. One quite useful monthly article (in the first week of each month) in Investors Chronicle is the one by John Barron about using investment trusts to create a widely-spread portfolio.

Well-thought-of equity managers include Terry Smith, Nick Train, Simon Knott, Alex Wright, Keith Ashworth-Lord, Martin Lau, Giles Hargreave, Neil Harmon, James Henderson, Job Curtis, James Anderson, Praveen Kumar, Gervais Williams to name but a few.

Morningstar is a useful website for discovering which funds and trusts, and which managers, earn their keep and get a 'Gold' / 'Silver' /'Bronze' rating!

Trustnet is pretty good for exploring options and performance tables, and for creating dummy portfolios.
2 users thanked Alan Selwood for this post.
neil mcrorie on 21/10/2017(UTC), mohamed dellal on 27/10/2017(UTC)
Tyrion Lannister
Posted: 29 September 2017 19:22:21(UTC)
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Joined: 03/03/2017(UTC)
Posts: 214

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Neil,

I recently transferred a DB pension, roughly the same value as yours.

I used Tideway. They charge 1% of the pension value to execute the transfer but nothing if you don't go ahead. To help you decide, you'll get a comprehensive report specific to your circumstances, on the pros and cons of transferring and the IFA who handled my transfer was refreshingly honest about the risks etc.
2 users thanked Tyrion Lannister for this post.
neil mcrorie on 21/10/2017(UTC), mohamed dellal on 27/10/2017(UTC)
Jay777
Posted: 02 October 2017 13:32:29(UTC)
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Joined: 02/10/2017(UTC)
Posts: 2

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Hi Neil,

I was in a similar situation as you are 16 months ago and spent weeks trying to find the best way forward.

Luckily for me I found a great professional who already had assisted a number of BS pension members with their transfers.

I can't praise him enough as he really knew his stuff.

Now happily retired at 56 with a very healthy income.

I can let you have his details but not sure how to go about it ?

All the best


2 users thanked Jay777 for this post.
neil mcrorie on 21/10/2017(UTC), mohamed dellal on 27/10/2017(UTC)
Jay777
Posted: 03 October 2017 13:08:04(UTC)
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Joined: 02/10/2017(UTC)
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Was thanked: 3 time(s) in 2 post(s)
To whom it concerns,

Am I allowed to give out contact details such as tel?

Regards
1 user thanked Jay777 for this post.
mohamed dellal on 27/10/2017(UTC)
neil mcrorie
Posted: 21 October 2017 07:05:51(UTC)
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Rob L;51543 wrote:
Good afternoon Neil. - Firstly I think Mark has provided some very sound advice and highlighted some useful links. That said please also find below my own thought.

I would summarise your options as :
1. Remain in the DB scheme - this will either be to agree to move to BSSP2 (assuming that the new scheme meets the relevant criteria) or remain in BSSP - which in effect is agreeing to move to PPF. The option that best suits you should be clear in the info pack you will be receiving around early October.
2. Transfer out from DB scheme - this as you know requires an approved IFA advice. This will theoretically give you a number of options, although I would suspect the most appropriate would be some sort of drawdown. In my personal (non qualified ) view if you were seeking high levels of guarantee and limited/no risk and hence wanting some form of annuity - then I would say to remain in the DB scheme (whichever sub-option works out best for you).

I would just clarify that the DB scheme (BSSPS2 and PPF) utilise CPI rather than RPI as means of providing the increases in deferment and escalation once in payment.

What option you should go with will in many ways be a very personal choice - it is an important decision so don't feel pressurised into following what many of your colleagues may be doing - that CETV does look like a very large amount of money but its not a lottery win its there to look after you for a long time.

That said, because the factors have increased significantly since last valuation , whereas most "good" IFAs would have been sending you off with a flea in your ear if you had approached them last year, now the situation is different and is at least worth a detailed look . Note from what I have heard the factors ( ie x pension = CETV) offered whilst doubled and more dependent on age compared to last year they are not as good as those offered in some schemes (Rolls Royce for example).

On the assumption that the "buddy" block transfer(which could be of interest to you if you joined BSSP before April 2006) is not undertaken by the Trustees (they are resisting it strongly to date) then you will not be able to take your pension before 55 at least. I understand that depending on how young you are that could change to higher age 57 or 58 so not sure if you fall into that category?
The buddy transfer would allow maintaining "protected rights" that would allow you to access pension at 50+.

