Blocked from Transferring DB Pension to DC… Opinions Sought

Neil_Graham

I am a 53 yr old male looking to take early retirement at 55. I have a deferred DB pension that I would like to transfer to DC, so I can access it flexibly to meet my needs at 55. I have received a CETV (valued at £350k which, as others have mentioned, appears to be very generous at the moment). I then contacted an IFA, who has now carried out a TVAS, which unsurprisingly shows that the critical yields I need to achieve to match the benefits I would be giving up are high. Based on that he is refusing to carry out the transfer from the DB to the DC plan. Now I fully understand he is diligently following a process, and if I wanted to buy my own annuity with the cash (which is what the TVAS illustrates), of course it would be foolish to go ahead with the transfer.

BUT, here’s what I actually want to do:

Retire at 55
Pay off my mortgage at 55 (~£60k needed)
Pass on any unused sum to spouse/children
Want to have more income when I’m younger (55 – 65) with it reducing as I get older

All of which I could do by transferring the DB cash to DC to draw down flexibly, which my IFA won’t carry out. So I am stuck. As is stands I won’t have enough cash to achieve what I want to do with my life post-55; but will have way too much income post-65/67 into old age when I won’t need it.

So, would value some opinions on how to progress this, or hear from others who have been in a similar predicament to me. The current CETV offer expires on Sep 7 so a bit tight for time. Also the DB company is in poor shape and I wouldn’t be surprised if it goes bust in the next few years (another reason to get the cash out now).

(Other info that might be relevant: I have other separate DC pensions which will be worth about ~£200k at 55, I expect to receive full state pension at 67; my wife expects reasonable private pension and state pension too, she is five years younger than me.)

davide691

For what it’s worth, Youinvest told me they’d accept a DB transfer to a SIPP even if your IFA doesn’t recommend it. They just need to see you’ve taken IFA advice, and will get you to sign an additional disclaimer before you transfer

dunstonh

. Also the DB company is in poor shape and I wouldn’t be surprised if it goes bust in the next few years (another reason to get the cash out now).

No its not.

(Other info that might be relevant: I have other separate DC pensions which will be worth about ~£200k at 55

So, why are you not using those to fund the gap between 55 and the scheme retirement age?

Neil_Graham

So, why are you not using those to fund the gap between 55 and the scheme retirement age?

Well, taking off the ~£60k needed to pay mortgage off, and even combining it with reduced DB annuity taken early, could just about eke it out for 10 yrs (55 - 65). But then we would have way more income than needed later in life, particularly when wife's pensions kick in. And that is the exact opposite of what we want to do: more income when younger when we are fit, able and motivated to do stuff; with less income when old and "worn out". For example my dad is now 80 and all he likes to do is potter around in garden and fall asleep in front of Countdown..!!

greenglide

So don't use the 60k now to pay the mortgage off? Could that not wait until later when you have more income? You would have that money to see you over the gap?

You also say you have £200k in a DC scheme. Use that?

dunstonh

Well, taking off the ~£60k needed to pay mortgage off, and even combining it with reduced DB annuity taken early, could just about eke it out for 10 yrs (55 - 65).

Its not an annuity. Its a scheme pension. It will be index linked income with a reduced penalty every year you leave it. Plus, an increased lump sum.

Effectively, you are looking to drain the defined benefit first from what you are saying and suffer the penalties for doing so. Whereas draining the defined contribution scheme would likely be more cost effective.

rpc

Neil_Graham wrote: »

But then we would have way more income than needed later in life, particularly when wife's pensions kick in.

Look at commuting the DB pension to get an increased PCLS? Possibly a better option than abandoning the pension scheme completely.

alanobrien

I am looking at a similar move for reasons of flexibility, consolidation and inheritance. I am fortunate to have no debt and my transfer value will exceed the 2016 LTA limit.

From what i have read so far on the subject the move from DB to DC seems to be a bit of a catch 22 making the new pension freedoms a closed door on that option for some.

I can understand the concerns of trustees, the government and IFA's but if pension freedom is real then adults should be allowed to make their own decisions.

Hope it works out for you, I shall be reading this thread with some interest.

atush

I am glad they stopped you doing the transfer. AS you have a wife and children, I think you are better off with the DB pension. At least you have time to consider our opinions and reconsider yours.

Because you want to take it early to pay off a mtg and then give some away. Which is not what pensions are for, and paying off a cheap mtg is just ill advised.

What you should do, is whack as much into the DC pension in the next two years as you can and take that one. Give away some If you must, pay off some of your mtg IF you must- with your TFLS. Then DD the rest until your DB pension pays out. Keeping the rest of the DC pot for upcoming expenses/luxuires etc.

atush

alanobrien wrote: »

I am looking at a similar move for reasons of flexibility, consolidation and inheritance. I am fortunate to have no debt and my transfer value will exceed the 2016 LTA limit.

From what i have read so far on the subject the move from DB to DC seems to be a bit of a catch 22 making the new pension freedoms a closed door on that option for some.

I can understand the concerns of trustees, the government and IFA's but if pension freedom is real then adults should be allowed to make their own decisions.

Hope it works out for you, I shall be reading this thread with some interest.

Pension freedoms were never meant to be for DB pensions.

milford59

The method that the FCA insist on for calculating the Critical Yield will NEVER produce a result that an IFA will be happy with. How can it ?? The FCA are comparing you SELLING your DB annuity back to your existing DB provider and then BUYING one from someone else (at a future date)

There is a massive Bid-Offer spread.

The FCA methodology is flawed and until it changes, we DB people are going to struggle to get a transfer done. Watch my lips "I neither want, nor need an annuity" - so don't compare the one I want to sell with another one that I DON'T want to buy...