Pension transfers and retirement planning. An example scenario

In this example scenario, we consider the case of Joe and Jackie Nash, both in their early 50s and looking to retire when they reach state pension age (67). They have multiple pension plans and want to consider transferring them into a single plan, as they believe this will be the most cost-effective solution. 

This example scenario is not a real-life case study and is based on a number of clients our financial planners have worked with. Additionally, pensions are a form of investment, and carry risk, so the value and the income from them can go down as well as up and you could receive back less than what you contribute.

If you’re thinking about transferring your own pensions, there are a few important things to consider before making a move:
Investment options:

• Look at what investment choices are available with the new plan. Do you need more flexibility or a wider range of options?
• Fees and charges: Compare the costs. Some plans may have higher fees and penalties for transferring
• Valuable benefits: Make sure you won’t lose any important features or guarantees that your current pension offers
• Employer contributions: Check whether your employer will stop contributing if you transfer it elsewhere
• Final salary schemes: If you’re in a defined benefit (final salary) pension, transferring is usually not recommended. You should seek professional advice before making any decisions

Joe, 52, is a sports journalist with a varied career. He’s currently on a short-term contract with Sky Sports and contributes to their money purchase pension scheme, which he’ll leave in three months.

Over the years, Joe has built up seven pension plans, including a self-invested personal pension (SIPP) which he was considering consolidating. His total pension fund value was approximately £650,000. He wanted to know whether he should consider transferring these pensions into one pot. 

Jackie, 53, works as a speech therapist for Bupa and contributes to their workplace pension scheme.

She also holds a defined benefit pension (also known as a final salary pension scheme) from her time with the NHS.

In addition, Jackie had two frozen personal pensions from earlier self-employment, valued at around £55,000 combined.

Jackie wanted to look into transferring her older pensions into her Bupa scheme. 

Joe and Jackie came to Evelyn Partners to review their pensions and retirement position. Knowing their chosen retirement age, their financial planner obtained state pension forecasts for them both and built a detailed cashflow model to project their income and expenditure in retirement.

Upon review, it was discovered that two of Joe’s older pensions offer enhanced benefits:

• One included a guaranteed annuity rate (GAR) of 11%, payable at age 65. A GAR is a fixed rate of income promised by a pension provider, typically set when the pension was first taken out. It determines how much annual income you’ll receive for life, regardless of market conditions, in exchange for your pension savings
• Another offered a tax-free cash entitlement of 45%, which is significantly higher than the standard 25%

If Joe were to transfer these pensions into another scheme, he would lose these valuable benefits. Therefore, the financial planner recommended that he keep these plans as they are.

His remaining six pensions, including his current Sky scheme, do not hold any such benefits so will be transferred into a new low-cost SIPP with a fixed annual fee, managed by Evelyn Partners. This approach reduces paperwork and ensures Joe’s pension investments are aligned with his attitude towards investment risk.

Jackie’s NHS pension offers inflation-proofed guaranteed benefits. As the name suggests, these benefits are linked to inflation, meaning that they keep their purchasing power over time. This is a valuable asset that would be lost if the pension was transferred to another scheme. Therefore, the financial planner recommended keeping this plan in place.

Her Bupa scheme has low charges and there is a good choice of investments within it. It was recommended that she transfers her other remaining pensions into the Bupa scheme. The financial planner then reviewed her investment choices to make sure that they are in line with her attitude to risk and overall retirement goals. 

By reviewing and consolidating their pensions where appropriate, Joe and Jackie have:

• A clear understanding of their retirement position
• Retained valuable benefits on some of their existing plans
• Pension investments aligned with their risk profiles
• Fewer pension plans and reduced fees
• A structured financial plan for the future

This example scenario shows how reviewing and transferring pensions, while preserving valuable benefits, can lead to a clearer, more cost-effective retirement plan. Our advisers are here to help you understand your pensions, align your investments with your goals, see if a pension transfer is the right choice for you, and provide peace of mind for the future.

Book an initial consultation today to discover how we can help you.