DB transfer value shock

Dark_Sunday

Thrugelmir wrote: »

Then there'll be a dependents benefit as well to factor into your decision.

Thanks. Yes I know it's 50%, £2k p.a but if I die soon after transfer there's £91k lump sum payout. If I don't die & retire there's 25% tax free lump sum plus lump sum at time of death payout from drawdown fund.

Dark_Sunday

Stubod wrote: »

..same dilemma as me....I have 3 "old/frozen" pensions, each worth between £2.5k and £3.5k / yr. but have been offered best part of £100k each to "transfer"....its very tempting, particularly as there is no index linking once I start taking them. From a dependents point of view I would assume better to take the money?...ie they would normally only get less than half per yr..

Exactly & why should you pay an IFA a considerable fee for something you can do yourself. The maths is actually very very simple.

Thrugelmir

Dark_Sunday wrote: »

If I don't die & retire there's 25% tax free lump sum plus lump sum at time of death payout from drawdown fund.

How will your drawdown fund perform. Therein lies the risk. Once gone capital is difficult to replace.

davieg11

£4K a year or £90k is a no brainer. I know no one wants to pay but the IFA will pick a fund for you. If it makes 4.5% a year then you can have £4K for life and leave the £90k for your family.

Thrugelmir

davieg11 wrote: »

If it makes 4.5% a year then you can have £4K for life and leave the £90k for your family.

Trouble is markets don't move on a constant upward trajectory. In the periods that market fall. Realising assets maybe necessary. Then the remaining investments will have to work harder. Safe rates of draw down are recommended at far lower levels than 4.5%.

davieg11

I'm in the process of transferring 2 db pensions after advice from an IFS. Before anyone goes on about gold standard db schemes etc etc, my dc pension has had a 10 year cumulative performance of 70.09%. Even if there is corrections or a major crash, you should be able to access 5% yearly on a drawdown and not run out of money, and when you pass to the other side your family will inherit what's left.

davieg11

Thrugelmir wrote: »

Investing is so simple.

Nobody says it's simple but does it not make money over the long term and retirement could be long term for many.

ThinkingOutLoud_2

davieg11 wrote: »

£4K a year or £90k is a no brainer. I know no one wants to pay but the IFA will pick a fund for you. If it makes 4.5% a year then you can have £4K for life and leave the £90k for your family.

So what £4k would buy you in 1996, would need about £7k to buy in 2016 (20 years inflation)
You would only ever have £4k assuming your 4.5% return every year and drawing down all 4.5% growth (may be ambitious too).
So I wonder - will that constant diminishing in real terms £4k be enough?

(Of course we both kept it simple, ignored when you start taking the money or if you have any other provision or how much you need in total when retired.)

mgdavid

Dark_Sunday wrote: »

Reasons for considering transfer to an alternative pension fund:
1. Company no longer exists, & hasn't for a very long time & pension fund is managed by a 3rd party. Will there be a fund when I retire ?
2. Flexibility on my actual retirement date & this chunk of money would have an influence
3. 25% tax free lump sum on retirement

Reason for stalling:
1. Being ripped off by having to pay a fee to an IFA for a decision I'm more than capable of making myself

I really find it quite incredulous that an IFA has to be involved with any DB scheme transfer over £30k. Surely the onus should be on the financial industry not to rip people off with bogus schemes & giving wrong advice that pays commission to greedy insurance salesmen.

The government has clearly got this wrong.

Sad to say but the above does suggest a degree of financial unintelligence.
1. Almost certainly and if not then the PPF covers 90% of the benefits.
2. Fair enough
3. You haven't mentioned the DB pension's TFLS options - most do have them.

Final para:
- it's the Law, not the invention of the pensions industry
- commission has gone, it went a long time ago.
- the histrionics within your words suggest you are unlikely to make a reasoned decision based on the facts alone.

Seems like the law is working well to me; I don't want to be supporting you (via tax and state benefits) when you're in your late 80s or 90s and have run out of money !

Lastly if you take the 25% TFLS after the transfer you won't have enough to provide £4k a year at a safe drawdown rate. You can't have both.

soulsaver

neilvw wrote: »

More to the point, some consumers can't be trusted to do what's in their best interests without proper advice, which costs money.

But many can... and they are still forced to pay an arm & a leg.