We provide advice to deferred members of occupational pension schemes ( Final Salary Schemes).
We use the O & M Transvas Profiler which is an innovative programme widely used throughout the pensions industry as a means of accurately assessing and comparing final salary pension benefits. Our report contains innovative features such as the use of graphs to demonstrate benefits. It also enables us to illustrate the level of protection clients may receive under the PPF This is a highly regulated area since the advice you give could involve the switch from final salary benefits to a money purchase arrangement where growth and annuity rates cannot be predicted.
What you should do when considering a Final Salary Pension Transfer
• Go to a specially licensed independent financial adviser.
• Demand a transfer value analysis. This is a computerised calculation which allows you to compare the benefits of your frozen pension with the alternatives. It also gives a critical yield which indicates how fast an alternative scheme will have to grow to match the benefits in your old pension.
• Consider your retirement options. Are you intending to retire early? Do you have dependents ? Check if the scheme to which you are switching has the flexibility to handle your requirements.
What you shouldn't do
• Don't switch from your existing occupational pension scheme into which both you and your employer are currently making contributions. No private pension scheme can match the benefits provided by your employer. A transfer should only usually be considered if you have left your employer.
• Don't transfer from a public sector pension scheme, such as the nurses' or the teachers' scheme, even if you left their employment several years ago. These schemes are guaranteed against inflation no matter how much it rises in future. Unlike other schemes they also allow "linking" of different service years if someone returns to teaching or nursing after several years' absence. Some companies place a blanket ban on accepting transfers from these schemes, in the knowledge that the benefits cannot be match
Don't transfer if you are averse to risk. Money placed in a personal pension will be subject movements in the stock market, whereas a "defined benefit" final salary scheme offers guaranteed benefits. • Don't transfer without checking the death benefits of the former scheme, which may not be matched in a personal pension without having to buy a life insurance policy.
Don't transfer if you have just a small amount of money accrued in your former pension. The cost of a transfer can be about 5 per cent of the total pension funds, paid out in commission to the adviser and charges by the pension provider.
The majority of advisers are not authorised to offer advice in this area; some are yet to take the necessary examinations, whilst others simply prefer not to become involved in this area of advice.Given the complexity, advice from a suitably qualified professional in this respect should always be taken.
Neil Staley is considered to be an appropriate professional as he holds the CII G60 pensions qualification required by the The Financial Services Authority Rules and Guidance .
