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Cashing in an Index-lined pension?
rudebhoy
Posts: 54 Forumite
went to see an IFA a couple of weeks ago. 2 reasons - first being I am sitting on a fair amount of cash (around 200k) which is earning very little in the bank, so wanted some advice on how to get a better return.
2nd - I am thinking of taking early retirement, so wanted to work out the best strategy in terms of whether or not to take my pension early etc.
I've got two main pensions, one with BG where I worked for 19 years and one with my current employer. Both are final salary, index-linked.
BG one starts paying when I am 60 and current projection is it will pay 15k pa. I lose 5% pa for every year early I take it.
Other one kicks in at 65, and will pay about 12k pa. I lose 4% pa for every year early I take it.
He has written to both pension funds asking for a transfer value. He is keen on taking that money and putting it in a more flexible portfolio, where I can draw down as much or as little as I need pa.
BG have come back with a transfer value of 400k. The other one has yet to respond.
I am meeting him later this week, but from talking to him, I am pretty sure he is going to say take the 400k as soon as I am 55 (next year) and invest that with him along with the 200k cash.
Just wanted to check if this is a reasonable strategy. Guy seems sound enough, but that means nothing.
I have agreed to pay £450 for him to come up with some options and recommendation in a report.
I can then choose to implement the recommendations myself, or he will do it for circa 3k.
How does the above sound to you?
2nd - I am thinking of taking early retirement, so wanted to work out the best strategy in terms of whether or not to take my pension early etc.
I've got two main pensions, one with BG where I worked for 19 years and one with my current employer. Both are final salary, index-linked.
BG one starts paying when I am 60 and current projection is it will pay 15k pa. I lose 5% pa for every year early I take it.
Other one kicks in at 65, and will pay about 12k pa. I lose 4% pa for every year early I take it.
He has written to both pension funds asking for a transfer value. He is keen on taking that money and putting it in a more flexible portfolio, where I can draw down as much or as little as I need pa.
BG have come back with a transfer value of 400k. The other one has yet to respond.
I am meeting him later this week, but from talking to him, I am pretty sure he is going to say take the 400k as soon as I am 55 (next year) and invest that with him along with the 200k cash.
Just wanted to check if this is a reasonable strategy. Guy seems sound enough, but that means nothing.
I have agreed to pay £450 for him to come up with some options and recommendation in a report.
I can then choose to implement the recommendations myself, or he will do it for circa 3k.
How does the above sound to you?
0
Comments
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I am meeting him later this week, but from talking to him, I am pretty sure he is going to say take the 400k as soon as I am 55 (next year) and invest that with him along with the 200k cash.
Just wanted to check if this is a reasonable strategy. Guy seems sound enough, but that means nothing.
Very few occasions where transferring a DB pension to a DC pension would be seen as a sound strategy. Do you fit any of them? For example;
Single but have children you wish to leave the pension to
Short life expectancy
The IFA should work out the critical yield so don't assume he's going to go for transfer.0 -
What's wrong with the obvious strategy of living on the £200k cash and taking the pensions at their standard age?
If you are happy with £27k pa plus state pension as your long term pension then the £200k should fill in the gap nicely.0 -
When do you want to retire?
It sounds unwise to "cash in" either. Surprised an IFA thinks it makes sense..Few people are capable of expressing with equanimity opinions which differ from the prejudices of their social environment. Most people are incapable of forming such opinions.0 -
Very few occasions where transferring a DB pension to a DC pension would be seen as a sound strategy. Do you fit any of them? For example;
Single but have children you wish to leave the pension to
Short life expectancy
The IFA should work out the critical yield so don't assume he's going to go for transfer.
Am married, and no major ailments, so hoping to have another 30 years in front of me.
He has been going on about the flexibility it would give me, and 415k invested well would on the face of things (to a novice like me) be able to give a decent income without having to wait until I am 60.0 -
When do you want to retire?
It sounds unwise to "cash in" either. Surprised an IFA thinks it makes sense..
I am 53 now. My plan had been to pack in when I was 55, in 18 months time, however if I go in the next 6 months, I can get 50k redundancy, which probably won't be on the table in 12-18 months time.
I am surprised at his suggestion tbh, as I understood a FS, index linked scheme to be the holy grail!0 -
Am married, and no major ailments, so hoping to have another 30 years in front of me.
He has been going on about the flexibility it would give me, and 415k invested well would on the face of things (to a novice like me) be able to give a decent income without having to wait until I am 60.
Are you sure he is an IFA?Few people are capable of expressing with equanimity opinions which differ from the prejudices of their social environment. Most people are incapable of forming such opinions.0 -
What's wrong with the obvious strategy of living on the £200k cash and taking the pensions at their standard age?
If you are happy with £27k pa plus state pension as your long term pension then the £200k should fill in the gap nicely.
I guess the challenge is
1. it is 6.5 years till pension 1 kicks in
2. 11.5 years till pension 2 kicks in
3. 15.5 years till state pension kicks in
I reckon I need 2-2.5k per annum to have the lifestyle I want, which might be a struggle?0 -
Am married, and no major ailments, so hoping to have another 30 years in front of me.
Plus a pension for your wife if you die first.He has been going on about the flexibility it would give me, and 415k invested well would on the face of things (to a novice like me) be able to give a decent income without having to wait until I am 60.
Your £200k would bridge the gap from 55 till 60.I am surprised at his suggestion tbh, as I understood a FS, index linked scheme to be the holy grail!
It's only been a suggestion so far. Until he gets the transfer value and works out critical yield, he can make no recommendation.0 -
Sounds very odd, as above, it is very unusual to transfer a DB scheme to DC and not lose money, let alone two of them.
Given the amounts involved, the cynic in me thinks he wants you to transfer to get a % of the transfer values as a commission.
I would recommend a second opinion, from a second IFA who if independent and would not profit whether you transfer or not.
Yes you will be comfortable either way but losing money is losing money0
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