Just wondering whether my defined benefits are worthwhile?
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It also depends on when you can take those defined benefits, they may have protected lower pension ages than the state pension which would be worthwhile if you want to retire earlier than you state pension age. Furthermore what exactly is the index linking on each deferred scheme, you mention some have CPI indexing while others have other indexing. This will certainly influence the decision on whether to keep a pot or take the CETV especially if you've got a while until you plan to retire.0
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Diversification is a good thing. Those DB benefits are guaranteed and add nice diversification to your finances. Think of them as your fixed income so you can take on more risk in your SIPP and ISA. In retirement you'll have state pension, DB benefits and ISA and SIPP withdrawals which should give you a firm foundation and lots of freedom.“So we beat on, boats against the current, borne back ceaselessly into the past.”0
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I've got 3 defined benefit schemes of which I am a deferred member. In current money they would pay out £2.8k, £2k and £3.5k per annum. I've also been investing in a SIPP for several years.
I've always stuck with the advice to NOT transfer these defined benefit pensions, but I am rather frustrated as they increase at a rate below what my SIPP is earning. Typically CPI or LPI (Limited Price Indexation) which was 0.0% last year!! Whereas my SIPP has accrued at an average of 7.6% per annum.
All the advice says "don't transfer" as you lose valuable benefits, but what are they? A pension for my spouse or child? My partner has his own pension arrangements, and I could leave 100% of the SIPP to my son.
Should I just leave things as they stand, or is it worth getting advice? The sums are not huge, so I don't want to spend a lot of money on advice - especially when I could start researching this myself. :huh:
You must not have had your sipp for very long. Pensions can be up 20% one year, down 7% the next. So it is the average over twn years or more that you need to think about.
Then there are other thigns to consider, like they hold 0 risk for you. Which can allow you to engage in more risk in your sipp as you have those guaranteed index linked benefits banked.
If you have a younger wife, and children, they also hold survivors benefits.0 -
You speak of a "partner" - (spouse/other?) - you are the beneficiary of his pension should he predecease you?
You mention a son - not your partner's child?
What do your deferred schemes have to say about death benefits /nominated beneficiaries etc?
What are your current pension arrangements - just the SIPP?0 -
But the DB schemes would transfer to SIPP so (at present) can be taken earlier than state pension. They might increase it, but at present that is 55 isn't it?It also depends on when you can take those defined benefits, they may have protected lower pension ages than the state pension which would be worthwhile if you want to retire earlier than you state pension age. Furthermore what exactly is the index linking on each deferred scheme, you mention some have CPI indexing while others have other indexing. This will certainly influence the decision on whether to keep a pot or take the CETV especially if you've got a while until you plan to retire.
The best kicks in aged 60. That's 17 years away, and is RPI. I guess that's worth keeping, although the provider nearly went under during the financial crisis :eek:
The other two kick in aged 65 (22 years away) and are LPI (Limited Price Indexation) which is a capped CPI. I don't know about you, but the inflation I experience is closer to RPI. These annuities are not keeping pace with inflation.....
I have had my SIPP for 7 years, and yes, it has been up and down in that time! The 7.6% is compound annualised return over that 7 years, a large portion of which has come from the recent bull market.You must not have had your sipp for very long. Pensions can be up 20% one year, down 7% the next. So it is the average over twn years or more that you need to think about.
Then there are other thigns to consider, like they hold 0 risk for you. Which can allow you to engage in more risk in your sipp as you have those guaranteed index linked benefits banked.
If you have a younger wife, and children, they also hold survivors benefits.
I have a partner the same age, and they have their own pension provision. Either of us should be comfortably off surviving on our own pension. By my rough calculations, my son would be better off inheriting a £200k SIPP than a promise of 20% of pension until he finished education. In fact, if I dropped down dead tomorrow he would receive about £30k from the DB benefits. If I had transferred them to a SIPP he would get £200k.
Yes, my partner has nominated me as beneficiary on his pension. Again, I don't think I would need the additional income in retirement and if he dies before then, there is life insurance through our employers.You speak of a "partner" - (spouse/other?) - you are the beneficiary of his pension should he predecease you?
You mention a son - not your partner's child?
What do your deferred schemes have to say about death benefits /nominated beneficiaries etc?
What are your current pension arrangements - just the SIPP?
Son = me and my partner's child.
Checking one scheme, 50% pension to surviving nominated partner, and 20% to son until finishing full time education.
Current pension arrangements in decreasing order of annuity: Government / SIPP / 3 x DB schemesI've got a plan so cunning you could put a tail on it and call it a weasel.0 -
Thank you so much for the replies, it is really appreciated.
The low risk nature of DB schemes stands out as being the key benefit I don't want to give up. Perhaps lower growth and low value in inheritance are worth that risk? If I want to take them early, I am sure there will be some flexibility at that point in time. My SIPP will also be a more known value by then.
Lots to chew over, but nothing I need to rush into. :cool:I've got a plan so cunning you could put a tail on it and call it a weasel.0 -
But the DB schemes would transfer to SIPP so (at present) can be taken earlier than state pension. They might increase it, but at present that is 55 isn't it?
The best kicks in aged 60. That's 17 years away, and is RPI. I guess that's worth keeping, although the provider nearly went under during the financial crisis :eek:
The other two kick in aged 65 (22 years away) and are LPI (Limited Price Indexation) which is a capped CPI. I don't know about you, but the inflation I experience is closer to RPI. These annuities are not keeping pace with inflation.....
I have had my SIPP for 7 years, and yes, it has been up and down in that time! The 7.6% is compound annualised return over that 7 years, a large portion of which has come from the recent bull market.
I have a partner the same age, and they have their own pension provision. Either of us should be comfortably off surviving on our own pension. By my rough calculations, my son would be better off inheriting a £200k SIPP than a promise of 20% of pension until he finished education. In fact, if I dropped down dead tomorrow he would receive about £30k from the DB benefits. If I had transferred them to a SIPP he would get £200k.
Yes, my partner has nominated me as beneficiary on his pension. Again, I don't think I would need the additional income in retirement and if he dies before then, there is life insurance through our employers.
Son = me and my partner's child.
Checking one scheme, 50% pension to surviving nominated partner, and 20% to son until finishing full time education.
Current pension arrangements in decreasing order of annuity: Government / SIPP / 3 x DB schemes
OK, sounds like you are working it out from all angles. Just be aware that you cant assume your 7% plus going forwards. As you havent been thru a major downturn.0 -
If we went through a major crash tomorrow which wiped out your entire SIPP gains you wouldn't even consider this option.
7 years in your sipp is simply not long enough to see many ups and downs to see why the security of DBs are worth their weight.
I agree with the others, you are hedging your bets and if I were you would continue to do so - which also allows you to be bolder in your risks in the SIPP.Thinking critically since 1996....0 -
The low risk nature of DB schemes stands out as being the key benefit I don't want to give up.
As an IFA myself, once you state these words you really should keep your money in your DB pension.0
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