Final Salary scheme massive transfer value has turned my head!

jerrysimon

Of course my wife's won't forgot that

jerrysimon

Mr.Generous wrote: »

Really interesting thread, I have a final salary pension pot I paid into for 28 years, paid AVC's from my 20's until made redundant at 48. I didn't realise you could take the cash out and make your own provision. If I wanted the cash to buy houses to let out for a pension income I take it I'd be taxed to death? Rental yields of 8% the norm round the north west.

Indeed you would paying tax on anything over 25% that you take out as a lump sum where you transferred it to. Also likely it will be indexed linked to inflation where it is.

jamesd

Thrugelmir wrote: »

What's it been over the last 15 years though.

About 40% gain in the index plus about 3.5% a year in dividends, less inflation. So around 5.8% before inflation. Easily enough to have beaten the defined benefit pension and still be on track for success using either the 4% drawdown rule or the more modern ones.

Thrugelmir wrote: »

100 year averages mean very little in what is now a different world.

I suppose not being in a world war or the great depression or the 70s high inflation period is different. That's one reason why using long term averages matters for the time horizons normally involved in retirement investing.

ischofie1 wrote: »

Why are you assuming he'd be 100% invested in UK markets?
How does it look if he took a global approach?

I'm not assuming it, it's just an example. Global depends on what global investments were used.

kidmugsy

jerrysimon wrote: »

Don't quite understand that ? Unless you mean if I transfer my pension out into a SIPP.

Exactly. If you first transfer.

kidmugsy

jerrysimon wrote: »

My wife will get 2k with no tax and we will have about 56k lump sum tax free. .... Then the 13k state pension kicks in but taxed of course

I don't see the point of your wife taking her DB pension early if you have transferred yours. Surely she'd be better off waiting until she reaches scheme retirement age, and can draw her full DB pension. Your transferred pension should give you plenty for you both to live on until then.

In fact your transferred pension should give you both enough income that she could make £2880 p.a. net pension contribution (I'm assuming she's not earning because you've not mentioned it.) Then when she's 55 she can start to draw the pension, and she can get it tax-free, including the £720 p.a. that the taxpayers will have added.

With a bit of care she won't have to pay any tax on her State Pension either when it begins because she will probably not be using up her Personal Allowance.

jerrysimon

kidmugsy wrote: »

I don't see the point of your wife taking her DB pension early if you have transferred yours. Surely she'd be better off waiting until she reaches scheme retirement age, and can draw her full DB pension. Your transferred pension should give you plenty for you both to live on until then.

In fact your transferred pension should give you both enough income that she could make £2880 p.a. net pension contribution (I'm assuming she's not earning because you've not mentioned it.) Then when she's 55 she can start to draw the pension, and she can get it tax-free, including the £720 p.a. that the taxpayers will have added.

With a bit of care she won't have to pay any tax on her State Pension either when it begins because she will probably not be using up her Personal Allowance.

Ah sorry I didn't make it clear I haven't transferred my DB pension. Yes she won't pay any tax. I hadn't realised she could draw her pension at 55 hence why it's now an option as not being taxed hers almost makes up the difference of me taking mine reduced at 56 and 1/2.

I guess if we use her 11k she has in a SIP we might be able to delay both until she is 56 and I am 57.

jamesd

You do also know that she should continue to pay money into a pension to perhaps get an extra £720 a year?

jerrysimon

Her school pension ? She finishes 1/9/16 .

I am filling up her SIP allowance which is about 6k this year based on her earnings up to Sep ?