Transfering my DB pension to a SIPP

username12345678

I'll need that one explaining kidmugsy. :huh:

mgdavid

it keeps on paying out (& indexed) reliably for life, with no dependency on the mental state of the recipient. Whereas investing a pot, whether DIY or via a pro, depends on remaining compos mentis.

username12345678

I see it now.

Armchair_Investor

Hi
Great thread. I would be very interested to understand which factor helped you decide to transfer out. The tax charge on exceeding the £1m LTA would be quite significant and there is also an additional LTA charge at aged 75 applied on market growth on remaining funds. Difficult to factor these tax charges into future projections.
Ongoing IFA and IM charges are another consideration, these cost could easily be 1% - 1.5%, say £15k a year for 30 years = c£0.5m, which may represent a large proportion of the natural income on the portfolio.
These drawbacks may partially offset the IHT planning opportunity but transferring out provides a chance to escape the rat race a bit earlier.
Good luck with your plan.

username12345678

Hi Armchair,

I started from a position of being a definite 'no' when colleagues were discussing transferring out of the scheme post-Brexit but I found myself repeatedly revisiting the idea as I traded off the pro's and con's.

Some of my reasons for changing my view, in no particular order:

Flexibility to retire at 55 rather than 60 (very important to me and at age 44 I just qualify)
Historic family health (I try to keep fit but we're early departers!)
IHT planning
30% salary uplift pa
Mortgage is paid off this year so I can fill 2 x ISA's for 10 years to age 55
Above gives me a bit of buffer to avoid drawing pension before 60+ if needs be (15+ years of growth)
My scheme has a large deficit which is a small but still significant risk
My wife will have a civil service pension plus our 2 state pensions
We are both savers rather than spenders - our discretionary spending has always been 'frugal'


There are definite risks to transferring which have been discussed at length on this thread and others so it is not something i've done on a whim without consideration of the benefits i'm giving up and the potential tax liabilities that are being incurred.

The 1.65%pa IFA/IM charge is over £20,000pa which is a huge chunk out of long-term average historical returns. Set against that is the challenge of DIY which can be done for a fraction of the cost but with the need to be able to assess your risk tolerances, required return, appropriate asset allocation etc etc etc.

My feeling at the moment is to go DIY and drip-feed over 18 months (this is isn't optimal but is a useful psychological crutch) with a passive asset allocation determined by the long-term asset modelling that gives me the return i'm looking for with the least risk/volatility.

Or I may give the IFA one year whilst I carry on researching myself down a deep deep hole.

Cocktailqueen

I am going through the process of transferring two deferred DB pension schemes to a SIPP. My cash equivalent value is £560k. Which is 23x one of the schemes and 34x the other. The IFA I am using to provide advice which is a regulatory requirement for values over 30k has been awful. I have had to chase him every step of the way to get information as to how my transfer is going. All I have received from him in 10 weeks is two TVAS reports with no explanation to what they mean and I am now weeks away from my guarantees running out. I sent him a curt e-mail at the weekend telling him that I want the paperwork completed this week so I can move on with the transfers and that I was not happy with his service. I have always intended to manage my investments myself with low cost trackers and some active funds where I can see value being added. I have a financial services background so I am confident in what I am doing. I want to be in control of my own hard earned cash and my view is that most people can do it themselves by taking time to gain as much knowledge and doing lots of research.

C_Mababejive

If a company DB scheme suddenly had an increased number of members wanting to transfer out, that DB scheme had been closed to new entrants for some time and of course the total number of people being paid out was massively more than those paying in, what would be the implications? Would transfer out values drop dramatically? would the company have to pump more money in to shore it up or could they block transfers out?

Seabee42

If it is just a cash flow issue then the scheme will sell investments to cover the transfers. If transfers out are reducing the funding level for the non transferring members then the trustees may well reduce the transfer values to be fair to all members.

username12345678

If a company DB scheme suddenly had an increased number of members wanting to transfer out, that DB scheme had been closed to new entrants for some time and of course the total number of people being paid out was massively more than those paying in, what would be the implications? Would transfer out values drop dramatically? would the company have to pump more money in to shore it up or could they block transfers out?

This has been talked about at work with the (relatively) large numbers opting to leave the scheme with generous cetv's.

The IFA i'm using thinks that the scheme's trustees are getting the better side of the deal as the forecast cost of paying an individuals pension over the average term of life is far in excess of what is being offered to leavers.

I don't know if he's right because i've read a few articles that say trustees will limit/reduce payouts where cetv's are having an adverse effect on scheme funding.

PensionTech

The IFA i'm using thinks that the scheme's trustees are getting the better side of the deal as the forecast cost of paying an individuals pension over the average term of life is far in excess of what is being offered to leavers.

The IFA you're using doesn't understand CETVs then. It is required to be the best estimate of the cost to the scheme of paying the member's benefits. Of course "best estimate" is a grey area and different people might have different ideas of how that should be calculated, but he'd have to have some pretty strong reasons to suggest that the trustees' calculations are in fact shortchanging you.