Closure of employers pension scheme

carlos1973

£2335.16 yearly income vs current transfer value of £26328.53. I'm 42 so 23 years.

Maelwys

carlos1973 wrote: »

£2335.16 yearly income vs current transfer value of £26328.53. I'm 42 so 23 years.

Check the best buy annuity tables, assuming you don't pass away before hitting pensionable age it should be fairly obvious that you'd probably be much better off staying with the Defined Benefit Scheme (currently by around 3-4 times depending on the perks of your particular scheme, though annuity rates will likely change a bit over time).

You could, of course, invest the money in a SIPP and be extremely lucky with your investment strategy... but that would be a major gamble. As it stands you have a guaranteed very good annuity being handed to you that will rise in line with inflation. The fact that your employer is closing access to the scheme is an indicator of just how good a deal you are getting - it's costing them too much money to keep the scheme going!!

AlanP_2

I would suggest you look at the numbers and the realities of your choices.

Simple "quick & dirty" calculations:

DB Scheme £2335 pa increased by 2% (guestimate inflation rate) for 23 years produces ~ £3682 pa that will likely increase each year in line with CPI.

SIPP with a £25k initial investment growing at 6% pa (4% real + 2% nominal inflation) gives a pot at 65 of ~ 95.5k which if you withdrew at 4% a year (typical level for "safe" withdrawal to not run out of money before you die, an annuity would be another option)) that equals £3820 pa.

So based on that moving it out and taking on all the RISK you would get roughly the same money each year let alone and additional (surviving spouse) type benefits you would lose.

Nobody knows the future and inflation could go to 15% a year in which case a 5% cap on increases would hurt you.

Personally I would rather have a "virtually guaranteed" base level of retirement income "banked" than leave it all to my skill to select investments and the vagaries of the stock market but you are not me.

carlos1973

Thanks for the good replies.
I think that after allowing for fees etc, I would be at a loss.
It looks like leaving the money in the DB would be best.
My closing statement tells me that I can transfer into another scheme at any time up to retirement. Maybe a few years down the line it would work out better.
Thanks guys.

mgdavid

excellent decision; they don't call DB pensions 'gold-plated' for nothing. 99% of the time nothing comes near so good, been that way for a long time and likely to remain so in future.