Pension Management

Pension providers manage investments on behalf of their clients who are saving for their retirement. When an individual client’s retirement date arrives, then a way needs to be found to convert the accumulated value of the savings (the pension fund) into a regular income for the remainder of the client’s life. This is done through a pension annuity. Simply, the savings in the pension fund are used to purchase an annuity.
Buying an annuity
Although the purchase of an annuity is therefore very simple in principle, a surprising number of people give it little thought and instead make the first purchase they are offered – which in most cases is going to be the annuity offered by the pension provider with whom they have been saving. Even though many annuities bought directly from the provider in this way represent relatively poor value for money, it has been estimated that as many as two-thirds of those starting their retirement purchase their annuity in this way – many could have used their accumulated pension investment to buy an annuity on the open market that would have significantly increased their income every one of their retirement years.
What makes the choice of an annuity such an important purchase, however, is not just this difference in the returns from different annuities, but the fact that the purchase is a once-in-a-lifetime purchase. Once it has been bought, the consumer cannot simply switch to another annuity provider that appears to be offering a better return. Indeed, once bought, the annuity cannot be changed in any way for the remainder of the consumer’s life. When the capital accumulated in the pension fund has been used to purchase an annuity, there is no way of channelling any of it back to a surviving beneficiary on the death of the annuity holder.
The importance of independent financial advice
Because it is such a one-off decision, it can be readily appreciated why sound, independent financial advice should be sought for the purchase of an annuity. As if the unique nature of the purchase is not enough, however, there is such an array of different annuity types that independent financial advice becomes doubly critical.
If you are married, for example, you will wish to consider whether to use your pension fund to buy a single or a joint annuity – the latter providing a pension for your spouse in the event of your death. With either a single or joint annuity, you could also decide to take an element of financial risk in the annuity you receive – rather than elect a guaranteed, fixed annuity – by choosing a “with profits” annuity that adds future bonuses to your annuity income, depending on the performance of the annuity company’s investment fund.
If a fixed retirement income is your guiding objective, a standard level annuity is likely to be your choice. If you are concerned about the annuity keeping pace with inflation, however, then you are more likely to opt for an annuity that increases in line with the retail prices index or an annuity that has an in-built, year on year fixed rate of escalation.
The choices are many, varied and all the time diversifying still further. An independent financial adviser, qualified in pensions matters, therefore, is the best placed professional to advise you on your pension annuity purchase.

We tend to live in a world where yesterday’s brilliant deal becomes rapidly overtaken by today’s even better bargain. With a long term investment, such as a pension scheme, where savings are designed to see us throughout our retirement, there are likely to be many occasions when we wonder whether a better deal is going to be offered elsewhere. That is when we will consider the option of a pension transfer – but before converting any such consideration into action it is essential to seek the full and reliable advice of an independent financial adviser.
Is the grass really greener?
The incentive for a pension transfer is that the grass appears greener – in terms of the final pension you are likely to receive, the costs of managing the fund, and the flexibility of the pension arrangements. The only certain response to this is that it might be just as it appears, or it might not. Only with the help and guidance of an independent financial adviser would it be possible to make a properly reasoned judgement.
The first step in reaching such a judgement will be to obtain a transfer value analysis from your existing pension administrators. You and your financial adviser will need this in order to begin to compare the value and performance of your present pension investments. The analysis will include a measure known as the “critical yield” (and is likely to be between 7 and 11 per cent), indicating how quickly any alternative pension fund would have to grow in order to match your existing scheme.
Fees and charges
When comparing the financial outcomes of your present and any alternative schemes, you will also need to consider the charges made for managing and administering them. Clearly, over the life of your pension investments, these can be quite significant and the more you are saving in fees, the more you have to invest in your pension.
Flexibility
Your financial adviser will also ask you about your actual retirement plans. Do you plan to retire early and hope to start drawing your pension at that time or will you delay it? In any event, you will need to know that any replacement pension arrangements remain flexible enough to allow you the choice.
Final salary pension schemes
It is worth sounding a last note about final salary schemes. From the employee’s point of view, these are especially attractive schemes since they offer guaranteed, preserved benefits (for the same reason, many employers have started seeing such schemes as albatrosses around their necks. Many companies are winding up the schemes – to howls of protest from their employees – and many industry experts predict that such schemes will all but disappear from the private sector in a matter of years). Given the certainty of a final salary scheme, therefore, it will rarely make sense to make a pension transfer to another scheme unless it too offers enhanced, guaranteed benefits.
Once again, therefore, if you are considering a pension transfer from this or any other type of pension scheme, it is extremely wise to seek the advice of an independent financial adviser.

