Pension Advise

Same happened to me, leave the final salary scheme well alone and if possible leave it until you are 65.
Each year that you draw it out earlier, will reduce the payment.
Look at what guarantees come with the pension, how much it increases each year, how much pension your wife gets if you die before her.
My advice would be get a recommended financial advisor to help you out.

 

I saved this a while back for soemone - it is actually quite a good article that shows some possible options...

 

I had to visit the Wickes store in Croydon yesterday at 7.00am for two laminate w/tops, this was a repeat performance from thursday at the same time and that word was perfect for 90% of the staff serving on those two occasions.

 

Was she fit, and a tiger in the sack though .

 

Shit in bed. But hot.

like having a Ferrari and someone taking the engine out

 

I think the stunners or girls with massive juggs, often don't try very hard.

 

The best advice given here so far, as I see it anyway, is to get some professional advice from at least one other source, which will ultimately be money well invested in your future plans.

With the right type of business, this introductory advice should be free, however, as always in this life, being that there's no such thing as a free lunch, you will probably make some form of contribution within the fabric of any future business arrangement, albeit relatively minor in essence.

One thing, amongst numerous others, to be aware of though, with your current accessible pension pot; you will only be able to take out a maximum of 25% tax free, thereafter having to contribute yet further to dear old HMRC, for every £ withdrawn. That is also predicated on the next taxation threshold of the £12570 tax free allowance entitlement (basic tax free allowance) to which all of us are entitled on an annual basis. You will still have to take note of the requirement to pay tax on any income above the annual level, which with your state pension, whenever that kicks in, will also attract tax above the £12570 current tax free level. Tax @ 20% applies to every £ above £12570 to £50,270 and if you are fortunate enough to have access to money above this level, you will contribute to dear old HMRC once again, a further 20% up to £150k!

Good luck with getting the advice you are looking for and with your future retirement plans.
I use an organisation called Lonsdale Financial Planning, who I've always found to be excellent. If you have a mind to, take a look at them via this link The Lonsdale Financial Planning Team (lonsdaleservices.co.uk)

 

Also bear in mind the 1 month rule should you wish to carry on working in a similar role (eg in a consultant role). You MUST have a 1 month break in order to comply with HMRC rules otherwise you are in breach of Them. My pal fell foul of this and it took over 5 years to sort. HMRC were after taxing his whole pension pot as he was not entitled to any tax envelopes used. He went through hell and dreaded brown envelopes in the mail. This is referred to as Abatement.

 

Apparently Katie Price knows a good "Investment Advisor"....

 

The pension industry is a perfect storm of complexity, crummy, expensive advice, scammers and important decisions that affect us all. Most of us know a lot about how to perform our jobs, but absolutely nothing about saving, investing and tax.

Pensions are astonishingly complex. The Minister changes annually, as do the rules.

To clarify your opening post, your Defined Benefit scheme is a promise to pay you a monthly sum until you die. It may continue afterwards to pay dependents a lower %. You have no financial market exposure, but that promise, depends on your firm continuing to support the scheme and even if it goes bust, the Pension Authority has an insurance scheme that may kick in with a % compensation.
The DB "pot" disappears after they stop paying you or dependents.

Your new scheme is Defined Contribution. A bit like an ISA, but with more rules, no employer support although they may contribute a % as you mention above, no PA insurance and market risk of how you decide to invest.

You asked about DB transfer into DC. Yes, you can do that. You then have all the investment risk in your DC scheme, so no contractual promise to pay you anything. You have relieved your sponsor firm of all responsibility and you have all the risk of managing the money until you die. When you do die however, the DC assets remain yours in your estate, unlike the DB scheme where they "disappear". They become part of your estate for inheritance tax purposes.
If you go that route, the "transfer value" is a dark science. Advisors love transfers because they make 2-3% up front on the amount transferred. There may also be significant "liability fees" that you pay, in case you received poor transfer advice.

