Ethics?! It’s not a county near to London!
I saw a client last week who contacted us via the website as he had been cold-called by an operator who told him that there was a new law that meant that all pensions were to be reviewed for suitability. After she had spent about 10 minutes trying to bully him into making an appointment or give over his full contact details, he put the phone down as he was uncomfortable about what he was being told.
The companies that used to be pushing PPI claims, (Payment Protection Insurance), now seem to have moved on to pension transfers to unregulated funds and pension “liberation” fraud, so be very cautious if you are rung out of the blue by someone you don’t know.
My new client had a few little pensions in various places and a frozen final salary scheme from British Steel. What spooked him in the call was the firm assertion that he needed to transfer his final salary scheme to get the most out of it. Intuitively, he believed his final salary scheme was worth keeping and I was able to provide him with the detail that puts it beyond doubt.
There are two major types of pension scheme, a money purchase or defined contribution scheme, or a final salary or defined benefit scheme. A money purchase or defined contribution scheme only controls the amount of money going into the scheme; the eventual pension is whatever can be bought with the fund at the time of your retirement. A defined benefit scheme is what it says on the tin; you will get what you are contractually promised when you retire, guaranteed by the pension scheme, even if investment returns were terrible!
For the client’s British Steel scheme, there was a transfer value of slightly more than £57,000, but the cost of the benefits bought as an annuity today would be more than £75,000, so leaving the scheme and transferring the benefits elsewhere would be a risky proposition!
As a general rule, occupational final salary schemes represent very, very good value for the pensioner and an expensive nightmare for the employer, so transferring them is almost always a really bad idea. There are exceptions to every rule, but you need qualified, regulated, professional advice to sort the good idea from the potential disaster.
Contact me with queries
If anyone is looking for general advice, then please write in to the blog and I would be happy to help with anonymous advice posted here. Alternatively, please call us on 0116 253 5600 and ask to speak to an IFA, (Independent Financial Adviser), for a no-obligation discussion.
If you know you need formal advice, have a look at http://bankfield.net/personal/retirement-planning/ or ask around for a recommendation, it might even be me.