Thinking seriously of cashing in final salary pension

rudebhoy

Triumph13 wrote: »

One final question for Rudebhoy if I may. Why do you actually want to do this? The numbers may well suggest that you would probably end up with more money in the pocket of your shroud this way, but that isn't, of itself, a good reason to give up the certainty provided by the DB scheme. Is the intention to actually try a have a larger income in return for taking on more risk? Or is it to leave a larger inheritance to children? Either of those could be perfectly good reasons - although you would have to weigh them up against any impact on your quality of life from not having your income 'guaranteed' - if that's the kind of thing that might stress you.
Any decision like this is about more than just arithmetic.

Two things -

1. Having more to spend when I would be able to use it - i.e. the next 10/15 years when I hopefully will be fit and active, and less when I am slowing down in my 70s / 80s

2. Being able to leave a decent sum for my daughter if me and the wife were to die sooner rather than later

However, met with the IFA yesterday, and following that, have decided on balance that the best option for us will be for me to take the pension rather than cash it in. we have a decent amount already invested, and that hopefully now can help fund any additional spending we want to do, and still leave a decent nest egg.

blobby8

Now Rudebhoy has made his decision, perhaps I could use the thread for my similar opportunity?
I'm 60 and my deferred pension is currently worth either :-
£16k pa, or
£11.7k and a commutation of £78k, or
A transfer value of £510k
(the pensions are linked to CPI, minimum 3%, maximum 5%, 50% for the wife on my demise)
My thinking is, if the investments can grow at an average 4% then the funds should be able to sustain
£16k pa for 32 years, or
A lump sum of £125k and £12k pa for 32 years
As I consider 92 to be highly optimistic, I see a couple of upsides.
1. 100% for the wife on my demise.
2. A residual balance after the wife shuffles off.

AnotherJoe

kidmugsy wrote: »

I'm sceptical about the wisdom and practicality of downsizing for many people. I suspect that equity release might be a better bet.

Good point, well worth looking at that option if the time comes, and reinforces my point about not putting aside a massive amount of your pension and messing up your retirement, for a slim eventuality.

p.s. no reason you cant do both, for example if you are in a state whereby you need home help then a single floor (flat or bungalow) may work better than a house anyway, so for example downsize from 4 bed 2 storey house to 2 bed flat / bungalow releasing some money, and then later equity release on the flat or bungalow..

kidmugsy

blobby8 wrote: »

My thinking is, if the investments can grow at an average 4% then ....

That's quite a bet you're contemplating.

Unless there are features of the case you've not mentioned, I suggest you focus entirely on the issue of income for you and your widow. The next generation comes second. That might still result in your transferring.