JimDog, absolutely not a trader. The above isa are funds that are not traded. Yes there’s Tesla in there at 369% up, but that was a bit of fun. I have two pensions too, that have similar funds.
Personally I feel the combination of pension freedoms and high TV’s may be an absolute Godsend and a sea change for many people’s financial position.
Clearly however, the fear remains that many people will simply spend their pensions(!) and there are some advice firms which have been less scrupulous than they could have been in their advisory process…
Bear in mind that only a small number of IFAs still advise on DB transfers now. The heat and light placed on these by the FCA have pushed most away and any IFA still advising in this area has to come up with a wholly distinct and lengthy advice process in connection with DB schemes. And even then, cross their fingers their PI insurance covers them, if they can get it in the first place.
Further, the starting point for any firm’s PTS (pension transfer specialist) is to follow the FCA’s own dictum that keeping DB benefits is still going to be the best course of action for the majority of people, which ordinarily means there needs to be exceptional reasons why they would recommend a transfer at the end of the advice process.
How did the IFA lose it???
I can’t remember all the details.
The investor had literally give the IFA most of his life savings to invest, as he trusted him.
The IFA defrauded him and several other people, and as far as I know he disappeared.
But this was about 20 years ago.
I’m pretty sure the investor did not do proper research on the Advisor’s background and references.
Sounds more like theft than poor advice.
An IFA won’t usually handle client money. The investor makes a direct transfer or, more likely twenty years ago, writes a cheque payable directly to the investment firm.
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Interesting thread!. I too saw my funds crash in March and have now recovered all and more. I became a Contractor in 1990 and was advised to open a company pension plan through my Ltd co. And have adviser. As with a lots of people when younger you don’t really take much notice. In 2010 I realised the adviser did sweet * all so I got rid and have never looked back using my own intelligence to have a sensible portfolio of managed funds. I will be 60 next year and am ready to go into drawdown. At the moment trying to get my head round PCLS and UFLS😁 to take tax free sums. Can I afford Titan 606 or not😂
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Respect 
For me it was an easy decision to move out of my DB scheme, partly because if my wife survives me she would only get 1/2 of it, and my kids would get 0 after that. I’d have had to take some sort of insurance to cover the gap.
My DB pension would have paid a reasonable income at 65 (about 25% of my final salary) which would have been OK, but not Naim statement levels of disposable income. Also my income requirements will fluctuate.
On the other hand the CETV offered was more than 30 multiples of the pension payable at 65 and I only need to return ~+3% above inflation for the profit to match what would have been the pension income. I expect to get in excess of this which will allow me to retire early (sometime next year at age 58 is my plan, rather than having to wait until 65) and draw from the pension with the likelihood that I’ll only ever be taking the gains and never touching the initial investment amount. Well that’s the theory anyway.
But it’s a big decision and it is the law that you get financial advise if you are looking at this as an option. This advice is expensive and in my case it only confirmed what I knew anyway. I check my investment daily and it is still doing well, and far in excess of the %ages I need.
Also, I don’t know what Covid will have done to transfer values. They may have gone up further still, or crashed?
Are you personally managing your investments yourself?
Is that stressful and time consuming or fun?
One problem is that even when the investments are doing well, there’s always the possibility of getting it wrong, of the increasing volatility of global markets up ending your strategy and actually having less than you would have had.
On the other hand, as you say, instead of losing the capital, your partner and kids will get the lump - this is actually a huge difference.
I suppose the first step is to check the transfer out value of my 2 pensions…
No, I don’t do it myself it’s done on my behalf. When I do stop work I might use a smaller pension I have to see how I get on self investing but I wouldn’t risk that on the transferred DB amount at the moment.
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Reading the nature and the way your various comments and questions are framed, I think a discussion with an IFA (pensions advisor) would be beneficial - there may even be ways to enhance/amend what you are doing with the USS? Obviously, the maths of your position will inform and it’s highly laudable you are already thinking of the family picture.
As to TF values of DB schemes, in theory these should have risen materially over the last few years as long term market yields have become compressed (much lower - ‘lower for longer’ and all that) and, ironically, while the advice hurdle has become more onerous, I think some pension managers are pricing their TF values to encourage such actions. The potential impact of negative yields on Gilts and alike is a very big issue for PFs.
But beware ‘money illusion’, that is to say the package benefits of a DB scheme can be very expensive to replicate, not that you may require these (ergo the reason for TF), and there are so many potential tax issues and judgements/decisions which sit around these things.
Personally, I would avoid self-management as regret, should things go adversely at any time is a big load to carry and you’ll need to understand what you are allocating your monies in to. IMV, the more diversified the better and this is where a highly reputable fund manager comes in (i.e. it won’t the the IFA directing investments).
Of course, you can have some ‘play money’ if desired.
There is a phrase in the market (or used to be) that some investments are ‘not for widows and orphans’…quite a guiding mantra.
As a purely personal view, I’m circumspect as to future investment performance, in that over the last c.25 years, we’ve had numerous ‘events’ which have caused sharp adjustments/corrections to markets and legacy understandings about how differing asset classes (Gilts, equities, bonds) behave in certain scenarios have been rewritten (at best), such that I see such an unpredictable future.
Avoiding any political angle on this, where I struggle is what’s going to happen when the various central banks (who are effectively depressing market yields by their asset purchases - and directly supporting fiscal management insodoing), can no longer pursue such actions.
One thought is there must be a ‘great unwind’, with market yields having to better reflect actual economic risks, which could generate a severe adjustment to equity prices, and Gilt/bond prices can really only go one way (down!).
