Defined Benefit pension

qa1

Hello

I have a Defined Benefit pension from nearly 30 years ago with (Barclays UK retirement fund)

I got a quote and its giving a transfer out value of a rather large sum which I am considering "transferring out"

The annual payment on retirement is about £1700 p.a which I guess between now and retirement can fluctuate.

I understand I have to take compulsory advice as the transfer value is over £30k.

I also understand that once you take this advice, which can cost anything from £1500 to £5000, you may then NOT be able to transfer it to certain institutions?

I am also aware of the media coverage last week about DB pensions and that they could fall by average by £20K.

What advice can anybody give?
The large sum is tempting, what could I be missing?

thanks

PensionTech

The annual payment on retirement is about £1700 p.a which I guess between now and retirement can fluctuate.

Not "fluctuate" - it'll increase in line with inflation and/or fixed increases at 8.5%pa. (Your dates indicate you left the scheme in the late 80s, so it's possible that a small amount of any pension accrued prior to 1985 may not increase.)

I also understand that once you take this advice, which can cost anything from £1500 to £5000, you may then NOT be able to transfer it to certain institutions?

If the advice is that it would be a terrible idea to transfer out, then some providers may not accept the transfer, but others will.

I am also aware of the media coverage last week about DB pensions and that they could fall by average by £20K.

Replace "coverage" with "hysteria". The government has launched a consultation on the sustainability of DB pension schemes which includes, among others, a suggestion that schemes could change their inflation protection from RPI to CPI where it had not already happened automatically. The effect, if any, of this move, if implemented, on your pension would be nowhere near £20k.

The large sum is tempting, what could I be missing?

"Large" is relative; it is hard for people to compare a one-off sum with a guaranteed (possibly) index-linked pension payable over their entire life plus provision for their spouse. That is not to say that the latter is definitely better, but you should know that many people woefully underestimate how much a retirement income really costs - not least because there is a really poor understanding of life expectancy in retirement. You need to think about what you want to do with the money in retirement. Do you have any reason - e.g. high-interest debt - to need a lump sum early on? Would you just leave it invested, and if so, what kind of investment risk are you happy with? Do you want to take it out gradually over your retirement? What other retirement savings and income will you have? Work out the most appropriate form of retirement product for your circumstances - and for many people that might be an annuity-type arrangement, where it's guaranteed for life - and then decide whether this is better provided by the DB pension you already have or a DC pot that you could transfer to (minus the cost of advice).

qa1

Many thanks for replying.

I'm not sure at all at this point as to "what" I will want to do with it at that point etc. Its really just a case of assessing whether at this point I should leave it and let the transfer value "grow" or "shrink"??
The transfer value has gone up £4500 in a couple of weeks. And as for the guaranteed annual payout once retired even if i lived for another 30 years thats still far less a value than if i get my hand on thte transfer out value. It really is confusing at this point.

Either way I have to seek advice.

PensionTech wrote: »

Not "fluctuate" - it'll increase in line with inflation and/or fixed increases at 8.5%pa. (Your dates indicate you left the scheme in the late 80s, so it's possible that a small amount of any pension accrued prior to 1985 may not increase.)

If the advice is that it would be a terrible idea to transfer out, then some providers may not accept the transfer, but others will.

Replace "coverage" with "hysteria". The government has launched a consultation on the sustainability of DB pension schemes which includes, among others, a suggestion that schemes could change their inflation protection from RPI to CPI where it had not already happened automatically. The effect, if any, of this move, if implemented, on your pension would be nowhere near £20k.

"Large" is relative; it is hard for people to compare a one-off sum with a guaranteed (possibly) index-linked pension payable over their entire life plus provision for their spouse. That is not to say that the latter is definitely better, but you should know that many people woefully underestimate how much a retirement income really costs - not least because there is a really poor understanding of life expectancy in retirement. You need to think about what you want to do with the money in retirement. Do you have any reason - e.g. high-interest debt - to need a lump sum early on? Would you just leave it invested, and if so, what kind of investment risk are you happy with? Do you want to take it out gradually over your retirement? What other retirement savings and income will you have? Work out the most appropriate form of retirement product for your circumstances - and for many people that might be an annuity-type arrangement, where it's guaranteed for life - and then decide whether this is better provided by the DB pension you already have or a DC pot that you could transfer to (minus the cost of advice).

sandsy

qa1 wrote: »

Many thanks for replying.

