Over the last couple of years, I have been very privileged to guide a number of Lloyds Bank employees and past employees through the minefield of organising a transfer out of the final salary pension scheme into a personal pension plan.
The size of the transfers has been from around £200,000 to well over £1million. Every one of the cases has been different but without exception, transfer has enabled clients to achieve personal and financial objectives which would not have been achievable by staying in the final salary scheme. Giving up the security and guarantees provided by the final salary scheme was never done lightly. Some enquirers discovered at a very early stage that giving up that security was just not right for them notwithstanding the flexibility and control which would have resulted from a transfer.
Every one of the cases I have dealt with has started with a recommendation from an existing satisfied client.
The Lloyds Bank transfer values are amongst the most generous and have continued to increase over recent years. If you are still in employment you can obtain an indicative transfer value but a guaranteed value (current for three months) is only available if you have either left employment or opted out of scheme membership. The decision to opt-out of scheme membership whilst remaining in employment should never be taken lightly particularly if you are some years away from retirement. but if taking the transfer value is the only way in which you can achieve an essential personal/ financial objective it could still be the right decision.
The Financial Conduct Authority takes the view that a transfer out of a final salary pension scheme is rarely a good decision and the legislation, therefore, requires a full report from a regulated pension specialist who will explore all the reasons for and against a transfer before making a recommendation.
I cannot carry out that report but I can, from my many years as a leading pension specialist, source that report for you and guide you through the entire process.
Lloyds Bank employees, particularly those with long periods of service, have been in a very favoured pension position and pretty inevitably will find themselves in the top 10% of retirement incomes. It is that very favourable position which means that they are better placed to give up the security provided by the final salary scheme for the flexibility and control of a personal pension plan, post-transfer, than virtually any other group of employees.
The reasons why clients have made the transfer decision are personal, many and varied. They include the following:-
#Ill health, particularly if there are no adult dependants. The thought that a pension fund with a value of say £750,000 will lapse without value on death five or more years after retirement and minimal value within five years is just not acceptable to many people.
# Anyone entering employment over the last 20 years (other than public services) is extremely unlikely to be offered membership of a final salary pension scheme. Your children are therefore facing a much less favourable retirement than you. Many Lloyds Bank employees are determined to make sure that their children will benefit from their pension good fortune. Post transfer any remaining funds can pass free of inheritance tax to any nominated beneficiaries. Withdrawals will be taxed as earned income.
This is a major factor in many transfer decisions.
# Early retirement. The Lloyds Bank final salary scheme has little flexibility on early retirement. Either the whole pension is taken early less the impact of actuarial reductions or the whole pension is deferred. Post-transfer-tax-free cash -25% of the fund ( more than under the final salary scheme) can be taken either as a lump sum or in instalments and income withdrawals, if needed, can be varied from year to year.
If some employment, post early retirement, is envisaged the cash flow and taxation planning possibilities post-transfer are very exciting.
#Availability of tax-free cash pre-retirement. There have been a number of cases where the availability of tax- free cash pre-retirement has been the only way in which essential family objectives can be achieved. Examples would be assisting with university costs or house purchase, starting a new business or anything for which cash is needed.
#Retirement lifestyles. Many clients tell us that they do not expect to need inflation proofed income throughout retirement but do need more income in the early years of retirement to fund the exciting adventures they have planned. The flexibility and control post-transfer means that you can plan and enjoy your ideal lifestyle.
#Control and flexibility. Many clients tell us that after they have worked for so long and so hard they do not want Lloyds telling them how and when they can access those funds. They are satisfied that the transfer value is high enough to support their planned lifestyle in retirement even with a relatively cautious investment strategy and they expect to be able to access those funds as and when required.
What has been very satisfying is that even after the major stock-market falls in March, due to the Covid19 outbreak, not one client has expressed any regret or concern about their pension transfer decision.
As mentioned before the FCA are concerned that more people are transferring out of final salary schemes than should. The regulatory and compliance requirements are therefore becoming even more demanding and costly. Major changes are planned for Oct which may prevent transfers being recommended even for cases demonstrably in the clients best interest.
If you would like to find out whether taking a transfer value would help you achieve some important personal and financial goals my recommendation is that you book in for my Pension Transfer Introduction Module as soon as possible. The cost is a one-off fee of £250. By the end of our discussion, you will know whether this is something you wish to pursue or whether it is not for you. Your pension is probably of greater value than even your house. Surely you owe it to yourself to understand the options which are available to you and which will contribute best to the retirement lifestyle you have planned.
Just text me, Richard, on 07770575122, and I will let you have further details
THIS IS OF GREAT IMPORTANCE TO YOU IF YOU ARE OVER 55 AND ARE FACING REDUNDANCY OR THINKING ABOUT EARLY RETIREMENT. I CAN INTRODUCE YOU TO CLIENTS WHO I HAVE GUIDED THROUGH THE FINANCIAL AND PENSION IMPLICATIONS OF THOSE DECISIONS. PLEASE LET ME KNOW IF YOU WOULD LIKE ME TO PUT YOU IN TOUCH.
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