Our latest Money Talk is brought to you by Derek Pearce:
Having been a financial advisor for over 28 years now I’ve seen lots of people for investment advice, tax planning and of course pension advice. Over this period the latter has had more regulation changes than any other area of work I do.
The latest one of these was the biggest, pensions freedom. Although it has been with us for over two years now, many people are just becoming aware of not only their increased options but also just how much money they have in their pension, whether they are active members or not.
The current hot topic is people with “final salary” or defined benefit pensions. These pension, once consider the “Rolls Royce” of pension schemes, offered a range of guaranteed benefits that were hard to beat, and yet, they are now being transferred over to personal pensions by the bucket load.
For some, the ability to access all of your pension fund for whatever reason (many of them the wrong ones), was just too appealing. For others, reasons such as poor and failing health or debt problems meant they could get hold of their money before they died and live it up a bit before it was too late or were declared bankrupt. Others did not see the point of providing a pension for a spouse that they do not have.
Now there seems to be another reason, and I have heard it called on a recent presentation, a “once in a lifetime opportunity”. Some lucky people, who may have worked in the local shipyard of chemical factory, now have funds reaching over £1,000,000! The main reason these values are so high, sometimes 4 or 5 times higher than they were 5 years ago, is because of the economic climate of low interest rates and inflation etc. that we are currently in and have been in since the world economic crash of 2009.
But, and there always is a but, in doing so you will lose all of the benefits built up over decades of employment rights, so transferring should not be taken lightly. If you transfer these funds into assets such as the stock markets or other investments, and then God forbid we have another market crash then these million pound pots could fall just as quickly!
So get advice, good advice before you do anything. Find an advisor who has the permission to transact defined benefit pension transfers as special permissions are needed for this very complicated area of work. The FCA register will give you this information.
But most of all, make sure you know what you are doing, are happy with your decision and that you have all the facts before doing anything.
If you want to discuss this or any financial planning issues then contact us here at Poole Townsend.