The DB schemes (even PPF) are pretty (very) good and will give you a semi-fixed pension for life - that will receive a level of increase in deferment (subject to a number of caps for different tranches of service years) and similarly escalation of pension in payment. NOTE if you have years of service before April 1997 - no escalation in payment. If this is a significant portion of your service that could be quite important. Taking that option also means don't have to worry about (generally) stock market changes and investment risks - they are all the responsibility of Trustees Investment team.

What taking this approach will do is give you a very reasonable income and you will probably get richer the older you get (as the State Pension kicks in). The pension will however die with you (or your spouse who would get 50%). Don't forget you can take a lumpsum and you can retire early as well (subject to various adjustments).

However if you
think you would rather weight your cash-flow profile to having more money when you are younger (lets say 60-75 rather than 75-85) and hopefully healthier
have flexibility to take up-to 25% cash tax free BUT but NOT take a pension income and perhaps keep working - eg you may wish to take lumpsum @ 55 but not retire until 60
would like to be able to leave some of your pension pot as an inheritance to your children
are aware of risks that your investment growth is NOT guaranteed - and could go down as well as up
have sufficient savings or some other means of coping for maybe upto 1 -2 years of hoped for pension income (could come from your tax-free lumpsum?) rather than try to drawdown from the fund when timing not good

Drawdown could be good option for you.

Timing : whilst it is important to seek and take advice as Paul mentioned you don't want to hang around. As you already have a CETV (not sure if that is before or after the revised deduction) you will have a deadline of around 11th December to have made the formal request (which will have had to be accompanied by right forms, IFA advice and identity checking documents). Dependent on IFA company level of resources not all will be able to turn-around in time. Note also some don't actually provide the advice themselves - they contact that work out to companies that have the relevant qualifications.

Regarding fees - you will (almost certainly) have to pay for the advice. I say almost certainly as I am aware that there are some IFAs who will cover the cost of the advice on basis that you will use them for financial management on ongoing basis (ie at a certain% per year).
Some companies will charge a fixed fee (nearly) for the formal advice but all should offer a basic free (30-60 min chat) that should enable in broad terms to make a judgement on whether it has strong potential to be a viable option (they will certainly be able to quickly tell you not to move if that is the right decision).
These fixed fee approaches may sound a little costly BUT at least you can be assured that its not influenced by wish to be looking after your money and investments.
I have heard numerous firms charging around 3% of the CETV for the advice and transfer- AVOID. A much more typical range of costs I would say would be around 1 to 1.5% - but as I said some will do cheaper.
Be aware and ask for clarity of all charges - as sometimes when quote % fee it doesn't include other fees that may be chargeable by the pension company that you are transferring into or possibly certain investment fund charges. Ongoing charges shouldn't necessarily cost anymore than between 0.5-1.0% but if you use some companies BUT also chase high returns you may be facing overall charges of over 2% - not an issue if getting high return but not great if you don't.

I think(?) by law they can quote 3 levels of growth something like 2 5 and 8% growth (?) BUT note these are before taking account of inflation. I am a rather conservative pessimist and I would tend to base my decisions on how the cashflows looked at Low growth end (which taking inflation into account would typically be zero actual growth). If figures look reasonable then that should give you more confidence that is a reasonable option to transfer. Again a personal view I would not wish to engage with anyone that spent their time promising 8% growth + it is likely to be unachievable long term growth - although in any year easily (and currently) achievable.

ps
I have 36 years service am 52 and have made the decision to transfer - low growth cash flow projections were all looking good. I would like to take lumpsum between 55-57 but not draw income until 60 however I will be planning on being able to source my "retirement income" from savings that would last for up to 2 years (just in case). Mind you I have a big mortgage that I would like to pay off at end of fixed deals .




1 user thanked neil mcrorie for this post.
mohamed dellal on 27/10/2017(UTC)
neil mcrorie
Posted: 21 October 2017 07:56:17(UTC)
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Update guys this week. Received transfer value of 495k so have discussed with two different ifa,s. First guy was restricted, didn't. Know that initially but proposing 5% growth med risk in standard life products who are performing quite well. Fees are 1.69% which I thought slightly highe. Discussions around me possibly taking drawdown at 55 possibly retiring 55-60. Drawdown was fir a holiday home by the way but might not happen. My circumstances are quite good, both wife and I working, similar salaries, will be debt free in 2-3 years.

