IBOPs
£2bn in ‘unsuitable’ pensions schemes
Friday 27th April 2007: 11:30
Around £2bn is invested in occupational pension schemes which may not be suitable for the customer, Clerical Medical estimates.
The firm says clients in these plans have little control over where their money is invested, when they can take their benefits, and what happens to their money when they die.
Clerical has launched its Individual Buy-Out Plan (IBOP), an individual pension which can take transfers from existing occupational schemes.
Mike Brown, Clerical Medical head of pensions, says: “Clients in occupational schemes that are winding up may have little control over their benefits, for instance, where their money is invested, when they can take their benefits or what happens to their money when they die.
“An Individual Buy-Out Plan offers more control over their pension benefits.
“Many members of occupational pension schemes will have an entitlement to a tax free cash sum of more than 25% of the value of their pension fund.
“This entitlement is preserved if they remain within their ex-employer’s scheme but, they may have little or no control over the investment strategy or the ‘shape’ of their ultimate retirement benefits.
“In many cases, a transfer to a personal pension will give greater flexibility but on transfer, tax free cash will be restricted to 25% of the value of their fund.
“Crucially, IBOP allows an individual to preserve their entitlement to a tax free lump sum of more than 25% of the value of their fund on transfer.”
Features of the IBOP include self investment, an additional contribution facility and a plan that can be written under trust for inheritance tax planning.
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