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Pension Transfers – the need for advice

This feedback comes at the same time that the regulator has expressed fears that the members of eight of the UK’s largest company pension schemes are targets for rogue financial advisers, prompting their intervention. The Financial Conduct Authority (FCA) and the Pensions Regulator have alerted the trustees of company pension plans, including Lloyds Banking Group and J Sainsbury, that unscrupulous advisers may try to persuade their members to transfer out. They acted after a surge in pension transfers, following freedoms announced in 2015, with the quarterly total hitting a record £10bn in the first quarter of 2018, according to official statistics. They fear that advisers are trying to prey on worries about the future of pension funds. The regulators warned the trustees at J Sainsbury and Asda after the two supermarket chains announced a merger in April.

Unfortunately, like in any industry, there will always be the good and the bad and that is no different in financial services. The fact that transfers exceeding £30,000 require specialist advice is a real positive as it should avoid inappropriate advice. At Blacktower, we always adopt a ‘four eyes’ principal whereby any advice given is checked not only internally, but always requires external advice in the case of transfers from defined benefit schemes. Pension transfer advice is very technical and we will only ever recommend a transfer if the benefits from the existing scheme can either be matched or improved on.

The real area of concern however remains for the smaller pension pots of less than £30,000 as there is no advice requirement. I was helping someone recently who had four separate periods of employment in the UK that attracted a pension entitlement. Whilst these four pension pots were individually less than £30,000, the total exceeded £100,000. As cited by the FCA, an unauthorised adviser could have recommended an inappropriate pension transfer leaving the individual worse off than had she kept the pensions where they were. Whether a transfer is £10,000 or £1m we follow the same strict rules to ensure that best advice is always given. Sadly, that is not always the case as evidenced above.

There are potentially thousands of expats living in Cyprus who have not yet drawn on their private or company pension plans. With annuity rates at rock bottom, there is often a very strong case to transfer your entitlement overseas. Every case, however, is different. I have had personal experience of helping a vast and varied number of individuals and no two situations have been the same. For that very reason, I urge anyone not yet retired to seek professional advice from a regulated and authorised firm so as to avoid the many sad cases of people suffering from unscrupulous ‘advisers’ elsewhere.

Other News

The Pensions Black Hole

Meeting financial advisorThere’s quite a buzz around pensions at the moment – and rightly so, as they provide the backbone of our income in our later years. But currently, pension deficits are hitting the news, and figuring them out can still prove difficult.

Pension deficits concern what are commonly known as “final salary pensions” or Defined Benefit schemes.   Final salary or defined benefit (DB) schemes are essentially occupational pension schemes that provide a set level of pension at retirement, the amount of which normally depends on your service and earnings at retirement or in the years immediately preceding when you retire. Because your pensionable salary is used as one part of the formula in order to calculate your pension, a final salary scheme is commonly referred to as a ‘salary related’ scheme. Two common examples of ‘final pensionable salary’ would be your last year’s pensionable earnings or an average of your last 3 years’ pensionable salary.

Recently, there have been high-profile failures of these systems, such as the folding of Monarch Airlines – and the collapse of their pension fund. Initially, it appeared that owners could still walk away with a profit (after new hands tried to turn the airline into a more accessible and “Ryanair-like” product) by offloading debts, and this included dropping the pension fund. Ironically, this was once a major credit to the business. The fund, which is now in the Pension Protection Fund (PPF), had been under speculation of being left short when the business first began to struggle back in 2014, after years of asset-stripping.

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There are many wonderful and unique attractions to be found in Portugal, and there is, without doubt, something for everyone who visits this beautiful and varied country. However, it would be hard to find an activity in Portugal as popular with both the locals, tourists and expat population as golf. Due to the agreeable climate, […]

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