I'm not sure at all at this point as to "what" I will want to do with it at that point etc. Its really just a case of assessing whether at this point I should leave it and let the transfer value "grow" or "shrink"??
The transfer value has gone up £4500 in a couple of weeks. And as for the guaranteed annual payout once retired even if i lived for another 30 years thats still far less a value than if i get my hand on thte transfer out value. It really is confusing at this point.

Either way I have to seek advice.

But remember that the £1700 is a starting amount and at least some of it is likely to have index linking applied to it so it's not as simple as saying you'll still have had less value from it in 30 years. If inflation goes up, your income will go up with it.

You also have to understand the risks associated with transferring - how comfortable are you with the concept of investing that 'large' pot in the market related funds and watching your funds go up and down in value? Do you have other retirement funds you can rely on if you drew down on this one until nothing was left?

xylophone

You were in the Barclays DB Scheme and left around 1986.

You will have a pre 88 GMP and an excess.

Your statement of deferred benefits at leaving will show you what this was.

See https://www.barnett-waddingham.co.uk/comment-insight/blog/2014/08/18/what-is-a-gmp/

https://www.barnett-waddingham.co.uk/comment-insight/blog/2012/07/24/revaluation-for-early-leavers/

Barclays GMP revalues at Fixed Rate.

Scheme retirement age for Barclays DB was age 60 (this is still female GMP age - it is still 65 for a male).

Once you have reached GMP age, Barclays has no obligation to index link that part of your pension that relates to pre 88 GMP.

Post 165 here may be of interest. https://forums.moneysavingexpert.com/discussion/4736856

See also https://www.royallondon.com/Global/documents/GoodWithYourMoney/COMPANY-PENSIONS-FIVE-REASONS-TO-TRANSFER-OUT-AND-FIVE-REASONS-NOT-TO.pdf


Have you obtained a new state pension statement?

https://www.gov.uk/check-state-pension

qa1

sandsy wrote: »

But remember that the £1700 is a starting amount and at least some of it is likely to have index linking applied to it so it's not as simple as saying you'll still have had less value from it in 30 years. If inflation goes up, your income will go up with it.

You also have to understand the risks associated with transferring - how comfortable are you with the concept of investing that 'large' pot in the market related funds and watching your funds go up and down in value? Do you have other retirement funds you can rely on if you drew down on this one until nothing was left?

thanks for your points.

Yes but I dont want to miss the opportunity of "cashing in" on a potientaly large sum (how can it increase £4.5k in a few weeks?) Could this CETV suddenly plummet?

qa1

Thanks for replying.

I'm struggling to get a grip of this, its all too complicated.
The gteed Transfer value has a GMP of around 60K and "other rights" is about £52k

I left in 1995.
I logged on and it says: Total pension at date of leaving (£ per year): £1,073.29 Total GMP at date of leaving (£ per year): £202.80 Post 1988 GMP at date of leaving (this is included in the Total GMP figure shown above) (£ per year): £202.80 Total excess pension at date of leaving (£ per year): £870.49 State Pension Deduction (applied at SPA): £134.16
I guess when I get the compulsory advise someone will go through the best way to proceed. A question may be when to get this advice?

thanks

xylophone wrote: »

You were in the Barclays DB Scheme and left around 1986.

You will have a pre 88 GMP and an excess.

Your statement of deferred benefits at leaving will show you what this was.



Barclays GMP revalues at Fixed Rate.

Scheme retirement age for Barclays DB was age 60 (this is still female GMP age - it is still 65 for a male).

Once you have reached GMP age, Barclays has no obligation to index link that part of your pension that relates to pre 88 GMP.

Have you obtained a new state pension statement?

xylophone

You can't transfer out without advice from an IFA with Pension Transfer permission.

You are considering transfer out.

You need an IFA to advise whether thus is your best course of action.

You obtain the advice before you can proceed. You pay for the advice whether or not you transfer out.

The IFA's advice may not be in favour.

Some pension providers will not accept a transfer without a positive recommendation - others will.

https://forums.moneysavingexpert.com/discussion/comment/72173858#Comment_72173858