The Strathclyde Pension Scheme
The Strathclyde Pension Scheme is a Local Government Pension Scheme (LGPS) – a statutory defined scheme that gave all joiners prior to April 2015 the option to retire at age 60. As one of the largest employer pension schemes currently running in the UK, it has over 230,000 members and covers 170 separate employers, with funds under management of approximately £20 billion.
Despite its many benefits and guarantees, numerous pension holders have been persuaded to transfer away from the Strathclyde Pension Scheme in favour of alternative pension arrangements.
Many have undoubtedly made this move attracted by a 25% tax-free cash lump sum and tempting Cash Equivalent Transfer Values (CETVs) – options made possible by the Pension Freedom initiative introduced by George Osborne in April 2015. This was intended to give pension holders the opportunity to be in charge of their “pot” and spend it as they saw fit. Unfortunately, it has also left them at the mercy of ruthless IFAs looking to get rich from high commissions and extortionate fees.
Over half of pension transfer advice found to be flawed
The latest research from the Financial Conduct Authority (FCA) makes for grim reading. They have found that from April 2015 to September 2018, a total of nearly £83 billion was transferred out of the security of DB pension schemes.
Of the 235,000 DB pension holders who sought advice on a potential move during this period, nearly 70% had been advised to transfer and close to half of this advice was found to be flawed.
With an average fund of £352,000 being transferred per person, it is little wonder the FCA described the figures as “deeply concerning” and that it was “disappointing to see that transfers are still being recommended at the levels we have seen.”
Given this evidence, the FCA are now consulting on caping initial transfer fees at £3,500. This is much lower than the 5% CETV fee that some IFAs have charged for DB transfers, plus initial and ongoing fees on top of this.
No one size fits all solution
A pension transfer is likely to be one of the biggest financial decisions anyone will take and it is clearly only appropriate for a small minority of people. Suitability should be judged on capacity for loss, personal and family circumstances, finances and in some cases the health of the pension holder. It is never a one size fits all solution, as many IFAs claim.
Find out more about the facts and fiction of DB transfers.
Only level six Pension Specialists are authorised to sign off DB pension transfers, a qualification held by 3,000 IFAs in the UK along with FCA permission to provide pension advice. Unfortunately, there are many more operating without the appropriate professional affiliations and we are aware of numerous under-qualified Scottish-based Pension Specialists taking DB transfer referrals.
Try our free transfer check
Faulty advice may have been given to those convinced to move away from the Strathclyde Pension Fund or other defined benefit pension schemes. It some unfortunate cases this has resulted in substantial losses.
Our free DB transfer check is designed to give you peace of mind about the security of your pension funds. Our experts can reconstruct any transfer made since April 2015 to find out if it was carried out done legitimately. Call us on 01382 200474 to find out more about how we can help you.