Transferring small defined benefit pensions - help!

Daniel54

TechJinx wrote: »

Together these are worth approximately £32,000 in transfer value and recent statements suggest they would be paying ~£2500 a year in income

If £2.5k pa is the present value ( per Jem's question) then a transfer value of £32k is a really lousy commutation rate of 12.8 and therefore unlikely to be signed off by any IFA,even if you chose to go that route.


Where we have seen people asking on this board about transferring out DB pensions,they have typically had CETVs of 30 times the annual benefit ,or more.I cannot recall anyone in recent months reporting that they have successfully transferred a pension valued at over £30k without IFA advice.


Widow's pension seems unusually small ( typically is 50%).In most DB schemes,the widow's pension is not reduced if the PCLS is taken.


Your best bet might be to let the DB pensions run for the moment - the benefit will not reduce in value,inflation adjusted - and wait to see if future legislation relaxes the current rules.Then you could review and see if a transfer still makes sense to you.

TechJinx

hmmm, thanks Daniel.

Looks like it might be worth the IFA route after all!

dunstonh

unrelated but this thread reminds me of the subject of scams that was brought up in the Work and Pensions Committee this morning discussing the pension freedoms.

They said that those who are more likely to do the wrong thing are likely to be more experienced or have some limited knowledge about these things rather than those that do not. This isnt a scam but an important decision where you could be looking to do the wrong thing. You have a SIPP, which is an experienced investor product indicating you are above the average level of knowledge. So, that would put you as the type of person they were talking about.

I didnt think it sounded right when I heard it in the meeting but this makes me think that possibly they are right. The old saying is a little bit of knowledge is a dangerous thing.

As I said, just an observation that made me sit up and think.

bigadaj

Seems totally mad to move this pension.

A guaranteed 8% return is far better than anything you can get in the open market, if nothing else it can be used as a base for retirement plans, potentially reducing your bond allocation and allowing other investments to be higher risk and higher growth.

Thrugelmir

TechJinx wrote: »

because say I live ~20 years from 65 - a reasonable assumption - thats £50k.

The pensions will be index linked and therefore compound with inflation. Equity investments unfortunately don't carry the same guarantees.

pjread

I wouldn't even think about moving this, based on the info above. I'd buy 2.5k index linked in perpetuity for 30k in a heartbeat, even before adding in spouse benefit/any lump sum etc.

atush

bigadaj wrote: »

Seems totally mad to move this pension.

A guaranteed 8% return is far better than anything you can get in the open market, if nothing else it can be used as a base for retirement plans, potentially reducing your bond allocation and allowing other investments to be higher risk and higher growth.

That was exactly my point which the OP failed to grasp.

I would use it as a baseline (along with SP) and then use my sipp and other investments to provide more. And perhaps using higher risk funds.

But what do I know? I dont have a DB pension to throw away lol.

TechJinx

Well - I'm a big enough man to admit when I'm wrong Turns out my assumptions on the value were well off. Thanks all, I think I'll hang on to them (it was 2 smaller pots totalling £2,500 p/y overall rather than 1)