Transferring deferred pension

jamesd

Yes, it could go down instead of up and at times it will.

Long term UK stock market growth over the last hundred plus years has been a hair over 5% plus inflation, call it 4.75% after charges for investments. Over 12 years on average that would produce growth of 1.745% increasing the £140,000 to £244,300 in today's money. The £10,725 per year is 4.3% of this.

On the numbers given I don't think that taking the money is a good enough deal to do it unless you are an experienced investor. While state pension deferral will pay more than annuity purchase for the same cost, you still would have a lot of guaranteed income unavailable and the value now does not seem likely to provide enough capital to cover the difference. Various income drawdown strategies could deliver more income from the money but with some chance of reduced income if market conditions in retirement are adverse. An experienced investor might prefer that approach and its upside potential.

If you were to use the money in business or in some way that provided more than historic stock market returns it could be a better idea to take the money.

One thing that taking the money does is allow you to retire early but based on the numbers I think that it is more likely to make sense to make contributions to a personal pension yourself between now and when you want to retire if this is an objective of yours.

What we don't know is your desired income in retirement and other resources to achieve that income. It's possible that you're close to being able to retire early and this would make the difference while providing you with enough income potential to do it.

Don't take it is my recommendation. Keep the guaranteed income. Unless you are an experienced investor comfortable with income drawdown strategies and risk.

mgdavid

John_Munro wrote: »

I also have a stakeholder pension with my employer which me and my employer are paying into. That will run also for the next 13 years.......

You hope! but cannot be sure.
There are any number of scenarios to trip up that forecast, employer could go broke or be bought out, you could have an accident or get too ill to work, you might need to become a carer for a family member, etc etc. Not all as unlikely as you may think, please don't disregard them.

Whereas, despite the bitter and skewed gloom and doom of AG, a DB pension is pretty well rock solid, gold-plated, cast iron in today's regulatory environment and has the PPF to back it up if the unlikely should happen.

Converting it into cash at about half of its projected lifetime value seems like a particularly unwise plan, fraught with unnecessary risks.
If you end up on the right side of luck and have some surplus income in retirement, give it away to your heirs so they can use it while you are alive; from personal experience you get the added pleasure of seeing it being used and enjoyed.

John_Munro

Thanks for everything, i am possibly doing this through wealth management company with 30 years experience and has client funds of over 200 million. as well as £140,000 i have 22,000 of an old contracted out serps thing. My stakeholder pension that i am contributing to just now along with my employer will run to my 65th birthday. I just feel the access that my spouse and kids will get to the private pension is better than the DB scheme, if anything happens to myself. I will be discussing this with her over the weekend and meeting my IFA on Monday to let him know what i decide.

kidmugsy

You might be better off keeping the DB pension and supplementing it with some life insurance.

AlanP_2

As a comparison my CETV at the end of 2015 was £150k against £12,850 forecast at Age 65 (currently 56) and I started looking into the options as currently my ex-employer is not increasing pensions in payment and has only made 1 * 1% increase over the last 10 years.

So effectively I was looking at that pension staying the same for as long as I am drawing it with a 60% dependants pension to follow on if I go first.

Met with a three IFAs, who will look at DB -> DC transfers, and in the initial "free of charge" chats two of them made it obvious that they thought I was crazy for even considering it.

AlanP_2

What spouse / dependants pension does it include?

kidmugsy

AlanP wrote: »

my ex-employer is not increasing pensions in payment and has only made 1 * 1% increase over the last 10 years.

Is that consistent with the scheme rules? It's the trustees of the scheme who are responsible, not the employing company.

agarnett

mgdavid wrote:

Whereas, despite the bitter and skewed gloom and doom of AG, a DB pension is pretty well rock solid, gold-plated, cast iron in today's regulatory environment and has the PPF to back it up if the unlikely should happen.

Bitter and skewed is my second name I guess ... actually maybe I should grab it as a fresh username, as agarnett hasn't seemed to have worked as sufficient warning for some :rotfl:

I do recommend OP that if you get a chance and haven't already found a way, that you watch the movie The Big Short. It's not specifically about pensions of course, but it does spell out some of the environmental risks to our pensions, and why some of us may not be as overly bitter and skewed as we are labelled. It also should serve as warning that there is no such thing anymore as "...pretty well rock solid, gold-plated, cast iron in today's regulatory environment ... " and should really cast doubt on whether we really have "... the PPF to back it up if the unlikely should happen."

John_Munro

AlanP wrote: »

What spouse / dependants pension does it include?

Company scheme death benefit pre-retirement = zero
Company scheme death benefit after retirement = zero
Company scheme spouse pension £3,820

Personal Pension death benefit pre retirement £130,203.00
Personal Pension death benefit after retirement = Return fund tax free

mgdavid

John_Munro wrote: »

....... My stakeholder pension that i am contributing to just now along with my employer will run to my 65th birthday. ..............

see post 13 para 1 - how can you be so sure?
May I borrow your crystal ball please?