When it comes to pension planning exercising choice and making active decisions is almost as important as the simple act of saving in the first place. Having choice and not using it can be worse than not having any choice at all. I am currently working with a campaign called Pensions Income Choice, which is looking at ways to make it easier for pension investors to shop around with their pension fund at retirement. The idea is to ensure than when investors reach retirement and need to convert their accumulated pension fund into an income, they get the best possible value from their savings. The only way to make sure this happens is to encourage everyone to stop and look around at their various options, before committing themselves to a particular income arrangement, such as an annuity (remember, with most annuities, once you have bought it you are then locked into it for life). This principle of choice extends beyond annuities. Some pensions offer a default investment fund and perhaps a default contribution rate as well. This is all very well and these defaults can be useful for getting people started on saving for retirement in the first place; however I believe they are almost invariably going to be a less-than-perfect choice for most investors. Default options are lowest common denominators – they are the option which is going to be least wrong for most people. As a result most investors can get better value by tailoring their retirement savings to meet their own needs. If you’re happy making your own investment decisions, the Vantage SIPP puts you in control. You can manage your pension online and choose from more than 2,000 funds, shares, investment trusts, gilts, corporate bonds, exchange traded funds, and cash. Find out more about the Vantage Self Invested Personal Pension. We believe this low cost, easy to manage SIPP is one of the best on the market, and we aren’t the only ones, After studying more than eighty different SIPPs, I’ve plumped for the award winning HL Vantage SIPP from Hargreaves Lansdown – If you can find a cheaper SIPP, then please let me know…Cliff D’Arcy, The Motley Fool – personal finance website At the point of retirement it is almost impossible to have a default retirement income solution. The best way to get the most out of the pension that you have worked so hard saving for is to shop around. If you opt for an annuity then it is likely the income offered by your pension provider will be less than you could get by shopping around – you could get up to 30% more. Actions speak louder than words and so we are not just campaigning on this we do not have a default annuity for our SIPP, clients choose whatever suits them best and gives them the highest income.Our free online annuity search engine allows you to get quotes from the most competitive annuity providers quickly and easily. See how much income you could get.Personally, I would like everyone to be making active and informed decisions about all aspects of their retirement savings, not just at retirement but right from the outset.

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A QROPS Pension Transfer is a transfer of a UK Pension, or a “frozen” UK pension into another HMRC approved pension scheme, in a jurisdiction outside of the UK. QROPS means Qualifying Overseas Recognised Pension Scheme, and is a fantastic option if you have left the UK or are planning to leave the UK within 12 months.

If you have the option and qualify for a QROPS Pension Transfer, it is something that you should definitely consider as the benefits far exceed the costs, and it is an easy way to increase the value of your estate.

The reason that a QROPS Pension Transfer is such an attractive option is due to the limitations and restrictions placed upon an existing UK Pension or “frozen” UK Pension. Most people have a minimal understanding of UK pensions, and as a result are ignorant of the limitations. Once they understand the limitations of their current pension scheme and how a QROPS works, it becomes apparent why 90% of people who qualify for a QROPS Pension Transfer, utilise the option.

Each existing scheme is limited both by UK Pension Regulations, as well as the specific regulations of the individual pension scheme. These regulations can be summarised as follows:

In 2006, the UK Government introduced QROPS Pension Transfer legislation. If you qualify, this allows you to transfer your UK Pension to another jurisdiction with greater flexibility and less restrictions. For the first five tax years (6 Apr to 5 Apr), the QROPS Trustees are required to report any withdrawals or contributions to the HMRC. However, after these 5 years, they are no longer required to report to the HMRC and you will now have effectively 100% control of your pension.

One of the most important considerations of a QROPS is the jurisdiction of the QROPS Pension Transfer. You need to ensure that it is safe, secure and has similar financial principles to the UK. Many individuals have moved their UK Pension to a jurisdiction such as Thailand or New Zealand, and have found that they have lost much of the value, due to a weak currency. Other jurisdictions have a higher tax charge, or even more restrictions than the UK. Thus, you need to carefully consider the jurisdiction that you want to transfer your UK Pension to, and this should be discussed with an adviser.

