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Final salary pension

Final salary pension

Old Apr 2nd 2009, 8:47 pm
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Question Final salary pension

hi
Has anyone on this forum either transferred or considered transferring a final salary pension into an Australian scheme. We have taken advice from a funchal advisor who advises us to transfer but we are not convinced. Would like to hear from anyone who has done this or considering doing so.

Many thanks
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Old Apr 2nd 2009, 11:51 pm
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Default Re: Final salary pension

Originally Posted by bonniebuster View Post
hi
Has anyone on this forum either transferred or considered transferring a final salary pension into an Australian scheme. We have taken advice from a funchal advisor who advises us to transfer but we are not convinced. Would like to hear from anyone who has done this or considering doing so.

Many thanks
Bix has done this. He may see this post. Otherwise if you do two more posts, you can send Bix a PM .
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Old Apr 3rd 2009, 12:35 am
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Default Re: Final salary pension

Originally Posted by bonniebuster View Post
hi
Has anyone on this forum either transferred or considered transferring a final salary pension into an Australian scheme. We have taken advice from a funchal advisor who advises us to transfer but we are not convinced. Would like to hear from anyone who has done this or considering doing so.

Many thanks
Did they discuss the pros and cons of transfer?

For example, exposure to investment risk in future, and the fact that generally, you cannot transfer it back later on?

On the other hand, it is the right option for some.
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Old Apr 3rd 2009, 12:52 am
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Default Re: Final salary pension

Originally Posted by bonniebuster View Post
hi
Has anyone on this forum either transferred or considered transferring a final salary pension into an Australian scheme. We have taken advice from a funchal advisor who advises us to transfer but we are not convinced. Would like to hear from anyone who has done this or considering doing so.

Many thanks
I am in receipt of a final salary UK pension, which is paid into my Oz account each month via OzForex (Who are, incidentally, very good).

Only *you* can make a decision to leave the pension in the UK or transfer the calculated lump sum into an Australian super scheme. Advisors can be misleading: sometimes they will be taking a commisssion or cut - which can be substantial - and often they are not familiar with both countries tax laws.

Added to that is the exchange rate minefield: if the sum involved is large, a few cents' difference will make a big difference in the total amount transferring.

Then there is the question of where to put the money in Oz. We set up a self-managed super fund six months ago - on advice but mainly for tax saving reasons. But that was with spare cash, not money that we *had* to live off.

My own feeling is that most people who have final salary schemes would be better off remaining in them - especially after they retire. When in receipt of the pension they are usually better protected than contributing members if their employer goes to the wall.

My own view is that leaving the pension in the UK is rather like pound cost averaging in investments: each month you will gain or lose exchange rate-wise but overall will come out evens. If all the cash is brought over and it proves that the exchange rate is poor historically you are rather stuck with it!

But, again, only you can make the big decision. Hope this helps.
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Old Apr 3rd 2009, 8:30 pm
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Default Re: Final salary pension

Researched it in a fairly limited fashion about 18 months ago.
We went and spoke to a high profile outfit who who are in all the Emigration Magazines and are always represented at Emigration Shows.The company in question wanted 5% of my Final Salary Pension for all the alleged hard work involved in transferring it to Oz.

We paid about £150(one hunderd and fifty quid)to a "suit" who spent an hour trying to frighten us about the things that could wrong if we didnt use them, they wanted a good few hundred more just to advise to transfer or not.

As my pension will be paid by Govt and not subject to the stock market I am guessing that the mathematics involved would not be as difficult as with an invested fund.

So after a fruitless afternoon we came to our senses.

I think that when you are at the early stages of the migration process you want everything planned and thought through. Having achieved our visas last year/completed the validation trip and spoken to lots of people who are already over and settled, the fear that some of these companies try to bring on when touting for business seems aimed at people just starting the whole migration process and who are understandably concerned about transferring half way across the world.

I would say,dont buy into it. Am sure there are a good few posts on here about pension transfer, that will lead you down the right path.
Am equally sure that there are some advisers that are very good at what they do, but trading off peoples fears is a just a crap way of getting business.
The big play was the money you could save by achieving transfer within 6 months of arrival in Oz.But if I have understood it correctly then its only the gain of your fund during that first period in Oz that is taxed not the entire fund.

Also when in Oz I belive some of the local banks will advise and assist to get your pension over if thats what you want.Without the Mickey Mouse charges.
Might be worth having a look at some of the banks web sites or speaking to their UK branches.

