old DB pension

RuleTheWorld

I have an old company DB pension worth somewhere between £9k-10k/year in todays money.

I am interested to get a transfer value? I'm just looking into how I request one. Any feeling for how much I could get? Retirement age is 65 but you can take it a bit early based on accepting a reduction. I'm 32.

Ordinarily I would think DB pension is king and do NOT consider moving it but the increase per year is capped at a maximum of 2.5% year and perhaps it could grow more in a traditional investment DC pot.

Thoughts?

dunstonh

Any feeling for how much I could get?

Impossible for anyone to guess.

I am interested to get a transfer value? I'm just looking into how I request one.

Ask the administrators.

Ordinarily I would think DB pension is king and do NOT consider moving it but the increase per year is capped at a maximum of 2.5% year and perhaps it could grow more in a traditional investment DC pot.

thats what everyone thought in the late 80s and early 90s. However, 4 out of 5 transfers that happened back then went on to fail to achieve their required level and most were classed mis-sales.

Do you fancy having a highly volatile fund that would likely be required in retirement or the safety of a guaranteed indexed income?

kidmugsy

dunstonh wrote: »

Do you fancy having a highly volatile fund that would likely be required in retirement or the safety of a guaranteed indexed income?

Though the indexing is pretty miserable.

RuleTheWorld

agree with the comments.

certainty is good but the indexing is a bit on the mean side

also the employer scheme is heavily under funded so an element of risk there perhaps

ajbell

Its a decent amount of pension income to have built up at 32.

BobQ

When you retire you will have a pension based on multiple sources. Surely a DB pension of £10K indexed for the next 30-40 years albeit albeit at 2.5% would be a good basis for retirement (safe and secure).

Maybe leave it for a period. At least until inflation rises to 2.5%?

jamesd

Ask the administrators for the transfer value. Sometimes these are good, other times not so good. You will need the advice of an IFA to transfer. Also find out:

1. how the value increases between now and the normal retirement age of the pension
2. how it handles inflation after you take it
3. what spousal benefits there are, if any
4. what death benefits are payable if you die before taking it
5. what death benefits are payable if you die after taking it

You've a lot of time to go for investments to grow but it still might not be realistic to beat what his pension offers. Depends on the specifics.

When you reach the age at which you take the pension you have a range of income choices:

1. Buy an annuity. Normally requires you to be insane or not shop around unless there is a good guaranteed annuity rate. As of about three quarters of the way through last year fully 60% of annuities were sold to existing customers, who either had a good guaranteed annuity rate (what the insurers group said) or didn't shop around (another possible reason). But if your life expectancy at retirement is low or you buy after age 78-80s sort of timeframe annuities can offer good value for money. If you have so much money that you don't care and just want it done with and an income paid, an annuity will deliver that.

2. Defer your state pension. At current annuity rates this option pays something like twice the amount of income an annuity would pay for the same amount of money. The gradual purchase of this by deferring means that it starts to become noticeably less good value after five years so those with larger pots won't be able to get such a good deal. The exact break even point depends on the deals available but up to ten years of deferral may swell still beat a standard annuity in value for money.

3. Income drawdown. Here the desired success rate matters because you pick the income based on the desired success rate. Twice or more what an annuity would pay is likely at 95-99% success rates. Failures at that level would be near the end of your maximum life expectancy and if you didn't reduce income. That's the worst cases. Average cases would result in increasing income and/or the pot at the end being worth a substantial amount, even more than it starts with if you don't increase income. Main disadvantage is that it's not guaranteed. The protection of state pension deferral income makes doing at least five years of that an excellent combination with drawdown because it increases level of income that can be taken from the rest within the target failure rate area. You can also do drawdown for a while then buy annuities once those start to offer good value for money, which they will probably eventually do as you get older.

AnotherJoe

Do you mean it's worth £10k a year annually as a pension indexed linked, or the notional value of it currently is £10k lump sum ?

RuleTheWorld

my last statement was just over £8k/year and I have nearly a year service and small salary increase since that statement.


the spouse and death benefits are a good tip actually would certainly be a consideration if considerably reduced

AnotherJoe

Sorry I see you did say it's per year. Then I'd stick with that it will be a good guaranteed underpin to other components that will be more variable such as drawdown from investments that may fluctuate.

LHW99

You can always start a personal pension beside it so that you can take some income earlier than the DB scheme allows, or use it as a fund for an additional drawdown or annuity benefit at 65 to see you through until what will probably be an SPA of 68-70.