Big picture, every year you delay retirement boosts both schemes pay-outs and even the state pension goes up 10% if you delay retirement beyond your statutory retirement age. You can look up your state entitlements online at Gov.uk with NI number.

The reason your firm closed it's DB scheme is life expectancy is so much longer now. Retiring at 60 is therefore effectively "penalised" because the cost of paying you for the next twenty or so years in retirement is so much more than the assets in your DB scheme can support, especially if you withdraw a tax-free lump sum up front.

Old-age poverty is not nice. Keep working as long as possible.

 

I advise you read this if you are after some advice …

https://www.yodelar.com/insights/st-jamess-place-review

 

This, but IMHO, as early in your working life as you can....

 

The best advice, as others have said, is to take professional advice, unless you have a great deal of knowledge and expertise. That said, as long as you treat everything anyone here says (and certainly anything I say) as not being advice, it can be useful to get some additional inputs and background. I'll try to highlight a few things because I am bogged down in a similar matter for myself at the moment!

It's important to use the right terminology and to get to know some of the acronyms, and the first of these is DB for Defined Benefits (often called "final salary" but that's usually inaccurate and for newer members some of the generous public sector schemes are still DB, in the sense that they offer guaranteed benefits, but now use an "average salary" factor). In any case, it's very important, especially in your situation, to have an understanding of what salary figures are being used to define your pension entitlement (sometimes terms like "Final Pensionable Salary") and what the "Normal retirement Age" (NRA) is - it's often 65, but whatever it is, you'll usually have a reduced pension if you draw it before that age (understandably because the pension scheme will have to pay it out for longer).

"Frozen" probably isn't the best word for your DB pension now that you are no longer going to be allowed to contribute to it and accrue more years. Although you won't add more years, whatever annual pension you are being told you have entitlement to today will be increased between now and your retirement age to allow to a limited degree for inflation (I think CPI is used), so the pension can be said to be "deferred" or "preserved".

What I think you're considering is whether to transfer all of your DB pension (or perhaps part of it - some schemes allow that) to a Defined Contribution (DC) scheme (often called "money purchase"), which would involve your taking all control and responsibility for investment decisions (even if you then hand that over to another party) and no longer having a guaranteed pension income (although using the "pot" to buy an annuity does provide guarantees, but that's an unpopular choice these days for various reasons, but especially the very low returns offered these days due to extraordinarily low interest rates). Once you have money in a DC pension scheme (often a SIPP scheme), you can continue to save - any investment gains will on the whole be tax free, until you want to take money out, at which point you can put some or all of the "pot" into a "drawdown" state; at that point you do have the option (which most people take) to take 25% of the amount in question as tax free cash, but all the rest will be taxed as income as you take it out. There's a lot of flexibility, but lots more risk and responsibility than a DB scheme. For those reasons, and the huge problem of fraud, it's not possible to transfer from DB to DC without taking advice and that can get expensive, and might in some cases involve the advisors benefitting from your decision, if you transfer (you need a clear understanding of how they charge). Different types of DC scheme may have very different costs and facilities for others to manage money for you. Many SIPPs are very much services which allow you to make all investment decisions, and therefore to take all the risks; the costs for those tend to be lower, and flexibility high (examples might be Nutmeg, Hargreaves Lansdown or Fidelity). I don't know whether St James's Place offer services that involve their taking responsibility for all investment decisions (but even if they do, I don't think they can guarantee results) but I know they are probably more costly than basic SIPP services.

There are many complexities, which are all made worse, as others have said, by frequent changes in tax law, for instance:

The normal "Annual Allowance" which is the maximum you can save into a pension each year, without paying tax on the income you contributed, is £40K which is far more than would cause a problem for most people, but if you move a DC pension into drawdown, HMRC impose a future limit of £4K per year on you from then on - that can be a problem for people who wanted to go on contributing to another pension (which might apply to you if you go on working and paying into an employer's DC scheme); as with many aspects it's biased against the privately and self-employed; public sector employees who have DB schemes don't get hit with that annual allowance reduction, if they have a separate DC pension that they put into drawdown.

