Richard Alexander (Columnist)
WITH so much bad press about pensions over the years, I would like to share a positive news story on the subject for a change. Who knows, you might just be in a similar position to the client I recently advised.
The lady in question had some pension questions relating to several ex-employers in the UK. When I met her, she explained that she had been a member of four different pension schemes before leaving the UK. Now, as she has been living in Spain for a number of years, she wanted to look at the options available to her.
As we talked, it became clear that all four pensions were final salary/defined benefit schemes which are designed to provide a level of guaranteed retirement benefits, based on length of service and final pensionable earnings.
This type of scheme is extremely valuable for people who complete years of service with the same company. But for those who chop and change employers, such schemes are notoriously less generous. My client had worked for an average of just over three years with each of her four employers and the total deferred pension benefits added up to a little over £6,000 a year.
There were a number of other personal considerations that necessitated a full investigation of these seemingly trifling amounts of pension benefit. Thus, we embarked on gathering the information we needed to advise the client properly.
Once the information from each scheme had been received, it was then necessary to run each through a detailed analysis programme. This is vital in identifying all aspects of each scheme thoroughly, discovering how they apply to the individual case and what level of performance would be needed to match the retained benefits in the scheme. Not only is this a regulatory requirement; without such an analysis, this type of scheme is so complex that you cannot be sure all aspects are being considered and, where relevant, compared with the alternative options.
The result of these investigations was quite enlightening. In total, these seemingly insignificant little pensions actually added up to an equivalent cash transfer value in excess of £250,000!
As a result of the advice I was able to provide, this client has been able to secure a more appropriate pension structure, giving her control over when and how to take her pension benefits. It has also enabled her to nominate eventual beneficiaries in a way that suits her, instead of being restricted to the prescribed benefits of the old schemes.
In this case it was right for the client to transfer the pensions but that is not always true. There’s no rule of thumb that applies to all. However, if you too have some retained pension benefits from old UK employers, you may well have rather more value in your pension than you realise.
As always, when seeking advice, make sure you do so from someone who is suitably qualified, experienced and authorised to deal with these complex matters.
