Transfer from db to personal pension

PensionTech

I assume that means they invest £56.544k in equities, property, etc. etc. in the hope that they will get back at least 5% returns.

No. As Silvertabby says (and as I said in #7), the capital value is just a notional figure calculated for tax purposes and has nothing to do with the fund or transfer value of the pension. It is not the amount held by the scheme for the purpose of your wife's pension - DB funding is much more complicated than that.

So does that mean that if my wife can generate more than £2827.24 pa from the transfer value then she will be better off to do the transfer?

Important things to consider when comparing the promised income to what your wife can generate, particularly if she wants to DIY a flexi-access arrangement without ongoing IFA help:
- Inflation-linking (can increase the value of the pension by well over 50%)
- Level of investment risk required to generate sufficient returns
- Ability to deal with downsides associated with (specified as above) level of risk
- Security of other income
- Death benefits - the DB pension will come with a guaranteed spouse's pension
- Hassle and worry of managing investments over your wife's lifetime including as she gets older and less able to manage
- Cost of getting IFA involved in order to transfer (legal requirement)
- Willingness of IFA to get involved with transfer (many are reluctant to get involved with this type of transaction)
- Willingness of a scheme to accept the transfer if you do find an IFA to give you advice and his advice is that it's a bad idea

wooder

Thanks for that - food for thought for sure.

We currently have between us a reasonable amount invested in my personal pension and s&s isas, which I am managing and which is growing rapidly. We have a target figure which we want to reach before we retire (we're both over 55 so could retire as soon as we have enough in the pot) and the proceeds from this would mean we have reached the target, otherwise we would probably have to work for another year or so.

There is also an option to take cash sums and a reduced pension - maybe that would be the optimum position as it would help to boost the pot but still retain the benefits of the db pension.

Would the cash sum be taxable ?

neilvw

The cash lump sum is not taxable.

xylophone

Would the cash sum be taxable ?

From Fact Sheet

when you retire you can exchange part of your pension for a tax free cash sum

wooder

So, if she transferred out of the db pension does that mean that they would transfer a pot of cash into say, a personal pension, such as OMW Collective Retirement Account which allows flexi drawdown ?

If that is the case and she draws down only the amount by which the pension pot grows each year, so the original sum remains intact, does that mean that when she dies her immediate beneficiary would inherit the pot of cash ?

How would that differ from the db scheme when she dies ? I know there is a widowers pension included in the db scheme which pays out an index linked sum to, presumably, me.... but if I've already gone or when I curl my toes up does our daughter inherit anything ?

Dansmam

I understood that one of the benefits of transferring out of DB is that what's left after death can be inherited - which is why it's a better option if low life expectancy and no widow/er to benefit from DB pension.
Apart from IFA costs I've yet to find out what transfer charges apply if you do transfer.

Linton

wooder wrote: »

1)So, if she transferred out of the db pension does that mean that they would transfer a pot of cash into say, a personal pension, such as OMW Collective Retirement Account which allows flexi drawdown ?

2)If that is the case and she draws down only the amount by which the pension pot grows each year, so the original sum remains intact, does that mean that when she dies her immediate beneficiary would inherit the pot of cash ?

3)How would that differ from the db scheme when she dies ? I know there is a widowers pension included in the db scheme which pays out an index linked sum to, presumably, me.... but if I've already gone or when I curl my toes up does our daughter inherit anything ?

1) Yes, a transfer means a transfer of money into another pension of your choice. A SIPP or personal pension would be the normal way to go. Whether that pension supports drawdown depends on your choice.

2) Yes, on death any money remaining in a defined contribution pension and not spent on an annuity goes to a beneficary. This is outside your estate and so is not subject to IHT. You nominate the beneficiary when you set up your private pension but it can be changed later. Legally the pension trustees have the right to disregard your nomination but this would only be done if your choice was perverse. Exactly how the money would be handled and the tax implications depend on whether you die before or after reaching the age of 75.

3) In a DB pension what happens on your death is defined precisely by the scheme rules. Typically a surviving spouse could get a 50% pension. There is no pot of money to be inherited - those who die early subsidise those who die late.

Apodemus

wooder wrote: »

Thanks for that - food for thought for sure.

We currently have between us a reasonable amount invested in my personal pension and s&s isas, which I am managing and which is growing rapidly. We have a target figure which we want to reach before we retire (we're both over 55 so could retire as soon as we have enough in the pot) and the proceeds from this would mean we have reached the target, otherwise we would probably have to work for another year or so.

There is also an option to take cash sums and a reduced pension - maybe that would be the optimum position as it would help to boost the pot but still retain the benefits of the db pension. The figures for the two pension periods added together are:-
annual pension of £5289.96 or cash sum of £27008.73 and reduced pension of £4051.84.

Would the cash sum be taxable ?

In your shoes I would want to balance the guaranteed income form the db pension against the higher risk return from the private pension and s&s isa.

Only you can do the maths on this, but in my case I will most likely maximise my db pension rather than maximising the cash lump sum. That is because my db pension is likely to only be about a third of my estimated post-retirement needs (comes up to about half if I add in state pension). I am nervous of political changes down the line that might target investment portfolios and self-invested pensions and would prefer to have a reasonable portion in schemes with lower political risk.