The Importance of Pension Reviews

Feb 21, 2018 | Tony Byrne's View

Do you have a pension you no longer pay into whether it is an ex-employer’s pension or a private one? Such pensions are known as paid up (private) or preserved (final salary). Technically private pensions are also known as defined contribution, DC, or money purchase pensions. Final salary pensions are also known as defined benefit or DB schemes.

The alphabet soup of descriptions alone is confusing enough before you even get into the details of each scheme. Believe you me pensions have become more complex than ever since the government introduced so called Pensions Simplification on A Day on 6 April 2006 by the then Labour Government. I was cynical at the time that it was just a guise to secretly increase taxation on pensions and unfortunately years later I was proven right! Clearly the experience of watching the entire TV series of Yes Minister and Yes Prime Minister followed by reading the books influenced my judgement!

Unfortunately pensions today are more complex than ever and the complicated rules mean that many people are unaware of the hidden tax traps with pensions which are increasingly burdening individuals with large unexpected tax bills. This is especially the case for higher earners and those people who have large money purchase pensions and/or long periods of service with a final salary pension scheme especially in the public sector. People with both public sector and private pensions are often the worst affected.

So with the advent of greater pension complexity and the creeping burden of higher, hidden taxes on pensions what can you do about it? Well a good starting point is to get a pension review from a pension specialist, ideally one who is a qualified Chartered and/or Certified Financial Planner, working for a firm of Independent Financial Advisers and who is the firm’s pension transfer specialist or PTS. A PTS is a permission granted by the Financial Conduct Authority, the FCA, to advise on final salary pension schemes. This individual is usually the firm’s pension expert.

We conduct pension reviews regularly and what we have found over many years is that in 8 out of 10 cases clients are better off transferring their pensions than leaving them where they are because they can achieve better performance and/or lower charges. In addition to this clients often benefit with better features and benefits including significantly greater death benefits and better options and flexibility at retirement. Where clients are clearly better off staying in their existing pension schemes we will advise them to stay put.

So if you have any paid up or preserved pensions why not contact us for a review of your pensions? You know it makes sense.

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