Transfering my DB pension into SIPP

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cambb
cambb Posts: 219 Forumite
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in Pensions, annuities & retirement planning
Hi,
I'm 48 and currently have a frozen DB pension valued at £521K. I also have a second pension worth £80K that between myself and my employer we contribute about £1k a month into. Hoping to retire at 58 and use both pensions to drawdown to support my retirement.

I have had some initial advice from a IFA about transferring the DB into a SIPP with Prudential into the Prufund Growth fund.

Is that a decent fund and what are the risks in doing this kind of transfer?
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  • xylophone
    xylophone Posts: 44,426 Forumite
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    https://www.royallondon.com/Global/documents/GoodWithYourMoney/COMPANY-PENSIONS-FIVE-REASONS-TO-TRANSFER-OUT-AND-FIVE-REASONS-NOT-TO.pdf

    Does the IFA have Pension Transfer Permission?

    http://www.pruadviser.co.uk/content/knowledge/technical-centre/pension_switches_transfers/
  • atush
    atush Posts: 18,726 Forumite
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    If you have no skills in investing (as you are asking this question) then why do you feel that trading a guaranteed income for life is worse than taking all investment risk on yourself?

    Do you have a spouse? Do you have life limiting health issues?
  • cambb
    cambb Posts: 219 Forumite
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    Yes i have a wife, 2 children and no health issues. The main reason is my father is terminally ill @ 74 and I think if i was in his position my wife would only get half of the pension as it stands. I have worked out i need to live to 93 for the DB to "break even" and by that time what use would the money be? I would rather have the tax free amount in my 55 and enjoy it. Say the £521K + £200K by the time i retire invested would be able to support us through retirement. Forgot to mention that my wife also has a DB pension that would provide approx £400 a month when she retires.
  • hyubh
    hyubh Posts: 3,532 Forumite
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    cambb wrote: »
    I have worked out i need to live to 93 for the DB to "break even"

    How does it revalue before retirement, and increase once in payment?
  • EdSwippet
    EdSwippet Posts: 1,588 Forumite
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    cambb wrote: »
    Say the £521K + £200K by the time i retire invested would be able to support us through retirement.
    Presumably you expect your transferred £521k to grow between now and retirement? On these numbers, you would need to factor in the spectre of breaching the pensions lifetime allowance before you retire, and the potential 25% penalty charge on the excess.

    With ten years to retirement, your pension only needs to grow at around 5% real per year to breach the lifetime allowance, even if you stopped further contributions today. To avoid penalties you would need to either stop pension contributions either now or well before age 58, or retire earlier than that, or both, depending on how your selected funds perform.
  • cambb
    cambb Posts: 219 Forumite
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    hyubh wrote: »
    How does it revalue before retirement, and increase once in payment?

    Im not sure TBH. I presume once i get my details from the pension dept the IFA will go through this?
  • kidmugsy
    kidmugsy Posts: 12,709 Forumite
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    cambb wrote: »
    what are the risks in doing this kind of transfer?

    (i) Investment risk: either you muck up the investments (e.g. sell in panic when the market drops) or the markets simply don't do well - a phenomenon that can last decades, judging by history.

    (ii) Miscalculation risk: you turn out not to have a clue about what the effects of inflation might be.

    (iii) Extravagance risk: you withdraw capital far too quickly.

    (iv) Longevity risk: you outlive your money as a result of (i), (ii), and (iii).

    Start with (ii): You say "I have worked out i need to live to 93 for the DB to "break even"". That's not too encouraging. What inflation rate did you assume? Even simpler, without looking it up, tell us what inflation-protection your DB pension will have. If you don't know you're not taking inflation seriously.
    Free the dunston one next time too.
  • cambb
    cambb Posts: 219 Forumite
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    Right i've had a bit of a play with the pension website so below are the figures i'm working with:-

    Age 55 Gross Retirement Pension
    £12,288.60 Per Annum

    Age 58 Gross Retirement Pension
    £13,809.24 Per Annum

    Age 65 Gross Retirement Pension
    £19,016.28 Per Annum

    Off the website my pensions would increase as below:-

    Pensions in payment earned after 5 April 1997 are increased in line with the Retail Prices
    Index (RPI) up to a maximum of 5% a year.
    Pensions earned before 6 April 1997, above the GMP, are increased in line with RPI up to a
    maximum of 3% a year.

    Any ideas how i can work out how much say £13,809.24 Per Annum would be worth in 20 years time if it rose 3% a year?

    Also i know this is a million dollar question but my CETV has gained £750 this week so is this a good time to transfer out or do i sit on?
  • hyperhypo
    hyperhypo Posts: 179 Forumite
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    @OP

    am in similar postion deciding whether to transfer a DB pot of £422k into my £100k sipp, keep contributing for 3 years , make it to £600k and drawdown to SP. I'm 57.

    But i'm wondering how your CETV has grown in a week ...surely these are point in time offers, actuarial validations for a fixed term..at least mine is? I wasn't aware they are able to fluctuate ..

    The what to do with it is tempting though although my present thinking is to work the DC scheme hard and leave the DB as it is ...i am awaiting results of TVAS , but inclined (today) to stick !
  • kidmugsy
    kidmugsy Posts: 12,709 Forumite
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    cambb wrote: »
    DB pension valued at £521K

    .....

    Age 58 Gross Retirement Pension
    £13,809.24 Per Annum

    .....

    is this a good time to transfer out or do i sit on?


    Is this a good time? Probably. They are offering you 37.7 x annual pension. That seems pretty desirable to me IF you want to transfer.

    But do you really want to? Only you can judge; I hope you've read the useful discussion at the Royal London link that xylophone provided.

    Last questions: how well funded is your DB scheme? How much faith do you have that your former employer will continue to keep it properly funded?
    Free the dunston one next time too.
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