One of the most popular jurisdictions is Guernsey, due to their strong investor principles, established financial security, and the fact that they have worked closely with the HMRC to ensure a robust QROPS framework.

Guernsey was recently voted the top financial jurisdiction in the world, even ahead of the UK! If you do a QROPS transfer to Guernsey, you can keep your pension in a safe, neutral jurisdiction, in a currency of your choice. Thus, wherever you are in the world, or how often you may move, you know that your pension will be safe.

Who Qualifies for a QROPS Pension Transfer?

If you are between the age of 18 and 75, and are a non-UK tax resident, or are planning to leave the UK within the next 12 months, you can qualify for a QROPS Pension Transfer.

If you are a citizen of either Canada or the US, you will require specialist financial advice and will need to discuss this specifically with your financial adviser.

What are the Benefits of a QROPS Pension Transfer?

The benefits of a QROPS Pension Transfer are numerous, and depend upon the jurisdiction chosen. These benefits can be summarised as follows:

Thus, if you consider the benefits, as opposed to keeping your Pension in the UK, you can now understand why a QROPS is so popular.

What are the Costs of a QROPS Pension Transfer?

The costs of a QROPS Pension Transfer depend on the value of your UK Pension. If you consider costs as a percentage of the pension value, then the higher the pension value, the lower the costs.

Each specific QROPS scheme varies and has different costs and flexibility. Generally, costs are comprised of three components:

If you consider the benefits of a QROPS Pension Transfer, the costs should not be the consideration. However, there are many advisers who advise schemes with extortionate costs, that aren’t necessary. The key thing that you need to consider is the flexibility and restrictions of the QROPS scheme that you are transferring your UK Pension or “frozen” pension into. These restrictions depend on the jurisdiction, and we have found Guernsey to be the most favourable. Due to the fixed setup costs, it is generally advisable that pensions in excess of £25 000 be considered. If you have multiple pensions you can combine these to reach this figure, and if your value is a little less, you can make an additional contribution. Remember, that you will now have a tax-efficient, structure with diverse funds and flexibility that are generating a better return. This structure is a good savings vehicle and adding additional funds, would be putting those funds to good use.

How do I go about a QROPS Pension Transfer?

The process of a QROPS Pension Transfer is a lengthy one, and one that you can’t do by yourself. You will need to be in contact with an authorised provider.

The first step of the process is to obtain a Pension Valuation, and the specific details of your pension plan. To do this you can complete a very simple form that provides authority to obtain a valuation. This form is completely safe, as it does not authorise for any transfers, but merely authorises the pension company to provide the information. The Pension Company will respond to this within 90 days.

You can either get your financial adviser to do this (which is expensive), or you can utilise the services of http://QROPS-Pension-Transfer.co.uk. They will obtain this information on your behalf and provide it to you or an accredited financial adviser of your choice. They offer you two options:

Due to the fact that they are global and assist financial advisers around the world, they can also introduce you to an accredited financial adviser in your region/city, if you don’t already know one.

Once your adviser has this information, they can asses your specific situation and decide if it is in your best interests to utilise a QROPS Pension Transfer. If it is in your best interests, they will assist you to choose a jurisdiction, and setup the QROPS scheme/structure. Once this is complete, you can then discharge your existing pension and transfer the funds into the new structure.

90% of the time, it is in a client’s best interest to transfer their UK Pension or “frozen” UK Pension to a QROPS. However, some of the defined benefit, or final salary schemes were set with higher interest rates, and it may not be advisable to transfer in this instance. This however, is something you will need to discuss with your accredited financial adviser.

In Conclusion

If you have a UK Pension or “frozen” UK Pension and qualify for a QROPS Pension Transfer, it is important that you understand how it works, what are the pro’s and especially, what are some of the costs and restrictions. Most of this information is on the internet and if you spend a few evenings you should have a rudimentary knowledge. This article offers a high-level overview and is by no means comprehensive. Unfortunately, there are far too many sites with less information than this article on a QROPS Pension Transfer, and the only information they really provide is how to contact their adviser. The site that we mentioned above (QROPS Pension Transfer), that offers to obtain the information on your existing pension, also offers a wealth of knowledge, in an easy to understand and simple layout. They strive to be the most comprehensive QROPS Pension Transfer resource on the internet, and have either achieved this goal, or are extremely close. For those who have the time and inclination to delve further into a QROPS Pension Transfer, they have also offer a wealth of detailed information.

The most important criteria in picking pensions or investments to deposit your funds in, is their performance.

