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    • Harry81
    • By Harry81 14th Jun 17, 6:40 PM
    • 9Posts
    • 1Thanks
    Harry81
    Db transfer to Dc
    • #1
    • 14th Jun 17, 6:40 PM
    Db transfer to Dc 14th Jun 17 at 6:40 PM
    Hi, i get a yearly transfer value for a job i had around 10 years ago. Im 36 and the current transfer is 64k, last year it was 43k ( 3200 per year growing by 5% or cpi which ever is lowest) My current pension is a dc scheme with around 36k in. Last year it grew by around 9% with my company paying management fees. With this type of growth surely it would be a good idea to move it into the same pot. im aware that it can go up aswell as down but with 20-30 years to grow it looks like a no brainer. As its over 30k I'd have to speak to an ifa...can this fee come out of the pot or due to my age will i have to find the cash?

    Thanks with any pointers
Page 1
    • AnotherJoe
    • By AnotherJoe 14th Jun 17, 6:55 PM
    • 7,602 Posts
    • 8,202 Thanks
    AnotherJoe
    • #2
    • 14th Jun 17, 6:55 PM
    • #2
    • 14th Jun 17, 6:55 PM
    I'd stick with the DB. You'd break even after 20 years, you have extremely valuable inflation protection, you have certainty, and a DB pension would help give an underpinning to future DC pensions.
    • squeeks
    • By squeeks 14th Jun 17, 7:22 PM
    • 296 Posts
    • 226 Thanks
    squeeks
    • #3
    • 14th Jun 17, 7:22 PM
    • #3
    • 14th Jun 17, 7:22 PM
    Interest rates are low right now which makes the transfer value high (and dc pensions less valuable than db) if you think interest rates are going to rise significantly over the next 30 years, it could be a good move. As always do you own research and speak to a couple of financial advisors as I could be completely wrong.
    • Harry81
    • By Harry81 14th Jun 17, 7:57 PM
    • 9 Posts
    • 1 Thanks
    Harry81
    • #4
    • 14th Jun 17, 7:57 PM
    • #4
    • 14th Jun 17, 7:57 PM
    Thanks for taking the time to reply. I suppose it would be good to have the diversity of 2 separate pensions. I like the idea of having a larger pot so possibly something to leave behind also my dad hasn't got the best health and it makes you think how a db pot could be wasted ( i know everyones different in later life health )
    • LHW99
    • By LHW99 14th Jun 17, 8:14 PM
    • 966 Posts
    • 817 Thanks
    LHW99
    • #5
    • 14th Jun 17, 8:14 PM
    • #5
    • 14th Jun 17, 8:14 PM
    Having even a small DB gives you choices IMO. It means you have a basic income in retirement, to add to the state pension, and as you can always run a DC scheme voluntarily alongside, you can invest 100% in equities while you are young, with a good chance it will do well over the 30 odd years its likely to be before you need it / pass it on in the end.
    If you ever marry, a DB scheme usually gives at least a 50% pension to your spouse if the worst happens.
    • OldMusicGuy
    • By OldMusicGuy 14th Jun 17, 10:56 PM
    • 166 Posts
    • 285 Thanks
    OldMusicGuy
    • #6
    • 14th Jun 17, 10:56 PM
    • #6
    • 14th Jun 17, 10:56 PM
    I am just about to retire with no DB pension and a large DC pot. I would much rather have a smaller DC pot and a core DB pension because I am a risk averse person and would love to have the certainty of some inflation-linked income to rely on. OK I will get the state pension but I am not confident that will be around in its current form for the next 30 years.

