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  • Has anybody transferred a final salary pension? Any opinions?

    Posted by Gw
    • Reply by SelsdonLion

      Final salary pensions are generally regarded as the best type of pension to have. Why are you thinking of transferring it?

      • Reply by Gw

        My financial advisor thinks it’s the best option for me. All my friends and family tell me I mustn’t. I understand I would probably be better off transferring the money as it would pass to my sons if I die but I also like the security of guaranteed pension for life.

        • Reply by Chris Roberts

          This is only one option open to you. Has he talked about you taking a life policy out in trust “should anything happen to you”. The benefits of such a life policy can be passed to your dependants should you die. Your FS pension is also likely to carry with some dependants payments too. Please don’t do anything rash with the pension. Once done it cant be undone and the guarantees that come with a FS pension scheme are very valuable. The commission to transfer is also very high for your adviser. Have you asked him how much he will earn from such a transaction? If not you should as he is obliged to tell you.

        • Reply by SelsdonLion

          When you hear people talking about “a gold plated pension” they’re talking about the type you have at the moment – a final salary pension.

          There have been cases where advisors have recommended people transfer out of final salary pensions into money purchase pensions and then been sued for miss-selling.

          Would your financial advisor earn commission on the transfer by any chance? 🤔

          Have you spoken to Pension Wise? it’s a free service provided by the government through local authorities.

          Based on what you’ve told me, I would keep the final salary pension but if you go to Pension Wise they will be able to go through your options in detail.

        • Reply by Gw

          Thanks. Yes of course he will make a lot of money in commission. I thought about trying pension wise.

    • Reply by Chris Roberts

      You can only transfer out of a final salary pension scheme “after” you have received professional advice from an FCA registered Independant Financial Adviser. Whilst there are reasons why it might be beneficial to transfer out of a Final Salary scheme (Poor Health with dependants potentially being one of them). It is quite uncommon for this to be the best course of action as the risk of investments failing to perform is not relevant in such a scheme as benefits are linked to your salary.

      Hope this helps. Happy to converse more if you feel the need but only on a guidance basis. I am not offering advice here.

      Chris

      • Reply by Gw

        Thanks Chris. You’ve given me further confirmation that leaving my DB pension where it is is the best option. If I do, I would like to take 25% tax free to pass on to my sons now when they need it rather than when I die. Is there anything I need to consider when doing this?

        • Reply by Chris Roberts

          I’m a financial coach that offers guidance in these matters but not advice.

          I’d happily speak with you for free and offer you my thoughts if you’d like a second opinion on what the adviser has told you.

          The 25% option is generally something people do take, and they then use the money for things they have dreamt of doing at retirement. If you gift the money to your sons there are potentially tax implecations. If you sons are under the age of 18 then there is no issue. However if they are over 18, the max amount you can gift in any tax year is £3,000.

          Any more and there are inheritance tax implications. But if you survive for seven years after the gift has been made you should be okay.

          As I said I will happily chat with you. I’m not at all hard sell and I will not advise you transfer out of a FS pension scheme. It would be helpful to understand the sums of money involved here too, but please dont put that on this forum. You can DM me if you wish to speak.

    • Reply by mdshamilton

      What is the multiple of the pension you are being offered? I had 20 years of final salary pension from Barclays Bank. This was worth £28k p.a. at the age of 60, when I die my wife gets 50%, when she dies the pension dies with her – it’s basically an annuity. The cash value was over 40 times, which is cash that I manage in my SIPP, when I die my wife gets 100% of it, when she dies the residual goes to our children. There is a risk that if we do not manage the SIPP carefully that we could run out of money to live on. However after a career in financial services it’s a risk I can live with and manage and I will be retiring at 57yrs old with a higher pension than if I’d left it at Barclays.

      Pension wise is very good and there are a few smaller IFAs who will charge a fixed fee to arrange the transfer rather than a high %. Happy to share my experience with you if that will help, but do your research as this is your pension and not your friends and family who may be well meaning but don’t know the details.

    • Reply by Sjp1

      I haven’t had any advice to transfer from a FA but found out about my options from a friend who transferred hers out. I’m widowed with3 children and my income comes from a small property company. My final salary pension is projected to give me a lowish annual salary ie £6k which doesn’t seem worth holding onto it because when I die, it dies with me. The transfer value just looks like it would give me more options ie I understand I could purchase a commercial property via a SAAS or residential via a SIPP and can do more flexible things from the income it would generate. After getting my transfer value I had a free consultation with the Landlords Pension. I’m still undecided really.

      • Reply by SelsdonLion

        I’d talk to Pension Wise before doing anything further

    • Reply by Gw

      Thank you for the reply. I know I would probably be financially better off by transferring but I would have to pay quite a lot in commission and all advice warns you not to do it… I too am a widow with two sons. I suffer from anxiety and don’t want to make the decision which suggests I probably shouldn’t transfer. I am already taking an income from my private pension and in another year I will get my state pension.

