Final salary pension funds - buy-in and buyout - Good idea????

[mikeprice]

Hi all

 

I have been looking for some intelligent and helpfull people that may be able to help me with something

 

but I couldn't find any so I thought I would ask you lot

(that was a joke - just so you know!)

 

 

My old pension fund (that I am receiving as I am old) has sent a brochure saying that they have taken a load of their money and used it to buy an insurance policy that is guaranteed to pay out every month

 

this is apparently called a buy-in - and makes the pension fund less reliant on the company owners - hence more secure

 

They have also said that their ultimate target is a 'buy-out' - which means buying into enough insurance policies to totally cover the whole pension commitments until all the pensioners have kicked the bucket - including their spouses

At that point the pension fund would have no further function and would cease to exists as each pensioner ( and future pensioner) would have their own personal annuity with these companies which is guaranteed to cover the pension that they are entitled to for the rest of their lives

 

 

 

Hence no further reliance on what remains of the company and better security

 

 

 

 

sounds good

 

 

 

probably

 

 

Anyway - I have been looking around for proper information about all this and I have found loads of stuff from companies that can offer these policies to pension companies - and info from pension people who are looking to go this way

 

 

but nothing from the point of view of the poor bu***r who needs to live of this money for the next x years

 

I was wondering if there is anyone out there who has looked into this and found proper advise about whether this is as good as I am being told

 

 

not that I have any choice - but it would be nice to know whether I being given a lifejacket or a rock

 

TIA

 

Mike

[stevejp]

Hi all

 

I have been looking for some intelligent and helpfull people that may be able to help me with something

 

but I couldn't find any so I thought I would ask you lot

(that was a joke - just so you know!)

 

 

My old pension fund (that I am receiving as I am old) has sent a brochure saying that they have taken a load of their money and used it to buy an insurance policy that is guaranteed to pay out every month

 

this is apparently called a buy-in - and makes the pension fund less reliant on the company owners - hence more secure

 

They have also said that their ultimate target is a 'buy-out' - which means buying into enough insurance policies to totally cover the whole pension commitments until all the pensioners have kicked the bucket - including their spouses

At that point the pension fund would have no further function and would cease to exists as each pensioner ( and future pensioner) would have their own personal annuity with these companies which is guaranteed to cover the pension that they are entitled to for the rest of their lives

 

 

 

Hence no further reliance on what remains of the company and better security

 

 

 

 

sounds good

 

 

 

probably

 

 

Anyway - I have been looking around for proper information about all this and I have found loads of stuff from companies that can offer these policies to pension companies - and info from pension people who are looking to go this way

 

 

but nothing from the point of view of the poor bu***r who needs to live of this money for the next x years

 

I was wondering if there is anyone out there who has looked into this and found proper advise about whether this is as good as I am being told

 

 

not that I have any choice - but it would be nice to know whether I being given a lifejacket or a rock

 

TIA

 

Mike

 

My head starts to spin with anything like this, so really can’t offer any advice, per se. However, I was just wondering; are you by any chance still a member of one of the teaching unions? ( I know many people stay as members for a few years in case some evil little wotsit decides to try to make a few bob by trying to make some allegations). If so, I know they all tend to be linked with partners who provide financial advice, and they may be able to help.

 

Hope this helps - apologies if not!

[mikeprice]

My head starts to spin with anything like this, so really can’t offer any advice, per se. However, I was just wondering; are you by any chance still a member of one of the teaching unions? ( I know many people stay as members for a few years in case some evil little wotsit decides to try to make a few bob by trying to make some allegations). If so, I know they all tend to be linked with partners who provide financial advice, and they may be able to help.

 

Hope this helps - apologies if not!

 

Thanks

 

yup - basically I feel I need to be a member for life due to the possibility of the 'little toe rag' situation - or more likely - disturbed and vulnerable ex-kid who needs some one to blame and find a 'no win no fee lawyer' etc etc etc

but could really do with a proper counsellor

 

 

but this - at present - doesn't apply to the TPS - so the free advise doesn't apply - as far as I know - other views would be welcome - NEU if that is relevant - after the ATL was boarded and overcome - sorry 'merged with the NUT with total agreement'

[stevejp]

Thanks

 

yup - basically I feel I need to be a member for life due to the possibility of the 'little toe rag' situation - or more likely - disturbed and vulnerable ex-kid who needs some one to blame and find a 'no win no fee lawyer' etc etc etc

but could really do with a proper counsellor

 

 

but this - at present - doesn't apply to the TPS - so the free advise doesn't apply - as far as I know - other views would be welcome - NEU if that is relevant - after the ATL was boarded and overcome - sorry 'merged with the NUT with total agreement'

 

ATL, prior to the failing to repel boarders, used lighthouse financial services - not sure whether that’s still the case, but I believe it is. My understanding was that they are there for you (not that they’re trying to sell you anything - totally altruistic, of course ) and can advise on all aspects of your finances - not just TPS. Might be worth a ‘phone call, as independent advice (which I think you need, by the way) can be costly, I believe.

[mikeprice]

ATL, prior to the failing to repel boarders, used lighthouse financial services - not sure whether that’s still the case, but I believe it is. My understanding was that they are there for you (not that they’re trying to sell you anything - totally altruistic, of course ) and can advise on all aspects of your finances - not just TPS. Might be worth a ‘phone call, as independent advice (which I think you need, by the way) can be costly, I believe.

 

hmmmm

 

I have a tame ish financial advisor - so I might give them a ring if I have to pay someone

 

however, I have no choice in this - not even a vote - so paying for advice seems a bit of a waste

 

 

 

Weird thing is that I am not really bothered about me

 

but my wife will be dependant on whatever I leave behind if I die before her so I feel I need to at least know where I am leaving her

OK - plus a little bit - but it is kinda up to me to sort out something to make sure she will be OK

 

 

 

 

 

 

 

somewhere up there my Mum is looking down and saying 'just like his Dad'

 

OK - I'll take that

[jmak]

So, with the obvious disclaimer that I am not a financial adviser....

 

I wouldn't worry about this.

 

With both buy-in and buy-out (which as you say is essentially the same, except one is for part of the fund/liability and the other is all of the fund/liability) it's about transfer of risk. Once you are drawing your pension you're fairly well protected whatever happens.

 

In your current situation, the trustees of your pension fund have to make investments to meet all it's liabilities. That's really quite complicated, since they don't know how long you and your dependents will live for, how much payments would need to increase due to inflation and the performance of their investments.

 

When the trustees buy an insurance policy, the company they buy from take on the risk. By law, the insurance company has to pay you exactly what you would have got from your pension, including anything due to dependents and increases for inflation. The regulator specifies a large amount of money (cash reserves) that the insurance has to hold to ensure they can meet their liabilities.

 

TLDR: you'll get exactly what you're supposed to and there's nothing you can do anyway, so just keep taking the money!

 

Edit: corrected predictive text. Larry to part [emoji849]

Edited August 13, 2020 by jmak

[mikeprice]

Thanks to all for the answers

 

some good info

 

we will need to talk to a financial advisor soon anyway - I will raise this when I talk to them