Back to ‘you pays your money and takes your chance’.
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This may help with a couple of points raised above (i.e. a TV index).
In practice the calculation of TV’s is a bit murky (and they won’t usually show their workings, they don’t have to). The Regulator sets a few mandatories but beyond that it’s down to the actuaries as to which figures are used in their calculations. It is interesting to note that the TV’s offered in some industries schemes are much higher than others (banks by and large are very high, social care firms aren’t for instance).
A point to note is that within 10 years of normal retirement age the actuaries have to switch from assuming returns based on equities to that from Gilts, if not done so already, as such some may see a step change in their TV’s at this time.
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Thanks - lots of really useful advice and suggestions in that post.
The prospect of a great unwind is a possibility.
Also, reaching the hard limits to economic growth at some point in the medium term.
What might be a strategy that takes account of these downside risks - diversify beyond/away from financial instruments? e.g. Take out as much as possible from my pensions within tax limits and buy an investment property?
I suppose pension fund managers will price transfer out valuations in a way that buys them out of the liability of paying the pension at the smallest price they can pay to achieve that.
One real risk I have to keep in mind is that if I live a few decades more, I will one day become fed up with or incapable of managing or even keeping an eye on any investments, including managing an investment property.
The beauty of a pension is it’s all done for you.
Then sort out a LPA…Probably more important than a will for most people.
Before seeing an IFA and in order to get one’s brain whirring, I’d get a roadmap in my mind and list of what I want my pension arrangements to deliver and for how long e.g.
1- what actual level of income will you want - and how to be delivered e.g. whether U-profile, implications for tax etc, and how you see your needs in latter life(?)
2- I wouldn’t want to look at a single-asset property play (BTL) - I just see so many return-limiting aspects to this e.g. how income would be treated in overall tax position/potential CGT issues, I suspect the latter will come in to even greater focus now HMG will be seeking soft tax targets.
If possible, I’d look to engage through a reputable fund.
Of course, all depends on how much value you have to allocate.
The thing is though, unless you are very ‘comfortable’, a conservative (balanced risk) approach and risk appetite are the watch words.
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Alas, there’s no prospect of me becoming very comfortable.
Reasonably confident I’ll be able to buy food is more like it.
I remember a meeting with the actuary of the local authority’s pension fund, which is an LGPS scheme, around the time that pension freedoms were introduced. His advice was that if you are a member of the LGPS you should never, ever, ever, transfer the funds out, and that you should never believe a word if anyone says it’s a good idea. I imagine the same would apply to any other public sector defined benefit scheme.
While I retired earlier than planned as a result of permanent ill health, I have to say that a few years on it’s incredibly reassuring to know that on the last working day of the month (that’s today - hurrah!) money will appear in our bank account and that every April it will increase by the previous September’s CPI. Should I die before Mrs HH we know exactly how much she will get, which is also reassuring.
If I was a member of a public sector DB scheme coming up to retirement and thinking of taking the money out I’d think about it, and then rapidly stop thinking about it.
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I completely agree with hungryhalibut. I’m lucky enough to be in an LGPS. For every £1 you put in, they put in about £3.50 and everything is protected by law - it’s the main reason that in comparison to jobs in the private sector, working in the public sector is paid less for an equivalent job. Taking the money out - I actually don’t think this is allowed anymore - means you only get your contributions back and not ‘theirs’.
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It took my IFA three months to write a report (that I had to pay over £1000 for…) to analyse whether taking the capital sum from a DB was worthwhile. I’d already told them I knew it wasn’t financially worthwhile, that I accepted it pushed me over the LTA but that I had my own ‘peace of mind’ reasons for wanting to do it.
They wrote the report (over one hundred pages and to be fair while a lot was ‘boiler plate’ much of it was personalised) and they advised me not to request the transfer. Further they stated that they wouldn’t accept instruction to make the transfer.
I gave up. I do wish they had accepted my instructions though, even though they advised against it. But not enough to change the IFA that I’ve been working with and have built up a level of trust with.
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You could say the same thing when you were in your 20s about your career. Do you rely on the apparent safety of an employer or work for yourself. Or if you run a business, do I go into large debt and expand or stay small and apparently safer? Everyone is different and has different levels of satisfaction and risk.
If you spread your investments around the world, this gives you a level of security. Trying to guess the timing of markets is a waste of time and energy. On a positive note, markets want to grow. It’s human nature to look forward and want something bigger. There may be a slide at some point, but it will recover. It always does.
I’m sure I’ve said this before, but try looking and investing on paper for a trial. Do it for 6 months to see if you succeed/fail/like it. You asked whether it’s fun or a pain. I have always loved it. It’s something that has kept me hopeful no matter whatever is happening with my finances or work.
As a side note. I have to thank Scottish Widows for their prompt. I’d had a stakeholder pension with them for years and I started getting phone calls from the same fella asking if I wanted to transfer into one of their other pensions as it had better fund choices. My first reaction was what’s the catch, how much charges, why are you ringing? etc… there must be something in it for them? I ignored him and after a couple of times asked him to stop ringing. They sent some info and I didn’t look at it for months. To cut a long story short, I did transfer and it was the best thing I’ve ever done. No transfer fees, charges aren’t more (tbf they are, because better managed funds) and the difference in performance between my old pension and new one is amazing. I suppose they get more out of me through higher charges linked to the value. This made me look at my other pension and then relevant funds in the S&S isa. Changing the first pension at the time was pretty nerve-racking (for an hour), but once that was done it gave an appetite for more control.