DB transfer value shock

bigadaj

soulsaver wrote: »

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

You've not read this thread then.

Number75

Interesting that you feel it's unfair that you have to pay for the advice of an IFA, yet you've posted on a forum in the hope of getting... advice!

Linton

Number75 wrote: »

Interesting that you feel it's unfair that you have to pay for the advice of an IFA, yet you've posted on a forum in the hope of getting... advice!

The OP wants free advice with no chance of compensation should the advice be inappropriate.

davieg11

The IFA does a tremendous job. You will get a private pension fund set up for you, a pension transfer analysis and recommendation report. These are full of valuable information. For example looking at the graphs, charts etc, when drawing income using drawdown from age 65, if my fund only makes 1.4% p.a. then the fund will be depleted at age 82. On the other hand if it makes 4.4% then I'll be fine.

Linton

davieg11 wrote: »

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.

70.09% compounded return in 10 years = 5.5% annual return. It's difficult to see how you can manage a sustainable 5% of initial sum inflation-linked income out of that especially if you take into account that the 10 years since the great crash have been unusually good for investors and inflation has been unusually low.

I think anyone thinking of cashing in a DB pension would benefit from spending some time playing with cfiresim. What % chance of running out of money or decrease of income in the bad times are you prepared to accept?

In my view in general a far better use of a DB pension is to regard it as the safe part of a portfolio enabling the adoption a higher risk strategy than one would otherwise accept. And if one doesnt have a substantial portfolio of investments or significant other income, dont consider trying to cash it.

Dark_Sunday

Thrugelmir wrote: »

Do you have a partner?

davieg11 wrote: »

The IFA does a tremendous job. You will get a private pension fund set up for you, a pension transfer analysis and recommendation report. These are full of valuable information. For example looking at the graphs, charts etc, when drawing income using drawdown from age 65, if my fund only makes 1.4% p.a. then the fund will be depleted at age 82. On the other hand if it makes 4.4% then I'll be fine.

I don't need IFA to get me a private pension as I can simply transfer the CETV lump sum to one of the 4 other pension pots I have. I can easily calculate drawdown figures at various rates, etc myself. Remember this fund is a "bonus" as it was so long ago, I had kinda forgotten about it, so now there is an extra £91k pot to potentially invest that could significantly reduce my retirement age.

I would transfer this lump sum to an existing fund that has for more than 10 years had average growth + 7%. Yes I'm fully aware that "past performance does not guarantee future returns", etc., but this is a risk I'm more than willing to take with this particular pension fund.

But the legislation / laws is that I need to pay an IFA anyway.

bigadaj

Dark_Sunday wrote: »

I don't need IFA to get me a private pension as I can simply transfer the CETV lump sum to one of the 4 other pension pots I have. I can easily calculate drawdown figures at various rates, etc myself. Remember this fund is a "bonus" as it was so long ago, I had kinda forgotten about it, so now there is an extra £91k pot to potentially invest that could significantly reduce my retirement age.

I would transfer this lump sum to an existing fund that has for more than 10 years had average growth + 7%. Yes I'm fully aware that "past performance does not guarantee future returns", etc., but this is a risk I'm more than willing to take with this particular pension fund.

But the legislation / laws is that I need to pay an IFA anyway.

Ultimately it's not your money, it's held in trust for you.

And of course it's benefitted from free money from your employer and the government, so it's not even as though you put all of the money in in the first place.

Thems the rules.

Dark_Sunday

bigadaj wrote: »

Ultimately it's not your money, it's held in trust for you.

And of course it's benefitted from free money from your employer and the government, so it's not even as though you put all of the money in in the first place.

Thems the rules.

Fair comment Ineed. I never thought of it that way.

For me this pension pot is a wee bit like a lottery win TBH so I guess I'm pretty fortunate, but I do want to make the most of it.

However IFA fees seem to be extortionate

justme111

If you have additional £4000/year from 60 onwards you could use your other investments more before that and retire earlier anyway. Or is there something I am missing?

davieg11

Linton wrote: »

70.09% compounded return in 10 years = 5.5% annual return. It's difficult to see how you can manage a sustainable 5% of initial sum inflation-linked income out of that especially if you take into account that the 10 years since the great crash have been unusually good for investors and inflation has been unusually low.

I think anyone thinking of cashing in a DB pension would benefit from spending some time playing with cfiresim. What % chance of running out of money or decrease of income in the bad times are you prepared to accept?

In my view in general a far better use of a DB pension is to regard it as the safe part of a portfolio enabling the adoption a higher risk strategy than one would otherwise accept. And if one doesnt have a substantial portfolio of investments or significant other income, dont consider trying to cash it.

That is great advice for anyone thinking of cashing a DB pension. In my case I just don't see the point of having £20k a year when you are 80 years old. I'll base my drawdown calculations from age 60 to 80. I could count on the 1 hand the amount of people I know above 80 and none of them leave the house due to health issues.