A mate has had communications by letter from their major pension co.
It’s a private money purchase scheme and he has about £180,000 in it.
They advised him that they no longer want to offer pensions and have offered him £60,000 to move the pension elsewhere.
The letter came on Thursday and I was wondering if the timing is deliberate (bank holiday limits communications).
Anyone else came across anything like this?
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I'd want to discuss it in more detail with the outfit and seek proper advice.
Does Google or other search engines throw up anything useful?
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Not that I’ve seen.
The rationale for the cash is that it’s to cover extra fees that other providers may charge.
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>> Not that I’ve seen.
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>> The rationale for the cash is that it’s to cover extra fees that other providers
>> may charge.
I've heard of such offers with DB schemes but not money purchase.
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Yes, I recall something along those lines.
Will advise home to call them tomorrow on a published number, not one in the correspondence provided.
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DB offers can make sense. For example if you need cash or if you think your health and other circumstances mean that the actuarial calculation on offer will beat what you’d have got if you let it run. You’re betting on your life expectancy.
As others have implied this wouldn’t apply to money purchase.
Anyway this case looks odd. A new company might charge an onboarding fee but nothing like 33%.
The only slightly similar thing I’ve seen was my mum’s share funds. Her provider decided not to provide service for investments, like hers, below £100k. They didn’t offer any money but helped with timing a move to cash in her bank over two tax years to ensure no tax was due. It actually timed well with her move into care.
It’ll be interesting to see what happens with this pension. My bet is on a scam, error or a misreading of the letter.
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>> I've heard of such offers with DB schemes but not money purchase.
Which makes me wonder if it came with any other benefits that would be lost on transfer, an example of which might be a guaranteed annuity rate. I had a section 32 buyout policy with one of those.
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Good thinking M.
Along the same lines my pension has a discretionary bonus that in this case might be additional to the £180k.
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60 grand is a nice fat amount of money to temp anyone to move pension providers. Just the right amount of money to make greed overcome common sense. Think about it, who would offer that amount of money to cover "fees"
My worry would be, if it pretends to purport from the pension company he is with, how? has there been a data breech
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Obviously he/she needs to establish it's genuine. Presumably a personal pension policy?
30%+ enhancement is far too much unless there are additional benefits being lost. He needs to dig out the paperwork and read it carefully. Back in the 80's guaranteed annuity rates on PPP's were not unusual. The cost of bribing people to ditch these will have reduced with the rise in annuity rates accidentally engineered by the Lettuce.
Is there anything to prevent you telling us who the provider is?
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>> Is there anything to prevent you telling us who the provider is?
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I think it was one of the larger providers, Prudential or Aviva rings a bell.
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www.aviva.co.uk/retirement/help-and-support/pension-scams-to-look-out-for/
"Scammers may offer a ‘free’ review of your pension savings with the promise of better returns. They’ll make up problems with your current pension and suggest transferring to a different scheme – often overseas."
Sounds like s***e to me.
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A son, 47, worked in the UK for the same employer for 15/16 years until 2014. Employer paid 25% of his salary into the scheme.
The pension fund was UK based insurer and it was generous insurer terms & conditions - conditions that dated from the early 1970s (before my son was born) when his employer set up in the UK
The Insurance /Pension Company has been taken over by another insurer and the new insurer has realised that the pension conditions are too generous for them.
He has had 2 offers so far - current pot + 30% & then just under 40% IIRC to transfer out. His advisers have said that is not enough and there is no point in moving as the longer it goes on the pension pot & the insurer's liabilities increase - he is sitting it out awaiting offer #3, #4.......
He is now in the US Company scheme which has less generous terms but based on the higher US pay rates.
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>>His advisers have said that is not enough and there is no point in moving as the longer it goes on the pension pot & the insurer's liabilities increase
The liability will only change in the near term if financial conditions change. When the Lettuce sent the interest rates up DB scheme liabilities went down c. 20% (unfortunately so did the assets).
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He will probably not look at the UK Pension pot for a long time as he intends just to leave it - unless he gets an offer that it is much better.
The US Pension will be sufficient.
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Both Pru and Aviva still do pensions, drawdown and annuities but Prudential, now owned IIRC by M&G, might be 'de-risking'. I think they 'sold' the annuity book a few years ago which would have involved them giving the new provider a lump of money to take over the payments.
Pension liabilities where there is a defined benefit (yes I know it's a money purchase scheme) are calculated based on the amount of money that is required to be held now to cover the future payments.
There is any number of ways to calculate this but broadly and simplified, there are 3.
The 'technical provision' (TP) is a sort of best guess as the the amount, with a bit of prudence in it - but there is a material chance it won't be enough. It assumes the investment strategy chosen by the trustee which will generally have some risk in it.
