Small pot: Is it better to transfer than leave?

Skinnydad

Hi folks any thoughts would be appreciated. I have a small defined benefits pension which has a transfer value of £39k. it only ran for a couple of years. I have been told the following:

Total preserved pension £934 pa

This has the following:

Total GMP at date of leaving (included on preserved pension): £50.96

Which includes GMP after April 1988 of: £50.96

GMP revalued to state pension age: £218.40

What do the last 3 statements mean? And if I understand this correctly does this mean an annual pension of £934?

If so roughly £20/week. I was thinking of transferring this from the existing holder to a Sipp I have with Aegon which is valued at £100k. I can’t really see the value in leaving this small fund where it is when I can consolidate it. Have I missed anything and does it make sense to move this. Any thoughts appreciated.. Thanks SD..

mgdavid

You will in all probability receive the same comments and guidance that you already received in your previous thread.
https://forums.moneysavingexpert.com/discussion/5156456
It is very unusual to be beneficial to transfer out of a DB pension. Remember that the payments are guaranteed, indexed, and provide a pension for your widow should you pre-decease.
It provides the safety of diversification, giving a rock-solid foundation stone should your other DC pension suffer the vagaries of the stock market.
It also saves you the work involved in managing the investments.
And finally you need IFA signoff to achievea DB transfer, which costs.

xylophone

http://www.barnett-waddingham.co.uk/comment-insight/blog/2014/08/18/what-is-a-gmp/

Skinnydad

Thank you mgdavid and xylophone I appreciate your response, you’ll see from my previous thread that I was asked to provide the figures for comparisons and consideration. Which I’m in the process of doing. I’d be the first to say I don’t understand all the terms and conditions associated with pensions, take it from me I’ll learn. From the previous thread you state “Why do people view pension funds as something to be left to future generations, when they are actually for living costs from when one stops work to when one dies?” This is an understandable approach and attitude. My question does not fly in the face of your response, but this must be based upon a certain value. My question was centred around the value inherent in the fund. 39K or approx..
£20/week. My thinking here which does fly against your attitude is that if I receive 1k/year then it would take me 39 years to recoup my pot (by then my wfie and myself will have probably popped our clogs). If I transferred this 39k to my sip would this earn me 1% or approx.. £400 per year, if so I’d be no worse off (unless I’m missing something) I for one don’t have any issues with using my funds for living costs but I firmly believe that anything left (after all it is your hard earned money) should be returned to whoever you choose and not be retained in the companies coffers.

You’ll need to forgive me but in a democratic society everyone is entitled to their opinion, whether you agree or not. Mines is that it is abhorrent to me that Banks and Pension companies have been fleecing the public for years, their charges are astronomical and not transparent. Just watch the news over the last 5 years. In fact the was a discussion on the local radio the other day that it is still nigh on impossible to find out what charges the pension company levies upon your investment as it’s tied up in all sort of loop holes. The pension administrators compound this fact by not forcing companies to be more upfront about the charges made. I have worked in the banking and insurance industry for a number of years and the amount of money they had in relation to war chests, unclaimed funds and lapsed polices etc. is astronomical. You just have to look around most of our major cities and the best buildings are all banks and insurance companies. I’m sorry for ranting here but I am very cynical on the management of funds and their lack of transparency in general.

Linton

To be offered £39K for a £1K pension seem wildly generous. Why should they offer that much? The only reasons I can think of is that your understanding of how much you are due to get is wrong. Note that as it is a DB pension the true value is the annual payment which the company has to provide. The Transfer Value is calculated from that by the scheme actuaries, and is usually substantially less than what it would cost you as a private investor to generate the same benefits.

Also, in calculating the payback time you do need to allow for the annual payment being inflation linked which would reduce the calculated years considerably.

On your point about the money left over after you die - the whole reason for guaranteed pensions, whether they are DB or DC annuities, is that the money is designed to run out somewhere near the estimate average age at death. Then those that die early subsidise those who die late. The money isnt simply retained in the insurance company coffers.

jem16

Skinnydad wrote: »

Total preserved pension £934 pa

Is that £934pa the amount of pension that was calculated on leaving or is it the current value of the pension after it has been revalued with inflation since you left?

If it's the current value then the £39k transfer value, as Linton says, seems far too generous.

If it's the original value you would need to find its current value.

Skinnydad

Thank you Linton appreciate your response, sorry for going off on one previously, I get a little frustrated by it all. If you look at my 1st post and the statement:

Total preserved pension £934 pa

does this mean I'll get £934 per annum?

and the statement I received does say a transfer value of 39K

but maybe I've read it wrong. This was a job I was in about 20 years ago for about 2.5 years. I'll have a read again when I get home.

Re your comment that money isn't retained may be valid but I'm sorry but can't help being cynical. Have a read of the below..though a few years old now and the landscape has changed has the procedures and methods of the pension industry changed..Mmm I wonder..

http://www.independent.co.uk/money/pensions/revealed-the-scandal-of-how-pension-providers-rake-in-the-money-2157940.html

Skinnydad

Thanks Jen I'll check this out when I get home.. As I've stated the correspondence from pension companies don't make easy reading.. thank you once again..

jem16

Skinnydad wrote: »

but maybe I've read it wrong. This was a job I was in about 20 years ago for about 2.5 years.

What was your final salary on leaving? Do you remember if it was a 1/60ths or 1/80ths scheme?

greenglide

that it is abhorrent to me that Banks and Pension companies have been fleecing the public for years, their charges are astronomical and not transparent.

So you are thinking of getting the money out of a DB scheme where, by definition, there is no fleecing going on (the level of benefits was set when you left the scheme but uprated by inflation) to transfer to a DC where it will be invested by the organisations you claim to despise?

Really?

atush

I agree. The OP is thinking with emotions, and misunderstandings of both the DB pensions, their LE (from their other thread) and other things.

You need to buckle down and do some reading. Here, the pension information etc. Then come back. With a clear head.