Transcript PowerPoint template

Pension transfers and
switches
Qualified Income
Paul Taylor ACII FPFS
This presentation is directed at professional financial advisers. It should not be distributed to, or
relied upon, by private customers
Today
2
•
Why enter the transfer market
•
The transfer drivers
•
Opportunities
•
Pension Switching
•
How AEGON can help
What makes up the transfer market?
Occupational transfers
 Defined benefit
 Money purchase
Personal pension switches
Premium redirection
Benefit Crystallisation
Pension transfer market
 £1.3 trillion in occupational schemes*
 £130 billion contract DC*
 £130 Billion contract – unbundled*
 50% in payment**
 41% deferred**
•*UBS 2008
•**The Pensions regulators purple book 2009
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Pension transfers - The objections
There’s a recession, a credit crunch.
I’m going to defer any action until things are clearer
The FSA & Compliance issues
I don’t do pensions transfers – they’re so complicated
5
Transfers pre - 6/4/2006
Controlling Directors
High Earners >45
Appendix XI tests
TFC certificates
Early vesting certificates
PN10.34
Lump sum death restrictions
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Transfers post - 5/4/2006
 Controlling Directors
 High Earners >45
 Appendix XI tests
 TFC certificates
 Early vesting certificates
 PN10.34
 Lump sum death restrictions
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Transfer freedom
No restrictions, tests or TFC certificates
But must be a ‘recognised transfer’
Partial and/or Split transfers possible
 Beware - Partial transfer if TFC>25%
Not treated as contribution - no impact on annual allowance
Not crystallisation event unless to overseas
8
Pension transfer market
You have to be authorised to do
Occupational pension transfers.
So…..
Are you authorised?
9
Pension transfer market
Key pad question…
Are you authorised to do
Occupational pension transfers?
Yes. Press 1
No.
10
Press 2
Pension transfer market
Key pad question…
Do you want help to become
authorised to do Occupational
transfers?
Yes. Press 1
No.
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Press 2
Pension transfer market
Refer to authorised IFA
Use a Pension transfer Bureau / Service
Engage service of / register 3rd Party as a transfer specialist
Ultimately…… Get qualified & authorised
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The transfer market drivers
Early leavers
Members want more control & choice
Wider & more suitable benefit choice
Pension sharing orders
Overseas transfers
Scheme reconstructions
13
Leaver options
Preserved pension
New employer's scheme
Transfer
PP/stakeholder
Early retirement
s32
Refund of contributions
Overseas?
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Preserved pension
May be best option
Some considerations
 Revaluation of Defined benefits
 Scheme funding position
 Benefits on offer & when payable?
15
DB transfers - TVAS
Report details:
 Investment return to match scheme benefits at retirement
 Analysis of immediate & long term death benefits
 Comparison of TFC
 Takes charges into account
 Based on various assumptions
 Contrasts DB, s32 & PP
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Wider benefit choice
Risk
Income risk to client
Drawdown
Full income risk with
policyholder.
Potential for investment
growth.
Income for Life
Guaranteed income =
less risk.
Potential for investment
growth.
Annuity
No income risk with
policyholder.
No potential for
investment growth.
Investment control
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Transfer considerations
 Benefits gained or lost
 Impact of future annuity rates
 New employer scheme
 Transfer club
 Charges
 Investment choice
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Transfer considerations
Transfer value offered
State of health
Term to retirement
TFC & death benefits
Attitude to risk and personal circumstances
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Transfer reasons
Wider investment choice
Consolidation
Lower charges
New job
Poor administration
Benefits, shape and availability
Will the client likely be better off?
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Reasons to transfer
8%
Better fund
1 performance
4%
2 Consolidation
10%
46%
4%
3 Lower charges
4 Flexibility
5 Moved Job
28%
6 Other
AEGON pension transfer survey July 2007
Transfer opportunities
Pensions & divorce – sharing orders
Court order specifies % of CETV to be deducted
Private sector schemes must offer transfer
Advice needed by both parties
Opportunity to advise & build professional connections
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Transfer opportunities
Occupational scheme reconstructions
Advice to employer
How to secure benefits outside scheme
How to protect members & avoid comeback
Advice to member
Members being forced out
Accept trustees proposal or choose alternative?
TFC protection minefield
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FSA Switch Review December 2008
FSA switching review
 30 Firms
 25% had 33% + cases judged unsuitable
 50% had up to 33% unsuitable
 Only 25% had all cases judged as suitable
Why Unsuitable?
More expensive than the existing scheme or stakeholder
Asset allocation out of line with risk profile of client
Lack of investment reviews
Loss of benefits
Source: FSA Switch Review December 2008
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Flexible Pension Plan – Why Suitable
Extra product costs without good reason
- FPP vs Stakeholder /RU 64 /Sandler shape
Funds unsuitable
- FPP – fund choice/cost / IRP /automated rebalancing /asset
allocated model portfolios .
Ongoing Reviews
- Portavista FPP - Online services
Loss of benefits
- FPP GAR – Income for life
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In summary
Buoyant transfer market
Still complex subject
We can help
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Important information
 This information is based on AEGON Scottish Equitable’s
understanding of current legislation, taxation law and HM
Revenue and Customs practice which may be subject to
change.
 This presentation is for professional financial advisers
only. It isn’t for private customers and shouldn’t be given
out to, or relied on by, them.
 AEGON UK plc, Registered Office: 90 Long Acre, London
WC2E 9TF.
 Registered in England (No. 3679296). Member of the
AEGON Group. www.aegon.co.uk