'Frozen' pension. Should we pull it out and invest elsewhere?

[Lagjet]

DH has a pension from an old workplace. We have had a valuation and it's valued at £170k. DH has a current pension that he's paying into with his new employer but we are of the understanding that the pension from the old workplace isn't making much, just index linked to inflation.

DH is 52, would he be allowed to cash in the old pension and place it in an investment that would actually make a bit if money on it? Should we use some of it to pay our mortgage off? (25k)?

Any idea what the best thing to do is? We have been told if he leaves it where it is and he dies then it will be lost, apart from a small widows pension that I would get - seems sensible to take the lump sum out?

I would absolutely pay your mortgage off.

If you can afford it why not place the remaining cash into a medium risk fund?

Depends - is old pension final salary or DC?

I believe he'd have to be 55 to withdraw it without very harsh penalties.

I would suggest taking professional advice on this as it can effect the annual allowance for pension savings going forward if it's a money purchase scheme.

You would also want to time withdrawals so that they don't adversely impact his tax position.

It's a final salary scheme that closed in 2007, he was then put onto another scheme before he was made redundant in 2008. It's sat there ever since.

I wondered if he'd have to be 55 actually, I seem to remember something about needing to be 55 before it could be taken but I wasn't sure if that meant he couldn't withdraw it and place it into a different fund

You can only access your pension under 55 if you have serious ill health and a medical opinion would be needed for this.

You can transfer it from one pension arrangement to another but if your transfer value is over 30,000 he will need to take financial advice. He would be transferring from a final salary scheme where his pension increases in line with inflation to a money purchase arrangement / investment where he would be taking all the risk of investing. He could as you say die and you would get a spouses pension payable for your life. Equally he could live to 100 and his final salary pension should continue to pay out. I say should because this does require the plan he is in to have enough assets to meet all the liabilities it has.

You can't use it now to pay off a mortgage. Also beware phone calls from people who talk about frozen pensions and promise to release your money / make it easy for you and courier documents etc. They are usually scammers and you may loose lots in tax and be left with very little.

Have a look at the info on the pension regulators site about scams.

www.thepensionsregulator.gov.uk/individuals/dangers-of-pension-scams.aspx

That said a transfer may be right for you - just go in with your eyes open and make sure you understand the risks both sides and are getting good advice

Thank you so much for your help.

He hasn't got any medical issues so he won't be able to withdraw it until he is 55 by the sounds of it. We aren't desperate for the money at all, it's just the thought of knowing that it's not increasing in value very much and the thought of it getting lost if he dies.

We'll reassess the situation after he's 55. Thanks again,

Also, final salary schemes are amazing in terms of pension amount. 170k in a DC scheme will buy you nowhere near the monthly pension the final salary scheme will pay on retirement. I would think long and hard before getting rid. The DC scheme tho yes consider cashing in when you can.

You need advice. Don't wait until he's 55 as there are many reasons why CETV's (if indeed that's what it is an not just a TV) are high right now.

I'm concerned about your comment 'an investment that will actually make money'. Pensions are a set of rules, not investments in and of themselves. .. you need more understanding of what you have.

Do not use St James's place shoot me now find an independent IFA, preferably Chartered that specialises in pensions. Themselves that is, holding a full pensions licence, not sending it out to an outside company to sign off which should be fucking band

Oh and BTW Final Salary/ Defined Benefit pensions hold many other benefits, but whether that CETV is 'good value' or not will depend if anyone will sign it off.

I would agree to a fee of 2%, non contingent on transfer. You'll find plenty of companies happy to do it for 5%, but they won't be around in 5 years if there is a problem as they are asset strippers.

It was a final salary scheme but like i say it closed back I need 2007. Nothing is getting paid into it now, it's just sitting there.

Just looking At the paperwork now. It's a defined benefit scheme. Ive enclosed the detail as I know nothing at all about pensions and am now confused as to whether we should leave it where it is or move it.

I don't think you will be able to access any money till age 55 and looking at the pics I would leave it where it is. I totally agree with apieceofcake and wouldn't move it.