I stopped worrying about it as Visa is in the bag, no plans to move over as yet and may already be receiving pension when I do.
But whether I go before receipt of pension or not we decided to leave it in UK.

The very best of luck with your decison.
Do not surrender a Final Salary Pension lightly.
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Old Apr 3rd 2009, 11:28 pm
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Default Re: Final salary pension

>>Do not surrender a Final Salary Pension lightly.<<

Exactly. There are millions out there (in here!) who haven't one but wish they had. OK, a final salary scheme won't usually have a residual value on a couple's death but it has great advantages. Think hard and long before taking the money out of it - exchange rates are only a minor consideration in the great scheme of things.

And from what people say, finding and following the rules for transfer of pension is not overly difficult: companies scaring you witless and offering to do it for a percentage are nothing short of criminal. What on earth has a percentage got to do with filling in the paperwork? I suppose an extra "zero" in the capital sum *does* use more ink......
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Old Apr 3rd 2009, 11:48 pm
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Default Re: Final salary pension

Originally Posted by pinoybill View Post
Do not surrender a Final Salary Pension lightly.
This would also be my advice. Personally I wouldn't (and didn't) transfer mine. I value it very much. I'm also returning to live in the UK so thankful that I did not transfer.
Some friends transferred their final salary index linked NHS pension 18 months ago. They got $90000 into their super fund, today it is worth $50000
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Old Apr 4th 2009, 12:54 am
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Default Re: Final salary pension

I have a Final Salary pension waiting in the wings for when I retire. I didn't realise about the 6 month time frame when transferring things over so I have left it in the UK.

In terms of transfer, if I ever did decide to do it (which I think is unlikely), I would not pay anyone - certainly not on a percentage basis. Contacting the UK Pension Team and your Australian Super people should provide sufficient instruction on how to do it.
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Old Apr 4th 2009, 4:49 am
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Default Re: Final salary pension

My Oh got a final salary payout here in Aus. Quite a few years before he retired they gave the option to transfer into a fund linked to the market or remain on final salary we made the decision to stick with final salary and are so glad we did.

We have nothing to do with financial advisers at all as they are in business for themselves. We saw plenty and were not at all impressed. If anyone is going to lose our money its us not some person we have to pay.
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Old Apr 4th 2009, 8:29 am
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Default Re: Final salary pension

Both me and hubby have good final salary public sector schemes that next to the house are our biggest asset. We have decided to leave his in uk and look at whether it is sensible to transfer mine. This is a very individual decision and there are a number of things to consider. The things I am considering are

age - I can take my pension early at 55 in uk but earliest 57 in Oz
tax - I will get my lump sum and annual income both taxed if I am in Oz and leave my pension in uk. I will get them tax free if I transfer them to Oz
flexibility - a pension pot in Oz has more flexibilty, but I can't get it out if I decide to go back to uk
currency - if my pension is left in uk, I will be not know how much money I have every month
risk - my pension in uk is in no risk of going bust, an Oz one -even if I specify it is invested in low risk securities - is subject to the market

I am paying for advice on the financial benefits of transfer, weighting up the amount I would have available for transfer v the tax position. I will decide what to do when I see the full position. I went into looking at this pretty certain I would keep my pension in uk. I didn't realise the tax position on my lump sum so am now looking at it carefully. We are not moving until the end of the year so have time.

There isn't a risk free option here - just different types of risk. If you leave it in uk you have currency and tax risks, if you move it you have investment risk and problems with moving the fund out of Oz.

Good luck
Scotty
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Old Apr 4th 2009, 10:29 am
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Default Re: Final salary pension

Both Mick and I have quite big UK pensions...still in the UK.
In the past I have approached a few companies regarding transferring them over and the charges they have quoted me are unbelievable!!
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Old Apr 4th 2009, 10:53 am
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Default Re: Final salary pension

Originally Posted by ozhappy981 View Post
Bix has done this. .
I did indeed OzH.

A UK pension can be transferred to a QROPS fund with no (UK) penalty. If it is not a QROPS registered fund then the UK government will take 40% tax on the total transferred amount.

It could be taxable in Australia but it is only the growth that is taxed. Growth of the pension from the time you became tax resident to the time you transfer. Pretty sure the rate is 15%.

