Is it worth the Risk?

ebw30

I would welcome advice on what seems a difficult decision despite realising i am in a fortunate position.

I will be 62 in September so considering my options due to the pending pension changes. My wife and i are in good health she as no pension provision, i have full NI stamps but i have been contracted out for a large chunk of my working life. my wife's state pension is now only due in 2021.

I have 40 years in a DB final salary scheme,The scheme went into deferral in 2013. i have a deferral certificate offering a pension at age 65 of 23K, this with a 50% widows pension and linked to a 3% guaranteed growth. I realise that the risk remains with the company with a DB scheme.

The company is a Global concern and treat the pension obligations really well, in place of the DB scheme we have DC scheme i currently have 20% of my salary going into this new pot. So what's the problem?

Well, over 80 employees in our group have transferred out to various DC schemes.(this makes me nervous despite thinking most are chasing the 25% TFLS on offer).

I decided that to get a real feel, i needed to know my transfer value.
Based on the 23k at pension age i thought the fund may be worth $400k i received the figure this week and it is $541k this i am told is because Transfer values are high due to the Gilts being low?
So therefore this is an opportunity? is it?

My instincts are telling me to stick with the DB scheme, i intend to go 18 months early with a lump sum of 55k and a 17k salary and a DC pot worth 20k.

Or could i transfer now take 25% 130k, and leave 400k in a DC pot to see us through retirement.

My worries are picking the right provider (is this risky) i assume charges on a pot of this size would be significant, what sort of percentage would i expect to pay.
And just how risky is managing a DC pot. considering i would be paying for the fund to be managed could it still all vanish?

Any advice would be very much appreciated.

Cyberman60

Keep the DB as it is guaranteed !!

mgdavid

Cyberman60 wrote: »

Keep the DB as it is guaranteed !!

agree absolutely! I'm sure your DB scheme would love to get shot of you and the commitment to pay you a cast-iron guaranteed index-linked pension for, in all likelihood, 30 years (assuming you are in rude good health).

hyubh

ebw30 wrote: »

Based on the 23k at pension age i thought the fund may be worth $400k i received the figure this week and it is $541k

Why are you quoting the CETV in dollars? And regardless of the reason, is the 23K in dollars too, or is that in pounds?

Triumph13

If you are in good health then, unless you have a specific need for the lump sum, I'd be going even further and using the DC pot to fund your living expenses for a year or so to avoid having to take the DB quite so early / have it reduced so much

atush

Triumph13 wrote: »

If you are in good health then, unless you have a specific need for the lump sum, I'd be going even further and using the DC pot to fund your living expenses for a year or so to avoid having to take the DB quite so early / have it reduced so much

Or to avoid taking any lump sum

sandsy

Do not transfer out. Please don't do it.

Triumph13

ebw30 wrote: »

i assume charges on a pot of this size would be significant, what sort of percentage would i expect to pay.

You would need to factor in a hefty charge to a financial advisor as well. No-one is going to accept the transfer without it being advised as in 99% of cases it would have 'mis sale' written all over it. The adviser will need to bill you for lots of time getting you to sign forms that basically say 'Yes, I know this is probably a stupid thing to do, but I want to do it anyway and I promise not to sue you afterwards' and he will also need to bill you to cover the significant cost of insuring himself in case the courts decide to ignore these disclaimers and let you sue him anyway.

redpete

I too was surprised when I saw the transfer value of my deferred DB scheme (I only got this because when requesting transfer of AVCs from the same employment the request went through to get the value to transfer the whole lot).

I agree with others that the guaranteed income for life is a very big argument in favour of leaving the DB pot where it is. This is what I'm planning to do, the 13%+ pa growth over the last 3 years of my current DC scheme investments will not continue.

TH1878

How much income do you need each year?

If you were to die, how much would your wife need?

In today's terms.

kidmugsy

In addition to wondering about transferring, you might do well to wonder about pensions for your wife. If she has no pensions other than SRP it is tax-efficient to buy her a pension because her withdrawals will be tax-free as long as she times them to use her Personal Allowance to best advantage.

You could also wonder about (i) keeping your DC scheme intact for her to "inherit" when you shuffle off, and (ii) investigate whether your DB scheme offers "allocation"; illustration here:
http://www.nhsbsa.nhs.uk/Pensions/4227.aspx