Should I move this pension

Paspatur

I have a deferred DB scheme pension
I understand that normally these should not be moved but as I am not married with no dependants maybe it is a better idea to move it as it will be lost if I die/only live for a short time once in payment
I am 56 years old and also have a drawdown pension pot of £196k - I am not drawing any of this at present
The DB pension is increasing by rpi until payment and also after payment
Current estimated payment per annum at 65 is £4,695
Guarantee period is 5 years
Estimated transfer value is £68,257 - I have requested an actual transfer value
Should I transfer this to my drawdown pot - I have 3 adult children who can inherit any unused pension in this pot
Will I need IFA approval for this? I am seeing him this month anyway to review drawdown pot
I am currently not working after being made redundant last year and am not looking for a job and am not paying into a pension
My income currently is from rented properties
Thank you in advance for any advice

kidmugsy

Paspatur wrote: »

The DB pension is increasing by rpi until payment and also after payment

If there is no cap on that RPI-linking, those are valuable terms.

Paspatur wrote: »

Current estimated payment per annum at 65 is £4,695
Guarantee period is 5 years
Estimated transfer value is £68,257 - I have requested an actual transfer value

I can't think off-hand of anything you could buy for £68,257 that would return as much as an RPI-linked £4695 p.a., albeit deferred for 9 years. That's an I-L 6.9% p.a.

Paspatur wrote: »

Should I transfer this to my drawdown pot - I have 3 adult children who can inherit any unused pension in this pot
Will I need IFA approval for this?

What do you plan to live off after 65? If your current plan is to live off the drawdown pension, it might be better to use the DB pension and so preserve as much as possible in the DC pension, with a view to leaving that to your children. You won't need IFA approval for the proposed transfer, but you will have to demonstrate that you have consulted an IFA.

If you expect to have surplus income at 65, (or later, say when your State Retirement Pension begins) you could ask the IFA what it would look like if you were to draw the DB pension at 65 and use the unneeded income to buy life insurance that would pay out to your children and by-pass your estate. That way you might achieve much the same effect without giving up an attractive index-linked income.

Paspatur

Thank you
Capped at 5%
I like the insurance idea but thought life insurance went into estate?
I will live on the rental income and then sell the rental properties and live on the proceeds - I will sell them before the point of CGT becoming payable - have Private Residence relief
Best case scenario is to leave the drawdown pension as long as possible or only drawdown any gains
Full state pension at 66
Just hate the idea that if I die young all or most of the pension is lost - mother died at 64, brother died at 60
What if I took the DB pension now - £15k lump sum and £2,204 pa or no lump sum and £2,944 pa - then I get 9 years more income out of it as long as I live that long

kidmugsy

Paspatur wrote: »

I like the insurance idea but thought life insurance went into estate?

Not if you don't want it to.

Paspatur wrote: »

Just hate the idea that if I die young all or most of the pension is lost - mother died at 64, brother died at 60

That changes the picture a bit: if you have objective reason to expect a short life then that alters the balance of advantage. How's your own health? You could always get some sort of medical as part of taking out life insurance, perhaps?

Paspatur wrote: »

What if I took the DB pension now - £15k lump sum and £2,204 pa or no lump sum and £2,944 pa - then I get 9 years more income out of it as long as I live that long

Those options are the equivalent of buying I-L annuities which are good value at 56. But if you are confident of early death, the good value may be irrelevant. Everything turns on whether you are right to expect to die early.

Paspatur

Thank you again for so much help
Had a look at insurance which would be prohibitively expensive
Not confident of an early demise but family history not promising, my own health not as good as it should be for my age
Is it a good idea to take the DB now but use it to make pension payments up to the not working limit?
Can these go in my Old mutual drawdown fund or would I need a new fund?
I would pay 20% tax on the pension but gain 25% on the contributions and still protect the index linking?

kidmugsy

Paspatur wrote: »

my own health not as good as it should be for my age

In which case, perhaps you were right the first time, and should consider transferring out of the DB scheme. A good-value I-L annuity won't be good value if you correctly expect to live only a short time.

The customary suggestion is that most people shouldn't transfer a DB pension unless (i) they have no need of the widow's pension, and (ii) have objective reason to expect a short life. You seem to fit the bill, so the remaining question is whether the CETV you will be offered is good value. You probably need the IFA's opinion on that. Even then, he might argue that keeping the DB pension constitutes good value as insurance against living longer than you expect to. If it is your health that makes insurance poor value, be sure to tell him about that.

xylophone

Are you considering requesting early payment of your DB pension with actuarial reduction?

Does your DB pension include GMP? If so, how much is pre 88 and how much is post 88?

Have you obtained a new state pension statement?

If you wish to transfer out, you will need the advice of an IFA with the necessary permission for pension transfers - does your current IFA qualify?

Paspatur

Hi no GMP and I have full new state pension £161

Paspatur

Sorry and yes my IFA qualifies

Paspatur

Hi did not mean to imply I am at deaths door but life expectancy more like 65 to 75 rather than whatever 'normal' is ? 88


So what makes most sense - move entire DB pension to drawdown or take DB pension now with lump sum and pay the maximum for non working person into drawdown pension thus preserving index linking and growing drawdown fund which is inheritable tax free before 75 or taxed after 75, both of which are better than pension dying with me
Obviously will discuss with IFA but like to get opinions of others beforehand so I look like I know what he is talking about
Thanks in advance for your help

kidmugsy

Have you any way of getting a doctor to guess at your reasonable expectation of life? (I take it that 65-75 is your own guess.)

Even if a doctor said "Best guess, early seventies" would you want insurance against outliving that guess? That's what the DB offers - even if you decide to make a split bet and draw it early.

Once you've pondered that, the second question is whether the CETV you get offered is good value. If the IFA says it is, as a multiple of what you would get by drawing the DB pension early, you will be tempted to transfer it. But only a crystal ball could tell you whether you'd be right.

I'm cautious, and like diversification, so having both a DB pension, perhaps in payment, and a large DC pot would appeal to me.

P.S. all you've told us about insurance is that it would be "prohibitively expensive". That's not much for us to go on.