How we helped Mrs F. get £5,500 a year more income

Mrs F. retired early and wasn’t sure when or how she should take her final salary pension. She asked us to take a close look and explain her options. Here is how we managed to get her £5,500 a year more, with no additional risk.

Mrs F., aged 61, retired from her role in IT in January this year. However, she did not claim her final salary pension because the scheme’s normal retirement age is 65. Since January she had been living on a small personal pension plan (around £6,000 per year) and drawing down from her savings in the bank (£135,000).

Mrs F. is divorced and has two grown-up daughters in their late 20s, neither of whom is financially dependent. She has absolutely no plans to marry again. She decided to contact us to see whether we could help her decide what to do about her final salary pension. After a quick chat on the phone with Mrs F., one of our advisers went to see her and completed a risk profile, which identified her as a very low risk-taker.

Spouse’s pension on death not required

He discussed the possibility of claiming her pension now rather than waiting until she reached the age of 65. However, on reviewing the scheme he found that, like many schemes, it included a 50% spouse’s pension on death. He asked the pension scheme in question if it was possible to forgo the spouse’s pension so that she could receive a higher pension – unfortunately this was not possible.

They offered her an annual pension of £12,400 with a 50% spouse pension, or £8,700 per annum with a pension commencement lump sum of £58,419. The adviser explained that she could look at transferring her scheme to obtain a single life pension and suggested that she should also ask what the cash equivalent transfer value was, which turned out to be £361,560.

Mrs F. is a smoker and drinks an average amount of alcohol but does not have any medical conditions or take any medication. She said that she did not want any guarantee built into her pension because “my children will get the house and all my savings when I die”, and her original scheme would have most likely also ended upon her death.

Getting the best rate from a suitable provider

The initial quotes the adviser obtained looked favourable. However, knowing that providers don’t always give their best quote immediately, he narrowed the research down to two suitable providers and, playing off one off against the other, was able to get the rate up by a further £300 a year.

Potentially well over £100,000 better off

The final quotation was for an income of £17,900 a year, which equates to £5,500 a year more than Mrs. F.’s original scheme was offering, and if Mrs F. lives to age 86 she will have received well over £100,000 more income as a result of taking professional financial advice.

Mrs F. was absolutely delighted with this outcome and could not speak highly enough of our service. She was relieved because she very nearly took the decision to claim her pension back in January and almost put the forms in the post and is so pleased she took a moment to think about it.

Until recently, transferring out of a defined benefits pension scheme was generally not appropriate because of the loss of guarantees. However, now that more options are available, it might be beneficial to transfer your benefits, but you should not do this without fully understanding all the implications. It is therefore essential to take professional advice from a suitably qualified expert. We have changed Mrs F.’s name and circumstances to preserve her anonymity.