Private pension projection seems way too high

desparateforadvice

Im in desparate state. I have a private pension estimated to yield approx £5500 on a fund of £47000. This seems way way too generous and I cant beleive this kind of return is possible. The provider says its only an estimate, but even so seems way over the industry nomr. Im in process transfering into my rail pension, but I now in order to opt for security. After last week seems a bad idea, so I may cancel the transfer.
The question is if I leave pension where it is, can I have any confidence in a projected yield of £5500 on just £47000???

dunstonh

This seems way way too generous and I cant beleive this kind of return is possible.

Its quite possible on an older scheme with guaranteed annuity rates (such as section 226 retirement annuity contract).

The provider says its only an estimate, but even so seems way over the industry nomr.

Is the projection at a future date (i.e. they are saying £5500 at retirement whilst your current value is £47k)? or are you retiring now?

Im in process transfering into my rail pension, but I now in order to opt for security.

That may not be a good move if there are guarantees on the existing scheme. Especially if you are in the DC version of the rail pension.

The question is if I leave pension where it is, can I have any confidence in a projected yield of £5500 on just £47000???

Tell us the context of the figures and how you invest and what the guarantees are

Loughton_Monkey

desparateforadvice wrote: »

Im in desparate state. I have a private pension estimated to yield approx £5500 on a fund of £47000. This seems way way too generous and I cant beleive this kind of return is possible. The provider says its only an estimate, but even so seems way over the industry nomr. Im in process transfering into my rail pension, but I now in order to opt for security. After last week seems a bad idea, so I may cancel the transfer.
The question is if I leave pension where it is, can I have any confidence in a projected yield of £5500 on just £47000???

You really don't tell us much.

If you were age 26, and hoping to retire at 65, then almost certainly a fund of this size could give you £5,500 in 39 years time! If you are retiring next year, then someone is suggesting your pension fund will roughly double in a year (absolutely impossible).

"The question is if I leave it where it is......" Where is it? If it is in a company "Final Salary" scheme, then you simply must never transfer it, except on the most expert and informed advice. Because there are extremely few circumstances where it would be better to move.

You need to give us some idea of your age, when you are going to retire, what sort of pension you are already in (rail pension???) and where this £47,000 is currently sitting. Who is telling you that £47,000 can be turned into £5,500, and in how many years?

desparateforadvice

dunstonh wrote: »

Its quite possible on an older scheme with guaranteed annuity rates (such as section 226 retirement annuity contract).



Is the projection at a future date (i.e. they are saying £5500 at retirement whilst your current value is £47k)? or are you retiring now?



That may not be a good move if there are guarantees on the existing scheme. Especially if you are in the DC version of the rail pension.



Tell us the context of the figures and how you invest and what the guarantees are

The current provider has quoted (it is not a guarantee) at my request in 8 years time a figure of approx £2500 age 60 and a balance of £3000 additional sum aged 65. These are annual figures, not a one off payment. They valued my fund at £51000 now in the original quote. When it came to arranging the transfer to the railway pension the valuation was quoted at £47000 now presumably they take a cut for themselves? Today I was sorry worried I asked for the transfer to be suspended pending my decision on whether to go ahead and transfer or whether to stay in the original scheme. The original scheme was stated as final salary. Back in 1996 it was projected to yield £1600 pa. Since then CPI has been applied and the projected future rate of 3% has been applied to generate the above two figures age 60 and the addition at 65. I dont know why they have split into 2 figures like that and not just quote one figure age 60 as I asked them. When I try and discuss this they say they cant offer advice (???? I not asking them I just want an explanation from them??!!!, cant they understand that) Why are they quoting two separate timescale for a split figure I wonder. Im totally confused. My existing railway pension is final salary but given the bombshell last week from the government its very unclear a) whether this will be allowed to continue or whether switched to DC and b) whether I will be allowed to retire age 60 under the railway scheme. Im so confused!!

vectistim

I _think_ the duplicate version has disappeared now, so here are the two possible explanations I came up with there:

Is the first figure for if you retire at 60 and the second if you defer to 65, ie: either/or rather than both.

Or

Are there some SERPS involved? Did you opt out? If so it could be the normal pension becoming payable at 60, but the other bit (opting out of the government scheme) not being payable until 65

desparateforadvice

vectistim wrote: »

I _think_ the duplicate version has disappeared now, so here are the two possible explanations I came up with there:

Is the first figure for if you retire at 60 and the second if you defer to 65, ie: either/or rather than both.

Or

Are there some SERPS involved? Did you opt out? If so it could be the normal pension becoming payable at 60, but the other bit (opting out of the government scheme) not being payable until 65

I asked the pension provider for a quote age 60 and they quoted £2500 age 60 with a balaance of 3000 age 65. It seems the scheme was contracted out for 8 years. They appear to tell me the £2500 is a guaranteed minimum assuming 3% pa, but that the additional £3000 age 65 isnt guaranteed. They also said the paying of 8 years into a contracted out scheme means that Ive no NI contributions towards my state pension for that period and so I will not receive a full state pension. However I tried checking this out with my current provider and they told me they hadnt heard of such a thing as getting a reduced state pension because of contracting out. So i dont know what to beleive. I know Ive misunderstood somewhere, but no matter how i try I cant make sense of either or them. can you help??