Another CETV Q; Help Me Thrash It Through...
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I'll admit I have a high risk attitude to investing.
In retirement your attitude might soften a little. You'll no longer enjoy your regular earned income to supplement your savings or replenish lost or spent capital. With equity investing being a long term pastime. There's less time for those acorns to grow into oak trees so to speak.
There's no wrong or right answer. Ultimately it's a personal decision.0 -
7.1% looks like a deal I'd have told you to grab even with a wait! Assuming the scheme is expected to stay solvent.bostonerimus wrote: »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.
You're doing well! Enough guaranteed income is nice, though I'm also very relaxed about fixed interest and drawdown in general. Something under 2.2% drawing would cover my own core plus basic discretionary needs of say £12,000 a year with an owned home. Though a good deal less than that could work if necessary.bostonerimus wrote: »that and rent cover most of my needs.....actually all of them as I'm spending around $30k/year. ... 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.0 -
Agree, absolutely.Thrugelmir wrote: »In retirement your attitude might soften a little. You'll no longer enjoy your regular earned income to supplement your savings or replenish lost or spent capital. With equity investing being a long term pastime. There's less time for those acorns to grow into oak trees so to speak.
There's no wrong or right answer. Ultimately it's a personal decision.Personal Responsibility - Sad but True
Sometimes.... I am like a dog with a bone0 -
7.1% looks like a deal I'd have told you to grab even with a wait! Assuming the scheme is expected to stay solvent.
Yes an excellent payout rate and when you factor in the index linking at 2% or 3%, and assuming I live to my early 80s, then I'd have to get around 7% annual return from the lump sum in a DC account to match the lifetime income.......so I'll take 7% with the only risk being dying young and even then there's a capital payout to my heirs. It's a government pension and is currently 70% fully funded so it's a good bet.You're doing well! Enough guaranteed income is nice, though I'm also very relaxed about fixed interest and drawdown in general. Something under 2.2% drawing would cover my own core plus basic discretionary needs of say £12,000 a year with an owned home. Though a good deal less than that could work if necessary.
I was all set to drawdown using dividends and savings, but the DB pension offer came along and it was too good to ignore and also gave me income at 55 rather than me having to spend down my regular taxable accounts.while waiting until I was 59.5 years old to access my DC accounts (I'm in the USA).“So we beat on, boats against the current, borne back ceaselessly into the past.”0 -
I'm going through the process of transferring a DB pension at the moment. I admit I have only skimmed through the full thread but two things occurred to me. Have you considered the effect of the LTA - You appear to be very close to it at an assumed rate of only x32 at x40 (I have a recent valuation at this sort of level) you will be substantially over it and with a number of years still to run.
My second slightly related thought is that, is there a possibility of doing a partial withdrawal? I believe some schemes allow this. This could give you the best of both worlds. It could allow you to cover all your normal living expenses purely from a combination of Your and OH's DB + state pension whilst still providing you with a substantial SIPP that would give you the additional flexibility. You would also have a much better chance of dodging the LTA.0 -
No, I hadn't. Everything is still hypothetical atm but you are correct, any CETV ratio much more above 37 would hit the LTA.I'm going through the process of transferring a DB pension at the moment. I admit I have only skimmed through the full thread but two things occurred to me. Have you considered the effect of the LTA - You appear to be very close to it at an assumed rate of only x32 at x40 (I have a recent valuation at this sort of level) you will be substantially over it and with a number of years still to run.
No partial transfers allowed. Part of the reason for starting the AVC was to allow additional flexibility in how . what I took as DB pension. At the time of commencing taking the pension I can transfer the AVC to another provider (SIPP). And, at present that was my plan. Although it very much depended on what the commutation factors would be for buying additional pension (unlikely to take this option).My second slightly related thought is that, is there a possibility of doing a partial withdrawal? I believe some schemes allow this. This could give you the best of both worlds. It could allow you to cover all your normal living expenses purely from a combination of Your and OH's DB + state pension whilst still providing you with a substantial SIPP that would give you the additional flexibility. You would also have a much better chance of dodging the LTA.Personal Responsibility - Sad but True
Sometimes.... I am like a dog with a bone0 -
It is late so my thinking may not be as clear as usual (if it ever is).
On a side note, I am making £250 AVC via SS. Part of that reason is to benefit from HRT savings (plus a small amount of benefit from child benefit taxation). At present my wife will not be maximising her annual income tax allowance in retirement, possibly not even when her SP kicks in, and one of the additional goals was to maximise her SIPP even though she is a LRT payer so as to maximise her income (against the income allowance when retired).
That's the background.
The main reason for starting this thread was in relation to me thinking in terms of the perceived, or real, lack of flexibility with our current set up. I know people are unlikely to be able to answer this as it is very much scheme dependent but, wrt early retirement (lets say 62) might the below be possible:
With my existing DB pension might I be able to retire, 'commence' it (the pension) but defer taking it until lets say 65. In the meantime, what if we had reduced my wife's SIPP contributions back to their usual level (£150 gross pm) and I were to increase my AVC to £700pm. Hopefully in ten years time I might have an AVC pot of approx £125k ((£700x12x10) + 50% growth).
Might I be allowed to transfer the AVC to a SIPP (for example) and start drawing on that? Leaving the DB scheme intact until my NRA for the DB scheme of 65? (I know, I will need to ask the scheme administrators).
Are there any financial / IFAs out there who may have some more experience of what is possible for a DB company scheme?
EDIT: Or do I just forgo the SS benefit and stop the AVCs and start contributing to a SIPP?
I think I am / have identified that flexibility is a primary consideration. Oh, how I wished I'd started this discussion a number of months ago.
(now I'm talking to myself....bed I think)Personal Responsibility - Sad but True
Sometimes.... I am like a dog with a bone0 -
I don't remember seeing a DB scheme where you could do anything other than take it all or wait then take it all. Some increase if you wait until after normal retirement age for the scheme, others don't.
Usually you can transfer the DC portion.
Life expectancy is the really big issue for you, need to try to refine that.0 -
I think it was my IFA that mentioned partial withdrawal as a possibility but might be mistaken. Another thing to check is starting the pension early - a large chunk of mine turned out to allow me to start payment from 60 rather than 65 without penalty. They haven't factored this into the transfer value so they redid it and it went up by quite a bit. In uncovering that my IFA earnd his keep!
If you did decide on transfer then given that you will be close to the LTA crystallising the lot probably helps. Then setting up a SIPP in your wife's name and putting as much as you can into it whilst she is still working would be good. Maxing ISAs in both your names & looking into VCTs - lots of flexibility but also lots of hassle.0 -
The possibility of LTA being a thing to consider/bare in mind is quite interesting actually.
If we assume the government is keen for everyone to help themselves and contribute more towards their own support in retirement, the fact that they impose a penalising tax on pension pots at £1m surely implies that that is considered a more than sufficient amount to safeguard retirement. Therefore could it not reasonably be argued that anyone with a pension pot at or near the £1m limit must, by the Government bean counters, be more than able to provide for retirement, otherwise why tax those provisions at that level?Personal Responsibility - Sad but True
Sometimes.... I am like a dog with a bone0
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