Douglas McIntyre was recently featured in The Herald Scotland in an article written by Simon Bain about pension planning.
WHY SWAPPING MY OWN POT FOR CASH IS SUCH A BAD IDEA
“THE new freedom to access pension pots is tempting hundreds of thousands of people to consider transferring their supposedly ‘gold standard’ final salary pension into a pot they could cash in.
Almost 10 per cent of employees approaching retirement are interested in trading most or all of their final salary pension, a further 11per cent would be interested in exchanging half of it, and another 24 per cent less than half of it, according to research by Towers Watson.
Since April last year, Chancellor George Osborne has not only loosened the restrictions on pensions but cut the tax bill for passing them on to dependents. It sounds like a tempting proposition. But would it make sense?
I decided to put it to the test by investigating my own principal pension, which I paid into between 1981 and 2003.
First, I asked the scheme’s trustees for a ‘transfer out member statement’.
It offered me a transfer value of £245,866 – a tidy sum to convert suddenly into cash. But closer inspection shows the full value of the pension is actually £353,774.
Like so many schemes, this one is in deficit, and that usually means reductions in transfer values – in this case one of 30 per cent.
The pension I will be offered on retirement, of £12,466 a year, is based not on the transfer value but on the full value of the fund.
According to Douglas McIntyre, of Glasgow-based Loch Fyne Financial, who analysed the figures, if I were to transfer the value offered into a personal pension, I could get an annuity from the Prudential paying me £4,834 a year – barely a third of my guaranteed pension from staying put.