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DB scheme transfer question

20thcenturyboy
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Joined: June 10th, 2021, 6:56 am

DB scheme transfer question

#418526

Postby 20thcenturyboy » June 10th, 2021, 7:41 am

Hi all.

I know I'm in a tiny minority but I thought I'd ask here.
I'm tax resident in Australia, and will probably retire in Oz. I'm 53 but have no plans to retire. I am on a good salary in Oz and have a partner who also works and no intention of retiring. 3 kids, only 1 still at school. I contribute to an Australian pension (called superannuation, it is a defined contribution scheme). We also have a couple of modest investment properties in Oz.

I used to work in the UK and I have a defined benefits pension built up over 6 years while I worked there in the 90s. I have been given a CETV (transfer value) of 34x multiple to leave the scheme. In 2017, the same pension provided a transfer value of 25x. So there has been a big increase in 4 years. The value of the annual db pension is about 8,000 ukp if I retire at 60, increased by RPI each year. Not a huge amount, but not peanuts. That will probably be more like 9K when I reach 60.

I have been contacted by a financial company who are proposing that I move out of the db scheme into a SIPP, as they say I may not get as good a deal on the CETV in future, if interest rates rise. HOWEVER...we have had low interest rates for a few years now, and from what I've heard they are expected to stay low for a few more years yet. So in theory my CETV could get larger than even 34x over the next few years?

I don't like being rushed, and of course the financial company will get fat fees on whatever they are proposing so it is in their interest for me to act soon. But I must admit, a CETV of 34x does sound like a good deal.

Alaric
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Re: DB scheme transfer question

#418561

Postby Alaric » June 10th, 2021, 10:45 am

20thcenturyboy wrote:I don't like being rushed, and of course the financial company will get fat fees on whatever they are proposing so it is in their interest for me to act soon. But I must admit, a CETV of 34x does sound like a good deal.



Some UK Companies with DB liabilities in their pension funds may be attempting to derisk by getting beneficiaries to give up their benefits and offering attractive CETVs. That said, transferring to the proposed UK SIPP isn't the only option, particularly if the cost of such action involves signing over the SIPP to the financial company who presumably contacted you. You may also have the option of transferring the CETV to an Australian based arrangement.

20thcenturyboy
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Joined: June 10th, 2021, 6:56 am

Re: DB scheme transfer question

#418574

Postby 20thcenturyboy » June 10th, 2021, 11:23 am

Alaric wrote:You may also have the option of transferring the CETV to an Australian based arrangement.


I think I have to wait till I'm 55 to do this directly. As I'm only 53 I have to first move the CETV to a SIPP and leave it for at least two years.

Not sure it's worth doing at the moment, but who knows when CETV values will fall.

Yes as you mentioned the financial company will be organising the SIPP. I have yet to see the costs.

pompeygazza
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Re: DB scheme transfer question

#418601

Postby pompeygazza » June 10th, 2021, 1:04 pm

If you're going to do this it's pretty simple to do yourself. Don't pay someone else to do it, that may charge large fees and then take a chunk of the sipp each year for doing nothing.

scrumpyjack
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Re: DB scheme transfer question

#418606

Postby scrumpyjack » June 10th, 2021, 1:15 pm

I would never ever use a financial services company that had approached me! Very risky and IMO the sort of firm that cold calls trying to sell any financial 'product' is not one to be used.

mc2fool
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Re: DB scheme transfer question

#418607

Postby mc2fool » June 10th, 2021, 1:18 pm

20thcenturyboy wrote:I have been contacted by a financial company...

Oh yeah? By phone/letter/email? I think the very first thing I'd do is contact the DB pension scheme and ask if they know anything about this.

If not then the big question is how did the financial company get your contact details and knowledge of the DB pension?

If the scheme does know about it then I'd ask what they think gives them the right to give your details to a third party? (The proper thing to do would have been for the DB scheme to write to you about the matter and give you the contact details of the financial company so you can contact them, if you are interested).

P.S. Welcome to TLF :D

ursaminortaur
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Re: DB scheme transfer question

#418609

Postby ursaminortaur » June 10th, 2021, 1:22 pm

Alaric wrote: You may also have the option of transferring the CETV to an Australian based arrangement.


The receiving scheme has to be what the UK government refer to as a QROPS

https://www.pensionsadvisoryservice.org.uk/about-pensions/when-things-change/overseas-transfers

https://adviser.royallondon.com/technical-central/pensions/transfers/overseas-transfers/

This company claims it is the only Retail Super Fund in Australia that is registered with Her Majesty’s Revenue & Customs (HMRC) as a Qualifying Recognised Overseas Pension Scheme (QROPS).

https://www.ivcm.com/products/aesf/

You would need to check whether that is actually true - it seems unlikely as HMRC list a lot of Australian schemes as ROPS (and I'd expect that a few of them would also qualify as QROPS - see the Royal London link)

https://www.gov.uk/guidance/check-the-recognised-overseas-pension-schemes-notification-list

20thcenturyboy wrote:I think I have to wait till I'm 55 to do this directly. As I'm only 53 I have to first move the CETV to a SIPP and leave it for at least two years.


This isn't an area that I have any familiarity with but I don't think there is any age restriction as to when a QROPS transfer can take place so long as you don't access the pension after the transfer before you reach 55 years of age except in exceptional circumstances

https://www.pensionsadvisoryservice.org.uk/content/spotlights-files/uploads/QROPS_SPOT021_V1.5.pdf

Whilst pension freedoms were introduced for defined contribution pensions in the UK, QROPS remained subject to a test that 70% of the fund had to be used to provide income for the rest of the your life. This test has now been removed for all QROPS* as of April 2017, and you are allowed to have the same options as members of UK registered pensions. There is also retirement age test of 55 which has now been modified.
The new regulations allow for the following payments before age 55:

•a serious ill-health lump sum
•a short service refund lump sum
•a refund of excess contribution lump sum (where you pay too much into your pot by mistake)
•a winding-up lump sum (where you have a small pot and the scheme is wound up

*Including international organisations such as the UN and the EU pension schemes


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