By Steve Cashmore, Forth Capital
This is an area that needs so much investigation and a decision cannot be taken lightly. But we live in a different world and the pension regulator has now offered a freedom and choice! The issue is that the new UK pension freedom rules of defined contribution (personal pensions) have not been extended to the defined benefit world (company schemes).
So many factors now need to be considered…. Spouse’s options, Health, Lump Sum Death Benefits, Tax Free Cash (Pension Commencement Lump Sum), Financial Strength and Stability of the Employer, Flexibility of the Income, Inheritance, Investment control, etc etc etc.
Some company pension schemes only offer return of contributions in the event of a member's death before retirement. In my many years as an advisor I have seen many company schemes where this is the case… the worst I have seen was a company scheme that had a value of over £600,000 yet in the event of the members death before retirement his family would receive only return of his contributions approx £65,000 in this case… Explain that to your spouse or to your family!!
Another main area that gets overlooked by Pension Scheme Holders is the Financial Health/Strength of a Company Scheme. If a Defined Benefit scheme is underfunded and the employer becomes insolvent the PPF (Pension Protection Fund) will consider taking over the liabilities, but there is a cap on what they will pay out… Currently £32,761 pa – the surplus is lost!!.
Just to highlight how many schemes are in a deficit, the PPF 7800 index states that out of 6057 schemes, 4998 were in deficit as at August 2015.
A major concern if your pot value is over £1,000,000
As mentioned above these are just a couple of points to consider regarding the protection of YOUR money and YOUR future.
Please ensure that you receive professional, qualified, financial advice before considering your options.
Author's bio
With over 20 years’ experience in the Financial Services Industry, Steve joined Forth Capital in 2015 to take the position of Regional Head for the DIFC subsidiary.
Working for a number of key financial institutions such as Lloyds, Zurich Life and Legal and General, Steve developed an array of management experience before setting up his own financial services company, Gold Independent Financial Advisers, in 2003.
Relocating to Dubai in 2013 with his young family as a Senior Financial Planner, Steve has a superb understanding of the local market and the specific requirements of expats based in the Middle East.
