Transfer from Final Salary Scheme - Am I being naive?

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  • ssmi
    ssmi Posts: 33 Forumite
    edited 16 June 2017 at 10:01AM
    Thank you PeacefulWaters. Is it really that bad? What information have you used to come to that conclusion so I can check the figures I have given you again? But assuming the info is all correct what would you expect it to be roughly?
  • PeacefulWaters
    PeacefulWaters Posts: 8,495 Forumite
    ssmi wrote: »
    Thank you PeacefulWaters. Is it really that bad? What information have you used to come to that conclusion so I can check the figures I have given you again? But assuming the info is all correct what would you expect it to be roughly?

    I got £600k from a scheme where service had accrued an £18k income from age 62.
  • ssmi
    ssmi Posts: 33 Forumite
    Wow PeacefulWaters, that's quite a difference! Thank you again, I'll get the figures checked.
  • Silvertabby
    Silvertabby Posts: 8,971
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    It depends on the scheme. If OP is with the LGPS, then the offered transfer value could well be correct. The LGPS uses transfer factors set by GAD, whereas private schemes are linked to Government gilts, hence the current high values.
  • ssmi
    ssmi Posts: 33 Forumite
    Thank you Silvertabby, it is a private scheme but it would have had members transferred into it from government schemes if that would make a difference?
  • daveyjp
    daveyjp Posts: 12,468
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    OP. A compound interest calculator can be used to show how long it will take for the pension to pay out £397k.

    I suspect its a better deal for the pension company than yourself.
  • kidmugsy
    kidmugsy Posts: 12,709
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    On the information you've given us, it's probable that your best moves are (i) keep the FS pension, and (ii) make up your national insurance contributions to maximise your state pension. Depending on his circs, your husband might be wise to make pension contributions out of his part-time earnings.

    If you really are set on increasing your exposure to the residential property sector, use TFLS money from your other pensions. But you might be wiser to diversify away from property.
    Free the dunston one next time too.
  • bostonerimus
    bostonerimus Posts: 5,617
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    edited 16 June 2017 at 12:41PM
    "Doing something with the other 75%" isn't really a plan. Educate yourself a bit so you can achieve your goals in a sensible way.

    If we assume 2% inflation then at age 65 your pension will be £26k. If you take the payout and manage to get 4% return then at age 65 it will be worth £565k and if you continue to get 4% annual return you would be able to support the same income as the pension to age 91. Your life expectancy is 88.

    Assuming you live to age 91 and putting those numbers into a growing annuity calculator shows that with 2% index linking the internal rate of return of the pension is equivalent to 3.5%

    So the decision is the usual one......do you feel lucky? Or rather are you confident in your ability to generate an an average annual return of at least 4% if you do drawdown or would you rather go with the pension with it's life time guarantee, but lack of flexibility.

    Bear in mind that if the future statistics of the stock and bond markets are similar to those of the past then a sensibly managed low cost portfolio should allow you to withdraw an inflation linked income starting at around 3.5% for 30 years with a high probability of success. 3.5% of you potential balance at age 65 (£565k) is around £20k which is less than your pension, but with drawdown you might be able to draw more or leave something to your heirs depending on how the markets perform.
    “So we beat on, boats against the current, borne back ceaselessly into the past.”
  • ssmi
    ssmi Posts: 33 Forumite
    Thank you kidmusgy and bostonerimus. I appreciate I need to give this a lot more thought - it's taken a fair time to get a transfer figure from the scheme and until I got this as a starting point I didn't know whether it was worth even considering anything other than taking the pension as offered. I've looked at some scenarios with annuities etc but am aware there are other (low risk) investments that might be available also. I really do appreciate all the input here, it's difficult to get an unbiased view.
  • ssmi
    ssmi Posts: 33 Forumite
    And bostonerimus those are really interesting figures, thank you.
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