      • Reply by SelsdonLion

        The reason people are advising you NOT to do it is because they think you WON’T be better off transferring. It’s the financial advisor who will be better off. If you are suffering from anxiety, the best thing is to listen to the people around you who love you, and say goodbye to the pushy salesman.

        • Reply by Gw

          I have been telling myself that. The money is for me. I have two sons but they will still inherit a significant sum from other investments. I have had no health issues to date so I will probably get my money back, and maybe more, from the Benefits pension.

        • Reply by SelsdonLion

          Still think you should talk to Pension Wise they are free and independent. It would put your mind at rest.

        • Reply by Gw

          Yes I will do 👍

    • Reply by andylynes

      I have recently transferred my pension out and am very happy I have done it. I thought long and hard about the risks and benefits and it was the best option for me. The deciding factor for me was that the annual pension payment wasn’t going to be huge and that I will have other sources of income after I retire. The chance to leave the money in my will outweighed the benefit of the relatively small annual income. Therefore, in my case, the risk to me was low but the benefits to my family were high. However, everyone’s situation is different and unique and no one should be offering advice on this unless they are qualified to do so which I am certainly not! Hope that helps and that you make arrangements that you are happy with and that work for you.

    • Reply by PeteB

      I hesitate to add to a discussion on a decision that is such an individual one – your situation is unique in terms of the numbers and your financial needs.

      I would just say that there ARE pros and cons of both keeping a Final Salary pension and transferring out. I understand that something like 80-90% of cases, people are prevented from doing a transfer – you cannot do it without a review.

      The key advantage of keeping it is a predictable income that needs no management or specialist knowledge (so perhaps a “worry free” retirement). The key advantage of transferring out is that you gain “ownership” of the lump sum and can pass it on to somebody when you die.

      I transferred out of mine two years ago for one reason only. It allowed me to escape and resolve a very poor mortgage decision I made 20 years ago by using the 25% to clear the mortgage. My Final Salary scheme was only 11 years of savings and the lump sum in the scheme was a lot less than 25%.

      I think my situation was a rare one where it clearly made sense to do the transfer, based on MY particular numbers and financial needs.

      Bottom Line – you cannot make such a decision without consulting an IFA, Be very careful and get advice from somebody you trust. Looking at all the discussion, I’d think Chris Roberts could be a good sounding board for you.

      Good Luck – tread carefully!

      • Reply by Gw

        Thank you for that Pete. It’s a difficult decision to make.

    • Reply by HalloweenJack

      I transferred my DB pension out last year, a lot of companies will offer very generous multiples for CETV…basically every pension transferred out is one less pension for them to worry about – don’t forget DB pensions were shutdown purely on cost reasons…so the companies have no interest in doing anything other than maintaining the funds (usually via trustees). Any organsation with a DB pension scheme would love to divest themselves of the responsibility if they were allowed!

      I was offered around 25 times the DB final salary per annum and tbh the figure was jaw dropping. I then went through an IFA recommended to me by my brother and a friend who had used him when being made redundant from jobs later in life but too early to claim the pension. Most DB pensions insist on you being 65 before you can take the annual sum. There may have been scammers when the pension freedoms were introduced , and no doubt there are some around but if you stick to registered IFAs and fund managers then you minimise risk of scam merchants taking your money. In my case I had to go through a whole load of questions on my attitude towards risk and my reasons for wanting to transfer out. This is to ensure you’re not the sort who would put your money into FOBTs all day long, or use the money foolishly and to ensure you are of sound mind and accept the risks. My CETV was assessed via Briggs Murray who then sent me a huge and very detailed financial report with a ‘yes’ recommendation. It took around 3 months for the assessments and the questionaires to be completed.

      I had thought long and hard about doing this, but the success my brother and my mate had, and the freedom it gave them to take the redundancy and invest their pensions away from the company convinced me that even just for inheritance purposes it was worth it. In effect, the DB scheme would pay circa £35kpa but would halve if I died before my wife…and if we both died, then the DB pension would be dead as well and the money absorbed back into the scheme . I like my workmates but I’d rather the money went to my family than them!

      I transferred out in February 2020 and the investment fund is via Transact who are one of the big investment platforms. The pandemic meant my pension was initially left as ‘cash’ on the advice of Transact, but after the markets settled in around July 2020, the investment programme started – I opted for ‘medium risk’ and in the time from then until now the fund has grown 10%. I do realise this level of growth won’t happen every year, and there will be ‘downs’ amongst the ‘ups’ but it’s a decent start. I’m not touching it yet as I’m still working and paying into the companies replacement DC scheme (I pay 5% salary, they pay 10% in) but all the calculators tell me I will have a very decent amount for drawdown and from the CETV amount I have put the 25% tax free sum into some 18 month bonds paying me 2.6%, and that will pay off my mortgage in December.

