OH is just starting to investigate. One of his small pension companies has just offered him a single lump sum instead of his monthly pension payments. He’s said he would be interested to know what they are offering.
Before he goes much further he will need advice.
If he takes the lump sum he will reinvest it immediately but he needs to know whether he will be liable for tax on the lump sum and where would be a good investment to continue receiving a monthly pension.
Can anyone suggest a suitable adviser please (we live permanently in France. The pension company he is with is in the UK.)
Depends on where you are I guess.
Over the years I have posted tax stuff from Isabelle Want of BH Assurances including some articles about pension investment. You could try contacting her.
and there is also the Finance link in the SF Topic header bar…
Thanks a lot Graham. I’ll pass this on to him.
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Spectrum and Blevin Frank’s are the “big” two financial advisors aimed at Brits. They both use local advisors covering an area.
In reality the advice will be assurance Vie…it’s just choosing one.
There are simple’ish options available via Boursarama or Fortunea - or self investment products. You can set these up online yourself.
Avoid cash assurance Vie and I’d avoid anything linked to the bank. There are a lot of products where you can keep money in sterling and swap down the line when £ isn’t a basket case.
Like ISA etc in the UK there’s good choices and not so good choices.
Be very, very careful.
Timing of their offer is interesting. Lump sums are valued according to the present value of, mainly, the cashflows he will receive if he took it as a pension. So a “net present value” (ie kind of reverse compound interest) calculation.
The most important factor, by far, in the calculation is the interest rate used for the ‘reverse’ or ‘net present value’ calculation. The 15-year gilt rate (ie interest rate p.a. offered by the UK government for someone who lends them money for 15 years) is the base used in the industry but some companies will tweak it. The only other factor that is out in front of any others is his statistically expected life expectancy, as that gives the number of years the interest rate is applied to the cashflows to get the present value of the cashflows.
Most defined benefit schemes also have a level of increases in pension payments related to inflation and that is taken into account too in the valuation.
If he has a short life expectancy (statistically speaking) then ‘surviving spouse’ pension payments statistically expected might be worth more to him, but to schemes those benefits cost next to nothing overall. What matters is interest rate, and life expectancy.
Is it strange to wonder why an offer to buy him out of what they otherwise could expect to pay is being made now, with interest rates having notably gone up (so the net present value of the pension payments that will be owed, is less) and inflation having increased?
Of course with interest rates higher and inflation (at least currently) increasing a lot of pension schemes may offer a higher value than they need to, to encourage people to leave the scheme generally or in advance of taking the opportunity to sell the liabities if the scheme to an insurance company who will take it on and free the employer/scheme of the longterm liabilities of the pension scheme.
Be aware you don’t have to move it out of the UK and, if you have another pension account opened before you became nonresident you can still transfer into it and contribute to it depending on the receiving pension account’s conditions. A pure transfer within the UK may not need a commissionable product to be purchased but I’m guessing any transfer to another country that’s advised is likely to be via a commissionable product route if it is to be invested in anorher product.
As you will see on other threads here you will still need to declare to French tax authorities wherever it’s left but if the whole sum is taken as one lump then you will end up paying net 6.75% France tax and it’s then cash to do as you want.
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PS if the value in a UK defined benefit pension is £30k or more it won’t be released without you paying a UK authorised adviser for advice. So far as I can tell this applies even if you are no longer a UK taxpayer or resident. I would be curious to know is this hurdle still there as a lot of regulation in the UK doesn’t seem to join up the dots at the moment.
Only quickly skimming through comments and will leave him to look at the detail, but maybe I’ve not made myself clear.
This is a UK pension and he has been receiving his monthly pension amounts from it for the last 15 years.
Why are they now offering him a cash lump sum now? We suspect because it’s because they are in difficulties, unfortunately.
He wants to continue having that pension paid to him from a pension company in the UK.
We are UK tax payers as we have an investment property in the UK.
There is no built in adjustment for inflation. He receives the same amount today as he did 15 years ago.
I am shown as a possible future beneficiary and am slightly older than he is.
Hope this makes our situation a bit clearer.
I am wondering if they want to close the scheme. It may be that the value they are offering is more than technically they might need to.
Why not call them and ask them? If schemes are making these types of offers there are rules governing them. You are right it’s definitely a specific initiative of some sort as it’s rare to have the option of a lump sum buyout after a pension has started to be paid.
At the moment if he lives to be, say, 106 and you to 109 they are on the hook to keep paying. That’s the liability they are trying to get rid of.
There’s just a chance that if it’s a wellknown scheme or employer a Google might turn up something. Someone in the business may know or be able to guess what’s going on. I’d just ask them as it’s a very valuable right he’d be giving up.
A litmus test is to take the value they offer and get a quote online for in your case, a level annuity using the lump sum and see how long it would last Then think about the survivor’s pension and the range of what it could be worth to you.
We realise that, but also that will not be the case if they are about to go bust. OH has been reading for some time that they are flaky, so there is a fine line here. Take the money and run or stay in and watch the business fail. Obviously it depends on their offer and how generous it is.
I was offered £12 by BP. They were foolish. I refused it and so they continue to pay me £1.73 per year. So far they’ve had to pay out £25.95, quite apart from the cost of managing my measly sum. I intend to live to a ripe old age. 
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If it goes bust then pensions that are already being paid are still paid but by the govt pensions lifeboat, the Pension Protection Fund, at 100% value of payments due (I think there is a cap in that case on survivor’s % which will still give what lots of schemes give anyway).
If a scheme fails then those members who are still pre-pension age lose about 10% I think when a scheme fails and is taken in by the PPF.
Do not accept this offer just because you think the scheme might be insolvent. His payments are covered. Google the PPF and you will see what I mean.
I would think it far more likely they want to reduce and/or sell on the liabilities of the scheme by buying out all or certain classes of pensioners, perhaps as a prelude to a buy-in of what’s left by an insurance company who will then take all liabities in exchange for an agreed sum. Many, many schemes will finally end the worry of a defined benefit scheme for an employer in tbe next few years by doing a buy-in with an insurance company to get rid of all remaining liabilities which the insurance company takes on for a “dowry” payment.
If it’s a small scheme, or a big scheme and he is part of a remaining “tail” of pensioners then it becomes worth a lot to a scheme to buy him out.
Have a play with some annuity calculators online and you’ll get an idea of the range of capital sums it might take to buy existing benefits ( and no reason to accept an offer unless it’s very sweetened). Can you imagine what the last pensioner is worth to a scheme to get rid of, if they want the scheme off their books?
Do not worry about the downside, look up the Pension Protection Fund and you will see.
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And ask them, ideally by phone can they give you any background to the buyout offer, as you are happy as you are but curious. They may not say, but they might.
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Thanks Karen for your suggestions and reassurance. Much appreciated.
For some very basic advice (and I do mean basic) the government has a Helpline called Money Helper tel. +44 20 7932 5780 , they also do webchats and can make appointments if something needs a longer chat after first query
Just as a comment on Blevin Franks mentioned above - when I last spoke to them and also one of their rivals, they only dealt with sums greater than 100,000 euros…
reminds me another lifetime… when a Banking pal airily told me that she only dealt with customers who had at least £1m to spare/invest 
wasn’t Nick Leeson was it 
No, she was Not…