Company Pension Transfer
The aim of this section is not to advise you but merely to highlight some facts and scenarios for your consideration when thinking about your pension or pensions.
The work pattern has changed over recent years and a “Job for Life” is almost a thing of the past. Some still achieve this but many change or switch jobs several times during their working life. In this process one can accumulate many different company scheme pension memberships. In many cases these company schemes remain with the companies concerned often referred to as “Preserved”, “Paid Up” or “Frozen Pensions”.
Upon leaving an employer of which you were a Final Salary Scheme member your retirement benefits that you would be entitled to based on you years of service and pensionable salary at the time are preserved with that scheme until scheme retirement age usually age 65. These schemes can operate in different ways as to how they will calculate your retirement benefit and all relevant information can be found in the scheme booklet.
In essence a scheme has to be able to fund all of its members meaning current and past members who still have pension rights in the scheme, as well as current retired members at scheme retirement age or currently retired. This would be known as a fully funded scheme. Many are not fully funded and have large shortfalls.
The trend is moving away from Final Salary Schemes with many closing or not being open to new members, mainly because of costs and liability.
As a scheme member with a Preserved Pension Benefit, it makes perfect sense to explore all avenues open to you regarding these and all of your pension plans or even it the preserved pension is the only one that you have, especially if there is a while before your retirement.
The main things you need to know from a preserved final salary scheme are :
- What’s is it going to give me pension wise at scheme retirement age?
- Are there any guarantees?
- How much will the pension increase by each year?
- If you retired early, what is the early retirement penalty deduction?
- What is your Death in Service amount?
- What is the Spouse’s Pension?
- What is the current Transfer Value?
- Is the scheme fully funded? If not what is the shortfall?
- Is the scheme currently open to new members?
In this example we will assume there are two Paid Up previous company final salary pensions involved and you wish to transfer into a Flexi Access Drawdown plan and not purchase an annuity.
There is an advice process involved to enable you to do this to make sure that you are best placed with all facts in hand to make the correct decision, however this is just an example to show that you can transfer a singular final salary scheme, or multiple final salary schemes and also include other types of pensions such as personal pensions into a singular pot. In this example the Pensions will have to be transferred into a single new Flexi Access Drawdown Policy.
Scheme Pension A. Current Transfer Value £50,000.00.
Scheme Pension B. Current Transfer Value £475,000.00.
Combined values of Pensions A & B = £525,000.00
25% as Tax Free Cash or PCLS will be £131,250.00 paid up front tax free on transfer into a Flexi Access Drawdown Policy.
The remaining fund £393,750.00 will remain invested according to your attitude to risk and from this amount the adviser fee and any charges will be drawn on completion. The balance of the fund will then provide you with income each month.
Any income or funds taken from the remaining fund will be taxed as income under PAYE at your highest rate, so in this instance an large capital withdrawal would incur a large tax payment.
As the fund is invested in a Flexi Access Drawdown plan you can access the fund in excess of the income should you desire but this could erode the fund and reduce income long term.
The benefit of this transfer is that you now have control of the fund and it is ring fenced from any future outcome the transferring scheme may face in the future. The fund itself will now form part of your estate and it is very beneficial on death.
There is an advice process to go through to ensure what is best for you and that you have a full and complete understanding of your current situation and you are able to make an informed decision. Please complete the contact us details and we will be in touch shortly.
What do our customers say about us?
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Dear First Place Financial Ltd
Thank you for your help with my transfer. I have now been able to use the Tax Free Cash to reduce my mortgage which has made me better off each month. Things are looking up.
Having bought my flat from the council a few years ago they decided to re roof the block and whilst it was free to council tenants, those like me who had bought in good faith were sent a bill from the council for our share of the cost. Thanks to your help we were able to get his money by way of Tax Free Cash from one of my old pensions and we were able to settle the council bill without any further borrowing. Now the income pays for a nice holiday each year.
We asked for help regarding our retirement planning. First Place Financial Ltd were able to check every policy that we had and then offer relevant and clearly understandable advice to us about what we can and can’t do and as such we formulated a plan which was best for us. Thank you so much for all of your help.