However if you transfer in the first year or two the likelihood is that a UK pension would not have grown much so the tax figure would be very small indeed.

I cannot advise anyone on whether their pension is worth transferring or not or to which Super to use. I can only tell you what I did.

I had a final salary scheme pension that had been running for 20 years. As quoted in this thread you will generally see advice that you should never transfer such a pension as it is guaranteed. I baulked this and did transfer mine just before the new QROPS rules came into force.

Why ?
Because my UK company had been playing silly buggers for a while and started to dilute the fund. It was effectively a non viable fund because they had taken long periods of holiday in the past where they paid nothing into it. Just wanted it to perform to the minimum they could legally get away with but that backfired when bad years came along of very low investment returns. It is now a closed scheme.

Another reason is I do not trust them or the UK government. I would rather have my money in the country in which I reside.

The Australian Super schemes are lightyears ahead of the UK and close behind Singapore who are regarded as having the best in the world.

If I kicked the bucket the UK scheme would "generously" pay my wife one third of my pension value as a pension. When she dies the money would be totally "lost".
In Aus she gets 100% and the money is always your families to inherit.

What you can do with the money invested is your decision - not some UK "old boys" trustees who let's be honest more often than not are a load of old farts who know nothing about finance and get their positions by leghopping.

You can decide whether it is invested at high, medium or low risk.

You can decide into which type of investment it is placed.
ie property, currency, stocks, bonds, shares or mixtures etc.

You can do more with the money like drawing on the fund to put into other types of investment. Gold bullion, art work or property perhaps.
For example buying an investment property which pays the rent back into the fund.

There are other flexibilities in the Aus Super system that I do not think are available in the UK. Another one is salary sacrificing directly into the Super for tax concessions.

When I transferred my pension I paid no 15% Aus tax because my UK pension growth was zero and would remain zero until it reached maturity.

My Superfund did the transfer at no cost to me as I negotiated a zero fee based on the fact they would be getting a 20 year pension value into their funds.

The exchange rate when I transferred was also very good.

Timing can be very important and I think I hit it just right. I know I was going to get nil growth on the UK fund.....forever. Whereas my Super grew 35% in 3 years. 20% has been lost again in the last 2 years but it will bounce back and give me far more than the UK final salary scheme would give me.

It is a very tricky subject and only the individual can decide what to do. As you can see above there were a few things running in my favour.

IMO though the UK final salary scheme is not as great as it is claimed to be and I think the Aus Super is.....super
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Old Apr 4th 2009, 10:57 pm
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Default Re: Final salary pension

Originally Posted by Bix View Post
IMO though the UK final salary scheme is not as great as it is claimed to be
Mine is
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Old Apr 5th 2009, 1:37 am
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Default Re: Final salary pension

Originally Posted by Grayling View Post
Mine is
Good for you G.

And that is exactly why it has to be an individual assessment.
There are good ones - like yours.
There are bad ones - like mine was.

But they certainly aren't all good as is claimed.
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Old Apr 5th 2009, 3:59 am
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Default Re: Final salary pension

>>IMO though the UK final salary scheme is not as great as it is claimed to be and I think the Aus Super is.....super<<

Your post shows how each individual's circumstances is different to another's. And, therefore, how the decision must be up to one's own analysis.

Some facts (as I understand them, anyway) about UK final salary schemes are:

* Once you are taking the pension you are not normally entitled to transfer out (Since you have "crystallised" the actuarial value of your "bit" of the fund.)

* Although you have little say in what the scheme invests in (except distantly, by election of trustees) you are not on the other hand liable for shortcomings.

* Your company is responsible for maintaining the fund as a going concern (In your case it may have been in neglect?)

* Should the company go bust or dispense with its final salary scheme, the scheme should be sufficiently funded to continue with the pensions already in payment. Those still contributing would be lower down the list of "creditors", and indexing might not be possible. The trust should be independent of the employer, at least at that level.

* By transferring your built-up pension funds to an Australian Self Managed fund you will have total control over it - but also have responsibility for any shortfall in performance. Many of my Australian friends are looking at very bleak balances at present, and are having to sell assets at what could be fire sale prices to maintain their mandated annual percentage withdrawals (even at the temporarily halved rate). The future performance of their funds will be a fraction of what they were expecting because of these withdrawals from capital.

(My understanding of final salary schemes is based upon my own, which - touch wood - is in relatively good health despite the company being battered.)
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