Is it time to transfer out of your final salary pension scheme? Reply

Pension Scheme

Transfer values from final-salary schemes are at an all-time high (because 20 year gilts have fallen to 3% whereas in 1990 they were 11%), in fact transfer values are 80% higher than 6 years ago according to Investors Chronicle and they give 6 reasons to leave final salary schemes:

  1. You have other assets to fall back on
  2. You have a scheme from an ex-employer and don’t trust your former employer to keep funding the scheme
  3. You think you former employer is in trouble
  4. Your pension will not be fully covered by the Pension Protection Fund if you former employer becomes insolvent (the cap at age 65 for 2012-13 is £34,000 annual income)
  5. You are in bad health and won’t likely see an average length pension
  6. You are happy not to ever buy an annuity and want more flexible benefits

At December 2012 the FTSE 100 companies had a combined deficit of over £50bn and only 13% of final salary pension are open to new joiners.

How transfer values have out grown scheme benefits
This example would be a for a typical final salary scheme paying 3% benefit increases to deferred pensioners over the last six years and are based on a member who was 50 in 2006.

  Deferred pension
 Typical transfer
  value offered
Benefit in 2006   £50,000 pa   £1,000,000
 Benefit at end-2012   £59,700pa  £1,800,000
 % increase   19% 79%

 
Read more: http://www.ifaonline.co.uk/retirement-planner/feature/2244829/time-to-review-deferred-defined-pension-benefits#ixzz2MU35ToaN
IFA Online – News, blogs and analysis for IFAs. Visit the website now.

The Financial Services Authority (FSA) are in general against transfers out of final salary schemes and on the 28th February 2013 issued proposals to change the basis of calculation for transfer values:

The FSA estimates that the changes to the way TVAs are performed will prevent an undervaluation of benefits of up to £20bn. In other words, the changes mean that transfer values may have to increase before an adviser recommends a transfer.

Consultations close of 27th March 2013

Transferring out should be done with extreme care as its irreversible.

Charities have Pension Deficits too

In the Financial Director Magazine in February 2013 it was reported that Baker Tilly had resigned as auditor to Citizens Advice Bureau over a disagreement on pensions.

Citizens Advice’s pension pot has a growing deficit, which leapt from £19.4m in 2006 to almost £36.5m by March 2010. The defined benefit scheme closed to new entrants in 2008.

The charity insists “it is not possible to separately identify assets and liabilities relating to Citizens Advice”. For this reason, it cannot make provision under FRS12.

However, Baker Tilly disagrees and last year gave a qualified opinion on the accounts, calling for a provision of £8,305,000 to be made at 31 March 2010.

Read more: http://www.accountancyage.com/aa/news/2109706/baker-tilly-quits-citizens-advice-accounts#ixzz2MU8XpC7A
Accountancy Age – Finance, business and accountancy news, features and resources. Claim your free subscription today.

 

steve@bicknells.net

Are you a Business Owner with No Private Pension? Reply

You’re not alone its estimated that 1.3 million business owner have no private pension that’s approx one in two UK Business Owners (according to Prudential).

https://www.moneyadviceservice.org.uk/en/articles/uk-business-owners-lack-pension-savings

Nearly one in three business owners (or 792,000 people) say they will be entirely reliant on the State Pension when they come to retire, compared with twice as many people across all employment types retiring this year in the UK.

Other self-employed workers will supplement their retirement incomes with money from a mix of alternative sources:

  • half will draw on other savings and investments
  • one in four will use equity from their properties or plan to use their partners’ pensions, and
  • one in five plan to use funds from the eventual sale of their businesses.

Most of us know we should be saving more for retirement and the government knows that we need to save more too. That’s why they give pensions tax breaks and employers are being forced to auto enrole staff into pension schemes and make payments.

But how many of us stand a chance of saving £400k into our pensions? it’s a huge amount of money and yet it only buys a modest pension. Work out your strategy now before its too late.

https://stevejbicknell.com/2012/07/29/what-is-the-minimum-pension-fund-you-will-need-to-retire-400k/

steve@bicknells.net

 

What is the minimum Pension Fund you will need to retire? £400k? 2

Most of us know we should be saving more for retirement and the government knows that we need to save more too. That’s why they give pensions tax breaks and employers are being forced to auto enrole staff into pension schemes and make payments.

But how many of us stand a chance of saving £400k into our pensions? it’s a huge amount of money and yet it only buys a modest pension.

And it doesn’t sound like you can rely a on state pension or credit either, article below from Investors Chronicle…

A pensioner couple needs a weekly budget of £231 to meet a minimum income standard (£12,000 a year) that allows them to participate fully in society, according to the Joseph Rowntree Foundation. That £12,000 will enable them to eat out once a month and holiday away from home once a year on a half-board coach-tour package.

This may seem quite a modest amount. In fact, the income level guaranteed for pensioners by Pension Credit in 2012 is just over what is needed to meet the minimum income standard, and the proposed universal pension will be more. But don’t let that lull you into complacency.

The universal pension is just a proposal at the moment, and if you have investments, you are unlikely to qualify for the current Pension Credit, meaning £12,000 becomes a significant ball-park figure on which to base your investment plans.

http://www.investorschronicle.co.uk/2012/07/12/comment/smart-money/the-price-of-a-decent-retirement-MAnT9XzYoD1yOO5Xg4wr2N/article.html

Breakdown of minimum income standard for pensioner couple

 

Item £ per week
Food £60.46
Alcohol £8.67
Tobacco 0
Clothing £12.09
Water rates £6.44
Household insurances £1.82
Fuel £13.72
Other housing costs £4
Household goods £13.56
Household services £8.23
Personal goods and services £20.33
Other travel costs £13.51
Social and cultural participation £49.53
Total £213.48

Source: Joseph Rowntree Foundation, July 2012

 

steve@bicknells.net