Should I transfer my pension fund to a SIPP or QROPS?

By: John Hayward 3 February 2017 Topic(s): Money Purchase Pension Schemes, Pensions, QROPS, SIPP, spain
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There are a number of reasons why people who have money in pension schemes should be looking closely at what they expect to get out of them. Brexit has had a huge impact on pension schemes. The values of Money Purchase Schemes, those whose value is based on the performance of the underlying investments, may have increased since the Brexit vote through the apparent higher levels of stockmarkets, the FTSE100 in particular. The problem is that many trustees of these schemes have become more cautious in their investment outlook and may not have benefited from the upturn in stockmarkets.

Defined Benefit/Final Salary schemes, those which “promise” a pension based on years of service and salary, have a different problem. The pension that many believe is guaranteed may not be. This is because the majority of Defined Benefit schemes are in deficit meaning that they do not have enough money to cover all the pensions that are expected. The Pension Protection Fund (PPF) was developed recently to help cater for this problem. However, the PPF is a private, not Government, body and, as such, cannot guarantee full pensions.

The positive news is that, with Defined Benefit Schemes, it is possible to transfer from an ailing scheme and the Transfer Value is likely to be very generous compared to two or three years ago. This is because one of the factors when calculating the values is Gilt Yields, the interest paid on Government Bonds. When Gilt Yields are low, Transfer Values are higher. Gilt Yields have plummeted over the last two to three years. What this has meant is that, for anyone transferring their funds to a personal arrangement, values may be 50% or more than they were a year or two ago. Gilt Yields have increased recently but are still way down on 2014.

How do I find out my situation?

We can help by requesting a Transfer Value from your pension scheme. For a Money Purchase or Personal Pension, all we need is your latest statement. This does not commit you to transfer but enables us to provide you with a detailed report as to the advantages and disadvantages of transferring. We do not charge you for this report. Some schemes, such as Government and Superannuation schemes, no longer allow transfers. It is possible, if not likely, that the UK Government will put further restrictions on transfers. This could mean, in the worst case scenario, that you could be stuck in a scheme which is worthless.

For those in Defined Benefit, Money Purchase, or Personal Pension Schemes, a review of your current situation is vital. Whether you are a UK or a Spanish resident, we have the solutions through SIPPS and QROPS.

Article by John Hayward

John HaywardIf you are based in the Costa Blanca area you can contact John at: john.hayward@spectrum-ifa.com for more information. If you are based in another area within Europe, please complete the form below and we will put a local adviser in touch with you.

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