 

The key question here is - do you have to transfer your DB pension into the new DC scheme in order to qualify for the 12% "match" of new contributions (which I assume means that you can put up to 12% of future salary tax free into the DC scheme, and the employer will add the same again) ?

Your employer might prefer you to transfer your DB pension because it would reduce their responsibilities in future, but I think it would be unusual for an employer to apply pressure or incentives of any form. I am sure that for a DB to DC transfer a "Cash Transfer Value" would have to be defined by an Actuary in an independent and fair way (the calculations involved are mega complex).

For most people, if there are no strings and an employer will match contributions into a DC scheme, it's regarded as a bit of a "no-brainer" to make your own tax-free contributions.

For any DC pension it's very important to complete an "Expression of Wish" document to state to the trustees your preference as to whom the money would go to when you die (whether or not you have started to draw money out). For instance, you might well want to designate the money (apart from, perhaps, anything your ex can lay claim to), to go to partner, children and/or other relatives. The tax situation is complex on death because it would typically be money that is outside your estate (so that can be an advantage if you die with assets that would exceed inheritance tax allowances) but depending on the age at death, there may be different tax implications for those who receive the money (but if you die before 75, in many cases all of the money might be able to pass tax free to those you've nominated).

 

One other very important thing to check on, especially if you've been in a DB pension scheme for a fair few years and are close to state pension retirement age (might be 65, 66, 67, depending on when you were born) is to check on your state pension situation:

https://www.gov.uk/check-state-pension

It's very easy to do this if you have a "government gateway" login for tax.

From now on I think all of us will get the new "flat rate" state pension when we reach state pension age. Broadly speaking, to get the full amount, which is now about £9K a year, and increasing quite fast due to the rules on inflation increases, you need to have paid (or be treated as if you had paid) 35 years-worth of NI contributions.

However, if you have been in a DB pension it's likely that for some of the years you have been paying NI you will have been "contracted out" which meant paying marginally less NI because instead of earning a bit of extra SERPS pension (now defunct for people reaching state retirement age) you instead covered that by using your DB pension. Your flat rate state pension may be reduced by an amount that depends on how many years you were "contracted out". The forecast at gov.uk should allow for that.

From 2016 when the new flat rate pension was introduced, you'd no longer have been paying a "contracted out" rate, so any years from then on are "better" in terms of qualifying for full years (of the 35 needed) for the full state pension. However, for some people who may stop working and draw another pension (e.g. DB or DC/drawdown) or simply live on savings before they reach state pension age, they may have a "gap" in NI contributions after they stopped work (because you only pay NI when working), but before state pension age. Although the idea of paying extra NI may stick in the throat, it can in some cases be worth paying voluntary NI contributions to cover the "gap" if they will add a decent amount of extra state pension. The voluntary contributions are about £800 per full year I think, and can be paid up to 6 years after the "gap" occurred (more in some cases) and, as long as your life expectancy is reasonable, can be a bargain in some cases; in effect, where you wouldn't have got the full flat rate pension, you can "buy" an extra £250 per year (up to the max flat rate pension) with each £800 voluntary year, which is a guaranteed return, for the rest of your life, with inflation increases, of maybe 30% on the voluntary extra NI "investment" (taxable return of course because the state pension is quite rightly taxable income).

Useful info here: https://www.moneysavingexpert.com/savings/state-pensions/

 

Great post. I know that in an ideal world I should really "buy" these extra years/contributions for my old age pension. I worked for 30 years so haven't contributed enough. I was in a scheme that was also contracted out. I retired 2 years ago at 49, and haven't worked since. Going on that link, I'll be £100 a month worse off come OAP age (67), my max is £179 but I will get £154 a week. Hmmmm.