Many investors are disappointed in their pensions and investments performance, as the majority of fund mangers cannot even beat the index!

In recent years, this has led to a huge growth in index tracker funds.

Pensions and Investments can beat the Index!
Here is an outline of what you need to look for when seeking an advisory service with the potential to achieve an above average return on your pensions and investments while keeping drawdowns low.

Also outlined is a method that has actually returned over 20% annually.

Here are four tips on getting a better return on your pensions and investments.

Four Tips to Finding a Good Pensions and Investments Manager
1. Check the past performance of all the funds under management – you want to know what is the overall performance of the fund manager – i.e. make sure they’re not just showing you the good ones.

2. Look at the drawdowns, so you know the risk of the investment. You should also find out what their policy on money management is.

3. What are the fees?

How much do you pay and how does this impact on performance and drawdown.

Fees on your pensions and investment add up!

4. Does the manager have a conflict of interest?

Fund managers who not only make management fees, but also receive some of the dealing fees manage many pensions and investments. If this is the case, there is a conflict of interest, as they may trade to earn dealing fees, rather than concentrating purely on the investments performance.

W D Gann’s Amazing Method
One trading method that you should consider when seeking above average growth potential in pensions and investments are the methods of W D Gann.

$50 million in profits!
Gann was one of the most famous investors of all time amassing a fortune of $50 million dollars. He predicted the 1929 stock market crash for example a year in advance and then proceeded to buy the Dow’s lows in 1932!

Gann died in 1955, but his methods are still in use today by astute investors and traders worldwide.

Just like any good investment method, the techniques work on a wide variety of markets and aim to run the big profitable trends and liquidate losses quickly.

Your pensions and investments can benefit from this method of trading – it’s the basic logic upon which all successful trading occurs.

It’s Your Money!
So, invest it wisely. If you have a self-administered scheme, a sipp, a stock or commodity fund, make sure that when you pick a manager you pick the right one.

Easy to Understand FREE Information
When you look at the methods of Gann, you will see why so many investors trust his unique approach to investing.

In terms of pensions management, your location in the world doesn’t matter, nor does the type of pension you have – a sipps, a self-invested personal scheme, or a self-administered scheme.

What you are interested in is that when you become a pensioner, your pension’s management has performed to provide you with a comfortable retirement and does not give you a short fall on your expected cash!

Is a 20% Return Realistic with Low Risk?

Here we want to look at how a + 20% annual return is achievable and drawdowns can be kept to manageable levels.

Pensions Management Returns

Firstly, the best way to trade the markets is without emotion and this means using a technical based approach to pensions management. The reasons for this are:

1. A technical approach to pensions management takes the emotion out of trading and allows a disciplined trading plan, which can liquidate losers quickly and run the big profitable trends.

2. If the technical system is based upon holding onto the longer term trends the commission impact on the pension’s income is less than on a shorter term strategy. This means there is more money going to you and less in fund manager’s fees.

3. Even a good technical system will not hold losing trades.

Losses will always occur for any fund manager no matter how good they are, but the most important point is that they are manageable, and a good technical method can achieve this.

Pensions Management – The Risk

The risks in any form of investing are always there, but there is a misconception about how to assess the risk. Most investors look at the location of their pension, and see this as the main investment criteria. For example:

The view may be that if a fund manager is investing in Far East tiger economies, then this is more risky than say investing in UK blue chip equities.

This is only part of the equation though. If a fund manager is actively managing the pension or investment, you need to look at a fund manager’s money management strategy.

A good money management strategy in a volatile area can reduce risk; on the other hand, a poor money management strategy in a less volatile area can increase risk.

Pensions Management – Balancing Risk and Reward

A good pensions fund manager can achieve above average performance while keeping risk at manageable levels.

Here are some points you should consider when picking a pension manager:

1. When looking for a pensions fund manager make sure that you take the time to find out the performance of all the funds under their management, not just the good ones!

2. Ask a fund manager to explain their strategy, so you know the way they manage and control the risk of your funds.

3. Get to know them and see what their approach is and their reaction to your questions.

You are trusting them with your retirement funds – so make sure you are comfortable with everything about them.

Is a 20% Return Achievable?

Yes, it is – we know because we have produced gains like these for clients and so have other pensions management groups.

Use the above as a guide when shopping around for a manager and take your time.

You work hard, when it comes to retiring and taking your pension you want to make sure your pension can provide you with a happy and comfortable retirement.