Second ifa was younger but well qualified but independent. I started off talking about costs and that I wanted them low, he offered royal alliance products, limited spread bht cheaper. Now realise that costs less important investment strategy and risks etc. Offered alternative provider with bigger spread still aiming for 5% approx, though my risk profile with guy was higher at 5-6. We then discussed brewin dolphin and there discretionary funds as a better solution due to more control and likely less risk, though higher costs if 2.12%. This ifa seemed really aware and suggested I need to grow my money just now for next 6-7 years and then re evaluate my position.

What's peoples thoughts on discretionary fund managers v normal portfolio spreads. How dies the first ifa stack up against the second one in peoples minds. Definitely want to transfer out and try and grow the pot slightly for later years and be able to leave something for my son all going well.

Will be speaking to a third ifa next week as I have a bit of time to decide. Ant views would be greatly appreciated.
Tim D
Posted: 21 October 2017 10:09:04(UTC)
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Ugh. I couldn't tolerate those charges.

Let someone take 2% of a £500K pot for 5 years and they'll probably have had at least £50000 off of you over that time. That's money that could have been yours to keep. Someone with the confidence to DIY could get themselves into a cheap multiasset tracker on a DIY platform and be paying say 0.25-0.3% say; total cost over 5 years £6250-£7500. Even less for those prepared to put in the effort to do direct holdings or rebalance their own multiasset portfolio. Of course everyone's needs are different; just be aware of how much you'll be paying over time and consider whether you're happy you're getting value for your money.

BTW I have a relative who pays Brewin Dolphin 0.8% for discretionary wealth management (0.6% to BD, 0.2% to the chartered financial planner - not an IFA! - who got them in there; any held fund's own charges on top of that of course but still nothing like 2.12% in aggregate. BD running a lot of direct bond holdings for them helps. Review meetings with BD and the CFP twice a year seem quite sufficient). Another acquaintance I believe pays 1% at QuilterCheviot.

None of the above is advice; just my random musings on your post. I've not really considered the complication there's a transfer from a final salary pension involved here.

Might well be worth trying out a CFP instead of an IFA though. Seems to me IFAs are just the freelance salesforce of the financial products industry, whereas CFPs will take a bit more of a holistic view.
1 user thanked Tim D for this post.
mohamed dellal on 27/10/2017(UTC)
Langbarb
Posted: 22 October 2017 06:20:46(UTC)
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Hi
I am looking for an IFA to get the FCA required advice to transfer my DB pension pot. I will self manage the pension in my SIPP (which is already in place, as I set it up many years ago to consolidate 3 D.C. plans Inhad with different companies I worked for). My aim is to minimize the cost of the IFA (as you know advice is mandatory). I really struggled to find a cheap IFA, most quote me 3% of TV which is extortionate for me. Can anybody suggest a low cost IFA? Feel free to either reply to the thread or if you prefer to PM me. Many thanks for your help.
1 user thanked Langbarb for this post.
mohamed dellal on 27/10/2017(UTC)
Tyrion Lannister
Posted: 23 October 2017 17:17:55(UTC)
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Langbarb;52238 wrote:
Hi
I am looking for an IFA to get the FCA required advice to transfer my DB pension pot. I will self manage the pension in my SIPP (which is already in place, as I set it up many years ago to consolidate 3 D.C. plans Inhad with different companies I worked for). My aim is to minimize the cost of the IFA (as you know advice is mandatory). I really struggled to find a cheap IFA, most quote me 3% of TV which is extortionate for me. Can anybody suggest a low cost IFA? Feel free to either reply to the thread or if you prefer to PM me. Many thanks for your help.


I recently transferred a final salary pension using Tideway, I found them to very good although a little slower than id've liked.

They only charge 1% for the transfer and their advice was pretty good.

However, they will only transfer pension pots greater than £200K.

(Edit: I believe they'll accept more than one transfer if the total is greater than £200K)
2 users thanked Tyrion Lannister for this post.
Langbarb on 24/10/2017(UTC), mohamed dellal on 27/10/2017(UTC)
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