Money Box Live: Pension transfers

Money Box

BBC

Business

4.2 • 825 Ratings

🗓️ 4 July 2018

⏱️ 29 minutes

🔗️ Recording | iTunes | RSS

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Summary

Three years ago pension freedoms were introduced, allowing millions of people to transfer out of their Defined Benefit schemes and cash in their savings. The appetite for transferring appears to have grown since then - a total of more than £34bn being moved around in the last calendar year, according to the most recent figures from the Office for National Statistics.

So why would you want to give one up? The high transfer values is one reason - a pension of £10,000 could translate to a cash sum in the hundreds of thousands of pounds. But going down this route is not the right choice for every member of a Defined Benefit pension scheme. There have been concerns raised by regulators that unscrupulous financial advisors have been swooping in on members of these schemes, enticing them out of their pensions when that may not be the right move for them. A case in point was for workers at British Steel.

To talk about the pros and cons of transferring out of a safeguarded pension scheme, Paul Lewis will be joined by a panel of guests:

Ros Altmann, former pensions minister Melinda Riley, Head of Policy and Technical at The Pensions Advisory Service Claire Walsh, Independent Financial Advisor James Baxter, Managing Director at Tideway Wealth

You can e-mail your pension transfer questions now to moneybox@bbc.co.uk or on Wednesday 4 July between 1pm and 3.30pm call 03700 100 444. Standard geographic charges from landlines and mobiles will apply.

Presenter: Paul Lewis Producer: Elisabeth Mahy Editor: Andrew Smith.

Transcript

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0:34.1	life, check out BBC Sounds. This is the BBC.
0:40.9	Welcome to the download of Moneybox Live, the programme about your money.
0:46.5	Hello, have you paid into a company pension which promises you an income at retirement
0:51.6	that's linked to your pay and is guaranteed for life.
0:55.0	Well, if so, you have a very valuable asset.
0:57.8	And you can transfer that value out of the guaranteed scheme into one you control yourself.
1:02.9	But with no guarantees, you can even cash it in if you want to with some tax off it.
1:08.0	Two financial regulators have issued a warning letter to members of these schemes recently.
1:12.7	Warning was it will probably not be in their interest to make that change.
1:16.0	But with a promised pension of £10,000 being worth perhaps £300,000 when you transfer it, many have been tempted.
1:24.9	More than 72,000 people in the last year alone, and they've transferred out more than 14 billion pounds.
1:32.3	So today, Moneybots Live is about transferring your company pension. When is it a good idea and when should you avoid it?
1:39.3	Now, get your pens out. There's some jargon here. These schemes are nowadays called defined benefit or DB schemes.
1:47.2	They used to be called final salary or career average schemes because the pension is related to your pay and it's promised from retirement age for life and some or all of it will rise with inflation.
1:57.1	And that's why the transfer value, that's the amount you need to buy such a pension on the open market, is so high.
2:03.3	The schemes you move to are more like pension pots, they belong to you.
	...

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