Cashing in an Index-lined pension?

xylophone

Does your wife have her own pension?

Your pensions provide for your widow in the event of your death?

Has the IFA explained the downside of transferring out of a DB pension?

http://www.thisismoney.co.uk/money/pensions/article-2598971/Should-transfer-final-salary-pension.html

http://www.ft.com/cms/s/0/084f514a-b8d3-11e3-835e-00144feabdc0.html#ixzz31iSUz7Ba

kidmugsy

This is a leg-pull, isn't it?

rudebhoy

kidmugsy wrote: »

This is a leg-pull, isn't it?

not at all. it is only a suggestion, but he has been making a lot of positive noises about it.

will see what he recommends later this week.

rudebhoy

xylophone wrote: »

Does your wife have her own pension?

Your pensions provide for your widow in the event of your death?

Has the IFA explained the downside of transferring out of a DB pension?

http://www.thisismoney.co.uk/money/pensions/article-2598971/Should-transfer-final-salary-pension.html

http://www.ft.com/cms/s/0/084f514a-b8d3-11e3-835e-00144feabdc0.html#ixzz31iSUz7Ba

she only works part time, and had a lot of years off bringing up the kids, so her pension is a pittance.

she would get a pension if I die first, which is pretty likely as I am 10 years older than her.

but I guess conversely, she would inherit whatever investments I have, so she would be ok either way.

will have a read of those links, thanks.

zagfles

rudebhoy wrote: »

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?

Well you should get about 10 times that :rotfl:

rudebhoy

zagfles wrote: »

Well you should get about 10 times that :rotfl:

sorry, typo, meant to say I need 2k - 2.5 per month, not per annum

zagfles

rudebhoy wrote: »

not at all. it is only a suggestion, but he has been making a lot of positive noises about it.

will see what he recommends later this week.

What charges have you agreed? If you haven't, suggest you ask him for charges in cash terms, not % terms. Amazing how small 1% sounds but how big £6000 sounds!

zagfles

rudebhoy wrote: »

sorry, typo, meant to say I need 2k - 2.5 per month, not per annum

Like others have said unless you have a short life expectancy or desparately need the cash, it's unlikely to be sensible to cash in an index linked final salary scheme. The IFA would have to come up with a damn good justification.

You wouldn't be able to get more income from the invested capital than your final salary schemes would pay, with the benefits they give (eg spouse pension etc), without taking risks. Particularly as you'll have IFA charges to pay as well.

If you get £50k redundancy plus £200k savings, spend £30k per year for 6.5 years till age 60, you'll have £55,000 left. Then then take the pensions paying £24600 (inc 20% reduction on the age 65 one), plus £7k per year from your savings till 67, then your state pension kicks in which will presumably be about £7k. Tax will reduce it a bit but should be easy over £2k per month for the rest of your life, without any need for risky investments.

dunstonh

There are plenty of scams going on about defined benefit transfers. This often includes a non-regulated company doing the talk and using unregulated investments in an attempt to try and avoid common sense warnings.

Did you contact this adviser or did they cold call you? (the scams are mostly in the cold calls)

Triumph13

Just for the fun of playing with the numbers...

I would guess your state pension is likely to be around the £5,900 mark as you'll have been contracted out in your DB schemes and won't be contributing once it change to STP in 2016.

If your £200k plus £50k redundancy only matches inflation in a cash ISA or similar then I make that £2,200 a month post tax for the 13.5 years until SPA and £2,350 per month thereafter with no investment risk and taking your pensions as they fall due.

Exactly how much extra is the IFA suggesting on top of that and for how much risk I wonder?