DB transfer value shock

jimi_man

Dark_Sunday wrote: »

That's the gamble no-one knows how long they'll live. Probably a trifle optimistic living to the age of 105 tho.

So approx. figures:

Guaranteed, depending when you kick the bucket:
1 year: £4k
5 years: £20k
10 years: 40k
20 years: £80k
30 years: £120k

Not Guaranteed:
£91k transfer @ 6.8% growth for 12 years = £200k pot
TFLS: £50k; Drawdown @ 5% = £7.5k p.a.
or
Drawdown @ 5% = £10k p.a.

If all ifs, buts & maybes & the personal attitude to risk I guess.

Just looking at these figures from the eyes of a layperson, there doesn't seem to be any mention of inflation? With a rough 2.5% inflation rate, that increases the DB amount to a total of £180k roughly.

Presumably the same must apply to the £91k, so that reduces the interest rate to 4.3%, which gives a pot of about £150k or £112k after the lump sum, somewhat less than before.

I'm fairly new to this investment stuff, so I have no idea whether 6.8% is a feasible or realistic average over a given period of time across a spread of investments, but it seems high?

M_j_t

I'm in the same sort of boat although mine is a DC, The transfer value is 44k it has a 1791.40 GMP.

According to what I purchased I should get 1791.40 a year from 65. Why, if I'm happy with that should I pay someone to let me tell them that so they can tell me what I told them? At what I believe is very likely to be 6.9% of the transfer value? Of course I believe that in addition to the 1791.40 pa I could also get a lump tax free sum payment of 10940.

I guess many will argue the 6.9% but I am overseas.

However, I may consider a transfer as I also have 2 DB pensions which I believe are worth a great deal more (one had a GMP of 731 (8.5% fixed ) projected to 6097 and an excess of 2283 (min 5% or RPI) projected to 8525 as at April 1996). I have two identical (bar the date) certificates of deferred pension benefit, both state a deferred pension of 3579 and a gmp of 796.
so combining all this I would appear to get a pensions of at least 8684 (gmp's added). Assuming that the excess and deferred are mine as well then that jumps to 20,788.

I'd actually be little a unhappy with that because I think I'd end up paying tax in the UK as it's over the 11k. I think I might also have to pay taxes here as well (not sure about that). I also have what is something like a 150k pot over here, which I'll probably take the minimum (5% I think) from so another 7.5K. Considering that I have a wife 17 years younger than myself who is working full time (I'm not and haven't been for some years) and that currently we are living reasonably well and even putting money away regularly; this will then all be diverted to superannuation or our savings pot possibly even until my wife retires.

So do I really need to pay someone to tell me what I told them?

I'd be grateful of responses, even wizards doing the maths etc. However, I think some here should perhaps understand that some may save for the like of and use of money but that also there are some that save because of their dislikes of money and it's negative influences.

Dark_Sunday

soulsaver wrote: »

write up your reasons for the enquiry & for preliminary discussions; you can find your way to suitably quailed IFAs, that do it for much less than 3% and:

A) You may be able to establish that you're going to get a positive recommendation from the IFA at the free preliminary discussion.

If you exhaust plan A with no offer of positive advice maybe you ought to reconsider? But if you still wish to transfer, you take the lowest cost negative advice and transfer your CETV to a receiving scheme that will accept 'an insistent client'.

And there are well known and trusted schemes/platforms that will accept with negative advice... at the moment.

Thanks for the post. Very sound advice indeed.

sandsy

M_j_t wrote: »

I'd actually be little a unhappy with that because I think I'd end up paying tax in the UK as it's over the 11k. I think I might also have to pay taxes here as well (not sure about that).

There's a double taxation agreement between Oz and the UK so wouldn't pay tax on the same income twice.

Bazofts_Revenge

Dark_Sunday wrote: »

Thanks for the post. Very sound advice indeed.

When I first inquired about a transfer I had a telephone conversation with HL and advised my intention to retire at 55 which with the DB scheme I was being hit with a massive reduction factor (-38%). A natural yield of 4% from the transfer value would give me a return nearly double what my pension would pay out. I have plenty saved in ISAs & other investments (£220k + expect to add another 84K) which will provide my main income. Under these circumstances HL were optimistic their adviser would be positive but obviously couldn't guarantee it.

Giving the full picture is very important.

Dark_Sunday

Bit the bullet & have a free 1 hr consultation with IFA later in the week. Will be interesting to find out the initial reaction to transferring DB to DC fund. Also be interesting to find out the level of fees quoted for doing the TVA report. Told me "up to" 3% on the phone.

atush

With a large CETV, you should be looking for a fixed fee, not a %.

3% on 100K is almost acceptible, 3% on 500K not so much

Dark_Sunday

Met IFA today & the fee is wee bit lower than the 3%. My view is the fact we need to pay an IFA is not right, but that's the law & its not the IFA's fault, I've concluded that my issue with a DB transfer fee needs to be parked & I've accepted that the IFA needs to make a living. The fee should be recovered within a few months with the right investment.

I've also reminded myself that this circa £92k pot actually cost me peanuts all those years ago, so it's a mini lottery win for me.

From the initial discussion it looks like a positive outcome i.e. recommend transfer, so hopefully a positive result all round within the next few weeks.