      I think DB pensions are for the most part gold-plated, but they are inflexible and other options are there for you to look at. DB pensions have zero cost, but the IFA charges for me are very reasonable and come from the fund…and only if the fund grows..so they are incentivised to make it grow or they get less money themselves. As I say, if it’s over £30k of pension pot they you will have to jump through hoops and be very certain both to yourself and to the assessors/advisors of your reasons before they will say yes. If they don’t recommend it then your chances of transferring out are zero anyway (due to insurance reasons I believe) as no one would gamble on you if the assessmnet process doesn’t think it’s the right option. I hope this helps paint at least one picture of the advantages of transferring out.

    • Reply by KateGB

      I also am very satisfied with my decision to transfer out. I took advice which, by law, has to be extremely detailed. Yes, the advisor earns commission… why not? They have studied long and hard to qualify in their very complex field of expertise. You surely wouldn’t expect to get legal advice for nothing?
      As others have said, the decision is totally subjective and individual. You need to take advice. But please don’t think all IFAs are just out to make a killing.

      • Reply by Gw

        Thanks Kate. My IFA has been very upfront with me about the charges. He does put a lot of work in and he is bringing along another DB expert to our next meeting. It’s a big decision and I still can’t make my mind up.

    • Reply by JensW

      HI there, I just saw this question so apologies I’m a bit late. I had a final pension salary and was offered a Transfer figure that staggered me. I also have the comfort that my husband has a final pension salary. Anyway I got the appropriate financial advise and when they looked at the full picture they agreed that the transfer was the best option. For me the benefit of leaving the money, inheritance free, to my children was a great benefit. I was invested in the Brewin Dolphin platform and fortunately nothing was invested until July 2020 when COVID had settled. This year I made 18% (staggering) – I don’t expect to make that year on year but it was certainly a good boost and definitely re-enforced the belief I had done the right thing. However, if my husband did not have the final pension salary I would not have taken the risk. I believe I was very fortunate to have the underlying security to allow me to make this decision. The monies can go up or down whereas the DB pension is fixed but even if I loose some money I am still better off financially.

    • Reply by Gw

      Thank you for your reply. I was supposed to be sorting things out with my advisor today but cancelled as I don’t feel up to it today. I still can’t decide. I can see the argument for transferring. There is no doubt I would be better off financially. I thought you were going to say it was a good idea until you said that you wouldn’t have done it if you didn’t have your husbands pension as back up!

      • Reply by JensW

        The Financial Advisors have to sign off on your decision to transfer and although I was given a large amount of money they stated that they would only sign it off as my husband had a guaranteed pension. For me, the decision was easy. However, had I not had my husband’s pension guarantee the decision would have been far harder to make.

    • Reply by Lindaxyz

      I transferred my Final Salary pension but had to jump through hoops!!!!! The reason I decided on this path was because I would rather have left the money to my family than it die with me. After all I worked hard for it.

      I took 25% lump sum and left the rest to grow by creating regular dividends.. Sometimes I drawdown but keep under the month tax threshold.

      I transferred all my old pensions into one and manage my own SIPP through Hargreaves Lansdown and have never been happier.

      • Reply by Gw

        Thank you for the reply Linda. In my mind the transfer does sound like the best option but I’m not a very big risk taker. I’m still 50/50. I have a financial advisor who I trust. I wouldn’t want to manage my investments myself. It’s good to hear from someone who has a positive take on transferring. Did you invest the 25% lump sum? I want to take 25% now and possibly pass some to family and save some for holidays, etc.

        • Reply by Lindaxyz

          Hey I understand . I just wanted what I had worked hard for. But I think you can take another option in the form of annuity where you get a lower lump sum, but get a regular income.

          I took the 25% paid off a few debts and took my family on a holiday

    • Reply by Forestbather

      I wish I could help with your question, but I don’t even understand it. As for your replies so far …….. Mind. Blown. I just go to work and hope this government pays me wha I’m owed if I live that long!!!!

      • Reply by Gw

        I do have sleepless nights over it. Like you I just wanted to retire and have somebody tell me what I have to live on. I tell my advisor I wish I had died at 64 (lol).

        • Reply by Forestbather

          My stepmother died at 56. She had some pension thing going on. What was the point of that?

        • Reply by Gw

          My partner died at 54. I got a lump sum of 30k which after tax was 18k. That’s what you get for 30 years in the civil service. He died after leaving his job due to ill health. If he had died in service we would probably have got a huge payout. The kids also got a monthly payout until they were 25. A pension can have it’s advantages if you have dependants. Now I only really have myself to support I just want enough to have a comfortable retirement. I don’t really care what happens after I die.

        • Reply by Forestbather

          My stepmother had no children. Who got her money, I wonder? Big con job, I reckon.

        • Reply by Gw

          She could have nominated a benefactor…maybe it was you?

        • Reply by Forestbather

          Nope. No-one contacted me. It was my stepmother anyway, not my Mum. Some fat bloke in a suit is enjoying her money, I’m sure.

    • Reply by Miloson

      My husband has 3 small pension which matured last month but he did not do anything about them has he done the right thing .

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