Pension uncertainty

kidmugsy

Kendall80 wrote: »

Indeed, it does seem high. Its more likely to be around 1k per annum (ish). With that in mind, the 17k transfer offer may be the best decision here as I can invest that in a SIPP and significantly add to it over the next 25 years. Greater flexibility too.

It might be wiser to wait for the next crash and move it then. It'll buy you more shares.

Kendall80

dunstonh wrote: »

In 2008 when you got your statement, were you still an active member of the scheme? I wonder if the 8k figure is based on you still working for them.

Yes. I don't seem to have any statements since leaving. Not something I would've thrown away.


I have just received annual updates as to the schemes performance. Funding shortfall etc and how it hopes to make up the difference.

Kendall80

Update;


Upon my recent request I've received a statement of my deferred pension. Whilst it is still devoid of important benefits information it does provide a current value of my deferred pension - £1550 per annum. (1380 @ DOL - 6 years ago)


The value (in excess of GMP) increases each year in line with inflation to a maximum of 5%.


There are benefits payable on death in deferment but it refers me to the Rules - a copy of which has not been sent.


As I am still a 'relatively spritely' 34 - would I not be better off taking advantage of the offered 17K transfer value - starting a SIPP and adding to it monthly?


If yes, the problem then is to where do I transfer it. Bestinvest was my preferred option but it appears they wont accept DB transfers.

dunstonh

As I am still a 'relatively spritely' 34 - would I not be better off taking advantage of the offered 17K transfer value - starting a SIPP and adding to it monthly?

£1550 equates to 9.1% of the transfer value. That £1550 not only increases every year until retirement but the income once payable increases every year as well.

For a SIPP to pay a level that is similar to the income of the DB scheme, it would have to be worth around £60,000 now. This means you would need the £17k to not only grow to £60k. You would also need it to grow by more than that to keep up with the indexation.

You would need growth, each and every year, at a level that is way above the long term average for equities to beat the DB scheme.

Bestinvest was my preferred option but it appears they wont accept DB transfers.

With over 90% of defined benefit pensions best left where they are, that is not a surprise. Even those that do accept DB transfers in will want an IFA sign off on them.

Kendall80

dunstonh wrote: »

£1550 equates to 9.1% of the transfer value. That £1550 not only increases every year until retirement but the income once payable increases every year as well.

For a SIPP to pay a level that is similar to the income of the DB scheme, it would have to be worth around £60,000 now. This means you would need the £17k to not only grow to £60k. You would also need it to grow by more than that to keep up with the indexation.

You would need growth, each and every year, at a level that is way above the long term average for equities to beat the DB scheme.

Thanks Dunston. Your calculations do however assume the 17k is invested and left. I do plan to add to it. Just £100 a month initially as I'm also investing in an ISA and contributing to a current employers pension.


With this minimum extra contribution over 30 years (hopefully 20 ) and assuming average equity growth figures the value would therefore exceed the 60k you arrived at.

atush

No, it is NOT better to take the transfer value.

It of course, does not mean you should not open a DC pension, and add to it yearly. This is necessary. But a new work pension where your employer contributes money is always the best way to go. then perhaps consider a personal pension or sipp.

dunstonh

Your calculations do however assume the 17k is invested and left. I do plan to add to it.

It doesnt change anything as you can make the extra contribution(s) without transferring it. So, comparing like for like is important.

With this minimum extra contribution over 30 years (hopefully 20 ) and assuming average equity growth figures the value would therefore exceed the 60k you arrived at.

The £17k would need to exceed whatever 60k is in future years money. The £100pm should not be included in that calculation.