Final Salary scheme massive transfer value has turned my head!

Featherweight

During my career I spent 30 years in a final salary scheme. Now approaching 55, I can draw an almost undiscounted pension of £16,100, RPI linked, plus a tax-free lump of about £45k. Seems pretty good.

And then I saw the transfer value, a whopping £580K! That's more than double the value of my house. The scheme paid for an independent IFA who thought I'd be better off transferring it into my SIPP.

I have no qualifying dependents to receive the dependent's pension if I die, although I would like to leave as much as I can to my sister if I die early. I also have diabetes, so 5-10 years less life expectancy. I no longer work and live off my savings.

I'd be interested to hear what others would do in my situation?

ajbell

What would you do with the money?.
I suppose it would allow you to access a tax free lump sum of £145000.

chesky

What does transferring it to your SIPP mean in terms of annual income and a get-at-able lump sum.

xylophone

And then I saw the transfer value, a whopping £580K! That's more than double the value of my house. The scheme paid for an independent IFA who thought I'd be better off transferring it into my SIPP.

I have no qualifying dependents to receive the dependent's pension if I die, although I would like to leave as much as I can to my sister if I die early. I also have diabetes, so 5-10 years less life expectancy. I no longer work and live off my savings.

Is the IFA a Pensions Transfer Specialist?

Diabetes? http://www.diabetes.co.uk/diabetes-life-expectancy.html

You have no mortgage?

Your savings are very substantial? You would anticipate taking no drawdown/lump sum for a number of years?

Featherweight

Once the money is in the SIPP, it could be used to pay a pension using flexible drawdown, with the rest remaining invested. An investment return of RPI+3% would mean the pension could be paid out of earnings with no loss of capital. Obviously there's risk, but the rewards are greater too.


Also it could be used to buy an annuity in the future when rates are better.


Taking the pension means a no hassle income right away. Taking the transfer means a few more years of worrying about investments, but if all goes to plan, a better pension in later life -- if I survive. Also if I die young, the remaining money goes to my sister. In the final salary scheme, they pay out up to 5 years pension if I die in the first 5 years, nothing after that.


If I was in good health I would take the pension. But because my health is not so good, I have a dilemma.

chesky

Stop worrying about your sister and concentrate on how you would prefer to live your own life.

Featherweight

No mortgage. Plenty of savings. Could go for a long time without needing to draw anything. My life expectancy, though, is 18.1 years, rising to 21.1 years if I manage the diabetes well. Obviously I could live longer as these are averages, but an 85 year old diabetic is uncommon.


I really want to just enjoy my remaining time without the worry. Its just the low gilt rate has made the transfer value soar and created a dilemma for me.


The IFA was AFPS chartered, chosen by the pension scheme and a trained pension specialist. I don't know if she was a 'transfer specialist'.

Featherweight

Funny. That's what she says. And my doctor too. But I'm a compulsive planner, a compulsive saver, and always looking to the future. Living my life to the full is something I've never been good at. Probably have a heart attack the day I retire. Funny

Featherweight

Transferring into a SIPP does not, of itself, free up any tax free lump. It just brings the pot under my control. Flexible drawdown payments are 25% tax free. Buying an annuity allows a tax free lump I believe. I don't actually need a lump sum for anything.

ischofie1

Just my opinion but that transfer value is high.

I'd be transferring out.

xylophone

The IFA was AFPS chartered, chosen by the pension scheme and a trained pension specialist. I don't know if she was a 'transfer specialist'.


http://www.pruadviser.co.uk/content/knowledge/technical-centre/pension_switches_transfers/