    The one thing that I can guarantee is that a lot of what the experts are telling you now about what may happen in 20 to 30 years will not come to pass. No one predicted near zero interest rates and the death of annuities 20 to 30 years ago when I started saving for retirement. So if you are risk averse like me, hold on tight to that DB pension and save hard into your pot as much as possible now to give you a nice mix of retirement options. If you like taking a big punt, transfer it all into a DC pot and enjoy the ride over the next 20 to 30 years!
    • Kynthia
    • By Kynthia 15th Jun 17, 1:36 AM
    • 5,021 Posts
    • 7,001 Thanks
    Kynthia
    • #7
    • 15th Jun 17, 1:36 AM
    • #7
    • 15th Jun 17, 1:36 AM
    Does your DB pot pay a percentage to a spouse from the date of your death until they due? Does it pay a smaller percentage to any children until they reach adulthood? Neither of those are "nothing" although they obviously will be better for some and worse for others unlike a DC pot which will have the same amount for beneficiaries no matter what your marital sutuation.
    Don't listen to me, I'm no expert!
    • Harry81
    • By Harry81 16th Jun 17, 8:29 PM
    • 9 Posts
    • 1 Thanks
    Harry81
    • #8
    • 16th Jun 17, 8:29 PM
    • #8
    • 16th Jun 17, 8:29 PM
    It does offer a spouse pension for about half the amount. I've read a few threads on people asking about transferring out of a db scheme and most of them say stick with it. My is for a pot of x20 with 29 years to grow. If it stays in the db scheme it grows by between 2.5% and 5%. Whereas a dc scheme seems to grow between 5% and 10%... this is my main thinking about taking the cash now with the added benefit of retiring earlier. Me and my employwr are currently putting in around £500 per month via salary sacrifice, current pot of 37k. Maybe this would be enough to give me a half decent pot at 55-60 to retire and leave the db pension for a small back up... too many scenarios running through my head to make the right decision
    • Thrugelmir
    • By Thrugelmir 16th Jun 17, 9:41 PM
    • 55,958 Posts
    • 49,334 Thanks
    Thrugelmir
    • #9
    • 16th Jun 17, 9:41 PM
    • #9
    • 16th Jun 17, 9:41 PM
    Whereas a dc scheme seems to grow between 5% and 10%...
    Originally posted by Harry81
    What's your reference source?
    "Wide diversification is only required when investors do not understand what they are doing." - Warren Buffett
    • Harry81
    • By Harry81 16th Jun 17, 10:36 PM
    • 9 Posts
    • 1 Thanks
    Harry81
    From the last 3 years of my pot growth and what I've been reading up on. From what ive read 4-5% cautious 6-7% balanced 8-9% adventurous. Over 20 - 30 years i guess it is more of a gamble than a guaranteed 2.5% but surely worth the risk. or not
    • bigadaj
    • By bigadaj 17th Jun 17, 12:15 AM
    • 10,736 Posts
    • 7,022 Thanks
    bigadaj
    From the last 3 years of my pot growth and what I've been reading up on. From what ive read 4-5% cautious 6-7% balanced 8-9% adventurous. Over 20 - 30 years i guess it is more of a gamble than a guaranteed 2.5% but surely worth the risk. or not
    Originally posted by Harry81
    The problem is that those figures look like moderately optimistic projections based on historic data, no guarantees.

    We've had a year which has returned 25-30% on many equity heavy portfolios, and also inflation is heading upwards. Some indication interest rates may rise later this year, this may or may not be good for equities but low risk assets are expensive and difficult to find currently, wouldn't rule out the db offering value in the future.
    • bostonerimus
    • By bostonerimus 17th Jun 17, 2:58 AM
    • 1,133 Posts
    • 644 Thanks
    bostonerimus
    From the last 3 years of my pot growth and what I've been reading up on. From what ive read 4-5% cautious 6-7% balanced 8-9% adventurous. Over 20 - 30 years i guess it is more of a gamble than a guaranteed 2.5% but surely worth the risk. or not
    Originally posted by Harry81
    With a DB pension (or annuity) you are paying for guaranteed lifetime income. With drawdown from a DC pension there is no guarantee. If the statistics of future stock and bond markets are similar to those of the past then a 60/40 equity to bond allocation should give you a 95% chance of being able to draw an inflation indexed 3.5% for 30 years without running out of money. Notice all qualifications and used of the conditional tense in the last sentence.
    Misanthrope in search of similar for mutual loathing
    • LHW99
    • By LHW99 17th Jun 17, 12:42 PM
    • 966 Posts
    • 817 Thanks
    LHW99
    Whereas a dc scheme seems to grow between 5% and 10%
    But it may also drop by up to 50% in a year if things go really pear-shaped. Could you cope with seeing that, or would you sell out in a panic? What would happen if that really bad year was the one just after you retired?
    • bostonerimus
    • By bostonerimus 17th Jun 17, 2:26 PM
    • 1,133 Posts
    • 644 Thanks
    bostonerimus
    But it may also drop by up to 50% in a year if things go really pear-shaped. Could you cope with seeing that, or would you sell out in a panic? What would happen if that really bad year was the one just after you retired?
    Originally posted by LHW99
    50% stock market losses are very rare, but they have happened. If a withdrawal is set at 3.5% then a couple of really bad years at the beginning would probably push you into the 5% failure rate for a sensible 60/40 portfolio. So in bad years you should reduce your withdrawals, get a part time job or spend from the cash you set aside for just such a bad sequence of returns. Of course if you don't have a portfolio that is diverse and has broad stock market statistics then your chances of failure will go up. if you put everything into an alternative energy mini-bond or a single small cap stock the risk of failure will increase.
    Misanthrope in search of similar for mutual loathing
    • Joey Soap
    • By Joey Soap 18th Jun 17, 6:42 AM
    • 80 Posts
    • 21 Thanks
    Joey Soap
    My 2p worth. Stick with the DB scheme unless you think there is a very real chance of the scheme sponsor (the ex employer) going bust.

    Review in 10 years time.
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