The 'self-sufficiency' valuation - assumes a low risk strategy is nearer to the cost of using the fund to buy annuities for all the beneficiaries. So it's similar to the next version but without the insurer's profit.
The 'buy out' value. The amount of money an insurance company would charge to take the liabilities off the pension scheme.
Transfer values are generally around the technical provisions level. If a scheme wants to offload the risk, they know it will cost them a lot more (buy-out, rather than TP).
Before they do that, they might sensibly make a one-off offer of enhanced transfer values to the members who have not yet started taking their pensions, at a lower cost to them than paying the insurance company.
I suspect what is happening here is a version of that, and of course it's almost pointless me speculating, except to say that if it is genuine (and it doesn't sound like a fraudulent transfer scam but that needs to be checked) it is likely to be a one-off offer that could be to the pension holder's advantage if, for example, they intended to use draw down.
On the other hand, if there is a GAR (Pru for example did a lot of guaranteed annuities including on AVCs) then he/she needs to look at what it's worth to them were they to exercise it.
Another possibility is that there is some kind of terminal bonus that would be lost on transfer.
***I am not an expert and none of that is advice!***
Last edited by: Manatee on Wed 3 Apr 24 at 11:01
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The advice on here is spot on - take professional advice, thoroughly review and understand (a) what benefits you are forgoing by accepting the offer, and (b) the extent to which the funds can be transferred to a new scheme.
Personal experience - I was a member of a final salary pension scheme went bust - investments held did not cover the future costs of providing pensions.
A fall in interest rates had the effect of driving up the capital required to provide future pensions. Fortunately I was only 3 years in and most (not all) of the liability was picked up by the Pensions Protection Fund.
Pension schemes have evolved over the last couple of decades. Some points below relate to defined benefit rather than money purchase schemes - but a scheme starting 15+ years ago may have very different terms to todays norm. The things to be aware of include:
- any terminal bonuses not reflected in the base valuation
- any minimum pension or growth guarantees
- extras included in current pension scheme - eg: life insurance, spouse/partners pension
- is the current pension scheme adequately funded or at risk of failure
- tax implications - eg: is the sweetener taxable and at what rate
The risk of a scam is real, and the sums involved are material. Get professional advisers who understand the detail - there is too much money involved to any sort of risk.
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Confirmed, it's the Pru.
He is going to take advice from a professional pension advisor and suggested St James Place will be where his pension is going - I think they are known as being very expensive!?
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Sunday times money section has been giving them a pasting for weeks, believe there is a class action about fees for annual financial reviews that dont happen
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As Zero says SJP have had several goings over in the money pages of the press. I'm also seeing adverts for the (proposed?) class action.
In the circs set out by the OP I'd want fully independent advice with a range of providers to choose from.
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SJP are fkn extortionate.
Multiple layers each taking a slice.
Having seen one of their junkets for FAs when I was visiting my brother in Cambridge I'll be sticking with AJB* and making my own decisions.
* Other providers out there, some cheaper than AJB.
My old man had saved a lump sum after he retired around end of the 90s (not with SJP I hasten to add - think it was an FA attached to a bank or BS).
When I took over his affairs towards the end of his life the money had grown ok over 20 years but was in 2 managed funds - one was costing 1.7% and the other 2.5% pa in costs. Neither was exciting or exotic - European equity, and Global equity/bond mixed funds.
God knows how big a commission the FA got for "helping him choose" those funds.
Last edited by: Lygonos on Mon 8 Apr 24 at 10:35
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I had to pay quite a chunk to a specialist IFA to be able to take the offered money in lieu of my pension. Just because, as I think Bromp mentioned above, ditching a final salary pension (albeit a not-very-good-at-all one) for a SIPP is usually unachievable.
Anyway he did recommendations for where to invest, which I've followed, and the money has been there ever since. Due to withdrawals etc it's hard to estimate how it's grown but it looks like in excess of 10% pa net which I've been happy with. Cashing in the pension was def a good decision.
The key point being as soon as it was invested I removed the IFA from the equation so no fees have gone that way.
Last edited by: smokie on Mon 8 Apr 24 at 14:20
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SJP has been in the news for some sort of mis-selling I think - I didn't look at the details. I decided years ago they were a bargepole job, not to say they might not have rehabilitated.
Last edited by: Manatee on Mon 8 Apr 24 at 16:09
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uk.finance.yahoo.com/news/former-st-james-place-boss-070713367.html
Same story.
Halifax owned it for a while, whence it passed into HBOS and later Lloyds which managed to offload it. It's been under investigation on and off since well before Covid and I can't believe they've stuck with the name.
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Pension Question is this a scam? - Bromptonaut
