| Non-motoring > Another pension query | Miscellaneous |
| Thread Author: Bobby | Replies: 7 |
|
New Wed 26 Nov 25 17:51
Another pension query - Bobby
|
|
I have a preserved pension from a previous employer, from a final salary scheme. I got a transfer value in Mar 2021 and it was £155k. I just requested a new one and it is now £97k. Now I know in between times Liz Truss tanked the markets but I thought I had read that they had basically recovered by now? Unfortunately I don’t have any TVs for prior to this to know if the 2021 was adversely high. I have a preserved pension that is getting revalued every year in line with scheme rules so I guess as long as I don’t want to transfer them I will get that at scheme pension age (65) in 9 years time. But the TV concerns me especially if I was wanting to take earlier retirement etc ( I have other pensions also). Anyone able to shed any light on these values/ where the markets have gone etc (I realise no specifics can be given) I’m not very good with pensions / funds / etc…. I understand bank accounts and that’s about it! |
|
New Thu 27 Nov 25 09:52
Another pension query - Falkirk Bairn
|
|
Final Salary Schemes are best left alone. Miners, Steel Workers just 2 examples of people who lost a bundle - they transferred out on the false premise that an Insurer could grow their pension pot. Final Salary Schemes do not really exist in the UK unless it is Civil Service & other Goverment Schemes. I have a son with a UK Pension Provider - guaranteed Annuity Rate!! My son's employer started the Pension Fund with that insurer in the early 70s. My son joined the company in 1998 aged 21, moved to US age 35. He still works for the same company but is in the US Pension Fund - no guarantees - value of the pot can go up/down and annuity rates do the same!. The UK Pension Provider wants out and every few years he receives an increased offer to make him change to another Pension Provider. My son intends to hang on as the annuity guarantees are worth their weight in gold. Annuity rates today, which determines how much is paid monthly by the insurer when you retire, are around half the rates of 30+ years ago. |
|
New Thu 27 Nov 25 10:04
Another pension query - Bromptonaut
|
|
If you know what the pension is going to pay at 65 in terms of final salary * years accrued you can probably disregard the TV. If you want to take pension before the age of 65 set in the scheme then I imagine there would be an actuarial reduction as pension is likely to be in payment for longer and the scheme's rules will prescribe how that's applied. I understand you are now in the Civil Service and will presumably be in their current Career Average scheme with a current retirement age of 67. If the other schemes TV could buy you years that are worth more in the CS scheme it might have been worthwhile getting advice on doing so but I think there's a relatively short window after starting in the CS when you can transfer value in. |
|
New Thu 27 Nov 25 11:58
Another pension query - Bobby
|
| Brompt, yes you are right, now in civil service alpha Scheme and you get one year to transfer in previous pensions. Which I didn’t realise till year 3 so not a decision I had to take! |
|
New Thu 27 Nov 25 10:47
Another pension query - Manatee
|
|
If it's a final salary scheme then it could be worth quite a lot more to you than the transfer value. TV's on final salary schemes can behave strangely. You should not read anything into the fact that the TV has gone down 40%. The 10 year gilt yield is currently around 4.5%. In 2021 it was around 1%. What this means is that the market value of the gilts they held to meet their future liabilities (including your pension) is much lower now than it was in 2021. So your 'share' of the funds needed to meet future pension costs is worth less. But your benefits haven't changed. What probably has gone down is the value of your 25% TFLS. So try to be happy that Rachel Reeves is trying not to increase government borrowing costs, which is what her obsession with balancing the budget is about. Your annual pension would typically be based on [years of service in the scheme] *[final salary] * 1/60 but the product of that calculation will have been revalued in the deferral period. You will almost certainly find that you cannot buy anything near the same pension benefit if you took the TV to buy an annuity. Also consider that the FS scheme probably has a spouse's pension and some inflation protection with it. When you take it you can often ask to commute only your own pension for the TFLS so that your wife will get say 50% of your full pension should she survive you. You could wait until you want to retire, get some quotes and consider it. You could transfer out now and leave it invested until retirement, which means your pension will depend on how well it grows. That risk currently lies with the FS salary pension scheme. There are reasons why some people cash in FS benefits - the most obvious being ill health and a short life expectancy. Can't advise you but hope that helps. |
|
New Thu 27 Nov 25 11:15
Another pension query - smokie
|
|
Also transferring out of a FS scheme will be very costly, that's if you can find an IFA who will take it on. It is a very niche area requiring a super-qualified IFA, and even those specialists are very reluctant in case they are later accused of mis-selling or whatever. They won't accept it unless you demonstrate a high appetite for risk, and have other means of support if it goes wrong. I only know this as when I did it more than 10 years ago my IFA mate (who was a senior IFA with a mass of qualifications specialising in pensions but more around IHT and wealth management) wasn't able to do it, but put me in touch with someone who was and IIRC the bill was something north of £7k. In my case the annual pension felt really poor, and I was amazed when they offered me about 35 times the annual pension as a transfer-out value at age 59. The initial investment advice (additional to the £7k above) was sound and it has grown considerably. But that was assisted as I didn't need to touch it for some years while SWMBO carried on working, so your personal circumstances also play into it in a big way. (I haven't used an IFA since that initial transfer though). Must admit it has turned out really well for me. |
|
New Thu 27 Nov 25 12:01
Another pension query - Bobby
|
|
Manatee, thanks, this makes sense especially about the Gilts. My brother in law retired at age 55 probably around then. Didn’t know the detail but I remember him saying that his transfer value was huge because of what was happening in the markets so he was taking it and buying a drawdown pension or something like that. |
|
New Thu 27 Nov 25 16:01
Another pension query - Terry
|
|
I think most of the responses have been spot on. In 2019 annuity rates were low at ~5%. They are now ~7.5%. The effect of this is that in 2019 to provide a pension of (say) £1000 would require a capital sum of £20k. At 7.5% the capital required would be £13.3k. I also agree with the suggestion you leave the money where it is - you know precisely what you will get with no risk attached. Transfer to another scheme which allow flexibility carries risk and costs. You may then be able to drawdown up to 25% tax free, but you need to be careful about tax impacts. |
Forum Version 3.0 - By Khoosys
Car4play Forum
