Another CETV Q; Help Me Thrash It Through...
Options
Comments
-
bostonerimus wrote: »Exactly....why do you think companies and so keen to off load their DB pensions to employees. They want to get rid of the risk and it surprises me that so many people are so anxious to oblige.
However, the pension companies don't know the individual circumstances of those they are making offers to and everyone is treated using the same set of rules. As such, for some people taking the cash and losing the DB pension will be the correct choice.
Figures of between 10% and 20% of those eligible have been used for those who will be better of giving up their DB pension and transferring out.0 -
Let's see the actual CETV that the OP is offered. Current interest rates make these very tempting, but I believe that many people don't put enough emphasis on the longevity insurance and very low risk of their DB pensions when considering the transfer. We are currently in a buoyant market and the present good times can influence decisions as will whether you use 5.5% or 3.5% withdrawal rates, 2% or 3% inflation or a life expectancy of 25 or 40 years.“So we beat on, boats against the current, borne back ceaselessly into the past.”0
-
Wow you have been given some great info and more things to consider in making your own mind up as to what to do. You have made some assumptions as have other posters that may or may not be true. This is very complex and will probably be the biggest financial decision that you ever make. Have you considered taking advice form a financial adviser?0
-
Yes, and under normal (old????) financial circumstances the CETV ratios were horrible and made the remain within the DB a no brainer. Whilst we are currently under exceptional financial circumstances / coming out of those circumstances the ratios have become far more 'generous' (for want of a word), and have to a large degree tipped the balance point toward a CETV in a number of scenarios.
All of this is why I am keen to chew the cud and try to understand any implications as much as possible (either way).
15 year gilt yields are currently around 1.61%.
CPI 3%.
Hardly surprising that pension schemes are more than happy to offload the future risk onto the member, while reducing their liabilities. Unwinding QE is going to be a long term process. One only has to watch the Fed's well snail like moves with trumpets blaring. In order to maintain an orderly market. Likewise Japan tells us much about how an aging population can change an economy.
Remember markets aren't just indices. Beneath are living breathing companies that need to perform and generate increasing returns for shareholders. There's where your personal risk lies. If you opt for a high equity exposure investment strategy.0 -
The key piece of information missing is your 'number' as that could have quite an influence on the correct decision. Dropping your guaranteed income below your number may be more stressful than it's worth (depending on your personality). Conversely, if wife's DB plus 2 lots of SP comfortably covers your number then a big slug of money to do something like get your daughter on the housing ladder and through university may have more value to you than simply having more income when you already have enough. It's not a question that can be answered with maths alone.0
-
The key piece of information missing is your 'number' as that could have quite an influence on the correct decision. Dropping your guaranteed income below your number may be more stressful than it's worth (depending on your personality). Conversely, if wife's DB plus 2 lots of SP comfortably covers your number then a big slug of money to do something like get your daughter on the housing ladder and through university may have more value to you than simply having more income when you already have enough. It's not a question that can be answered with maths alone.
Maybe the middle road mentioned above where a lifetime annuity is used to supplement the spouse's DB pension and the state pensions to give a guaranteed income is a good option. It will depend on the "number" and the CETV.“So we beat on, boats against the current, borne back ceaselessly into the past.”0 -
Yes, the number and CETV.
I've got spreadsheet, got The Number, although this is to a degree dependant of an actual retirement date which I am unsure of. I've indicated to the OH that (financially) I would like for her to continue working until 60, and myself 60+ (lets say 62).
We wait on the CETV.
I'll admit I have a high risk attitude to investing. But, I could reasonable say that perhaps my 'high risk' attitude is because I know I have this reasonable amount of pension which is guaranteed (amount wise, if not inflation wise).
The conversation so far has been hypothetical; very, very useful, and has identified some options I hadn't even considered (thought about), and has thrown up a raft of thoughts, options, and potential problems. This is what I was looking for, and I'm glad to say the forum hasn't let me down.
The other thing to consider, after we get in to the actual CETV value real world is the psychology of grasping doing what would be correct as opposed to what your (fearful / greedy / indecisive) mind might be telling you.
One element that has helped ease my concern IF (and it is still a very big if) I were to go down this route is how the finances could be managed if I were to pass before my wife.Personal Responsibility - Sad but True
Sometimes.... I am like a dog with a bone0 -
No. Would I, possibly but, I will not have complex inheritance or ongoing tax considerations so, to actually take a pot of money and 'arrange' it for retirement is manageable. I would need to do the appropriate reading/research to ensure I fully understand.Brighter_FS wrote: »This is very complex and will probably be the biggest financial decision that you ever make. Have you considered taking advice form a financial adviser?
At present I understand the concept but actually doing it had not previously entered my mind until very recently. So, there would be a lot for me understand before deciding / doing.Personal Responsibility - Sad but True
Sometimes.... I am like a dog with a bone0 -
As an example here's what I did about 4 years ago when I retired. My situation was I was 52 and single. I conservatively estimated my annual expenses at $40k and I had a rental that provided $15k, a mid 7 figure DC pension pot and both US and UK state pensions coming in my mid 60s. So I was set. But my employer offered a one time chance to buy into their DB pension and a lump sum of $280k would give a $20k index linked pension at 55.
So I bought into the pension as that and rent cover most of my needs.....actually all of them as I'm spending around $30k/year. I used cash savings and some dividends to cover the 3 years between early retirement at age 52 and 55. I'm now 56 and just let my DC pension and other savings compound and I feel perfectly fine with 75% equities because a market crash won't affect my income.“So we beat on, boats against the current, borne back ceaselessly into the past.”0 -
I agree. Part of why I used no commutation earlier.Mutton_Geoff wrote: »I understand that, if the OP chooses to CETV then access to tax free cash is more of a "no brainer" but to reduce a DB pension for the sake of accessing the tfc is not automatically a simple decision.
Some months back I was able to show someone with three DB plans that they could get higher income and lump sum by transferring one and taking unreduced income from the other two than by commuting all three. It's an interesting opportunity to check for when there are two or more DB pensions.0
This discussion has been closed.
Categories
- All Categories
- 343.2K Banking & Borrowing
- 250.1K Reduce Debt & Boost Income
- 449.7K Spending & Discounts
- 235.3K Work, Benefits & Business
- 608.1K Mortgages, Homes & Bills
- 173.1K Life & Family
- 247.9K Travel & Transport
- 1.5M Hobbies & Leisure
- 15.9K Discuss & Feedback
- 15.1K Coronavirus Support Boards