As a very rough guide, if you had a pot of 100k and wanted to exchange it for a pension, annuity providers would give you 3k per year. This is how a DC scheme works, you build up a pot of money then when you want to retire exchange it for a guaranteed income per year.
What you have there I think (I'm reading on a phone so pics aren't v clear) is a pot of 170k getting you 9k per year, obviously much more than a DC scheme. That's because it's a final salary scheme, so the pension they pay is based on your salary, not the value of the money in the scheme. It's also why virtually all the final salary schemes have closed!!

Ok thanks but he'd have to wait until he was 65 to get the 9k a year, is that right?

We are in touch with many of his old colleagues and at the moment there appears to be a rush of people around the age 60 mark who have worked for the company for say 30 years who are getting their transfer values and cashing in and retiring. I assume this will have a big impact on the pension fund?

Ahhhhh! I'm sorry, but what is written above it just utter rubbish. You can certainly transfer the money now, nothing to do with your age, more about value.

Annuities as income structures? What bilge, I've put 1, yes one annuity in place in 10 years of being a pensions adviser. That is NOT how DC pensions work now.

Please please please ignore unqualified strangers on the Internet and get paid professional advice. For 170k why wouldn't you?

A closed fund varies greatly in how it operates, that's to do with the establishing employer. The PPF is also still in existence.

I'll have a look at your scans, but this isn't enough info to advise. Bear with me.

Ok thanks but he'd have to wait until he was 65 to get the 9k a year, is that right

No that's not right. That was the value at leaving.

Ok, just looked at your scans. There is no where near enough info to advise. For a start no revaluation of pension although I estimate this is £11,144

However the revalued AFD ~ £2861 needs consideration alongside a current State Pension statement. As this isn't clear and now leaves a gap.

A superficial look at this seems to be poor value, but what is the funding position, what are your other assets? You need to know more and so would anyone advising you. Be aware all of this needs to happen quickly. Once the guarantee runs out you MAY have to pay for another CETV.

Just because others are transferring, I wouldn't take that to mean it's a good move. It can leave the pension in a better position.

This is not straightforward.

Phone the pensions advisory service

Speak to your local CAB. Lots have IFA's who volunteer and at least you won't get a sales pitch

See what justification the IFA ex colleagues are using have. If they are remote/internet/not face to face avoid like the plague. When the complaints begin to come in they will close and leave everyone high and dry.

One last point while I finish the kids breakfast ask for the early retirement reduction facts. Also confirm NRA - it's not clear it's actually 65.

I think an early retirement (then you're fully covered by the PPF) might be a compromise. Before I did that, I'd be getting the last audit and funding statement. Do you actually know the funding position? Closed is irrelevant, but a bankrupt sponsoring employer isn't.

The widows pension is also better than many once in payment.

This is a decent sum so please take advice before doing anything.

Its index linked so 10K per annum in 2008 will be worth a lot more when he's 65. Frozen doesn't usually mean that it has stopped rising with inflation.

Okay thanks all. I have been given the details of a local independent pensions / financial advisor (he seems to be the guy that everyone that is leaving the company early is using and he charges a fee of 4% so is doing very nicely at the moment!)

We have 3 months to use the value theyve given us. I'll make an appointment for the both of us very soon I think.

I'd have a couple of conversations with other IFA's too. If he's doing lots I'd be a bit concerned about his long term prospects. What happens if his advice isn't strong? This is a one way street that you can very easily regret.

The Financial Conduct Authority is very clear that they expect pension advisers to start from a presumption that a final salary transfer is not in a client's best interests, and then the case for recommending a transfer is built up from there so that the advice is robust and the reasons are sound. There are a worrying number of advisers who are merrily raking it in at the moment with questionable transfers on flimsy advice that won't stand up to scrutiny. By the time you realise that you're worse off and complain they'll be long gone.

Please listen to what dontcallmethat is saying. I say that as a pension adviser myself.

The FCA is all over DB Pension transfers at the moment with lots of advisers getting slaps on the wrist as a minimum. Some have been banned completely. Many IFAs do a free initial consultation. Take in what you've got and see what they say, but don't sign any letters of authority until you find one you like. And definitely compare charges!

It could be transferred to a pension like Prudential or Scottish widows etc, even perhaps on an insistent client basis, but the benefits might not be worth it. Make sure you know what is going to be lost. Guaranteed annuity rates are good for some people who want a guaranteed income. Is there a backup plan if it's transferred and the market crashes?