Nearly 55, Unemployed, sitting on potential large pension pot

hyperhypo

GSP

Am in a very similar postion to you albeit still employed , a little older at 57 , wanting to chug on at work for three more years, and with smaller amounts in both my DB / DC pots ....but facing same management issues.

I requested a CETV value for a DB scheme in which i had 12 years of service from 2000 until 2012...came to well over £400k ...x34 of the original leaving amount promised by the DB scheme (RPI capped at 10%).

I am getting a non chargeable TVAS (is that right) as to whether to liquidise it but i almost certainly won't do it. I imagine the cost of analysis would be subsumed in any future fee for sanctioning the transfer.

I too have a DC scheme that i've been saving into aggressively since 2012 and this will almost certainly be my vehicle for aiming to pre upartially retire in 3 years after saving as much as i can into it..i hope to be able to continue to contribute via salary sacrifice until i'm 61...and then spend it exclusively until i'm 63 when the db kicks in, u then partially so until. SP at 66, deferring same if possible if remants of drawdown DC permit.

Mentally retaining my DB (not selling it) might allow for

Part of my wanting to know CETV was simply prurient interest, and disbelief that apparently £25k of contributions made over 12 years now equates to such a high CETV value...and an egotistical view that i ought to be able to live off a modest return from close to £600k in three years time , assuming i'm still able to contribute and still alive.

And that i've already outlived my mother and year of my father's first heart attack , and what weighting to give that in any decision....

So Plan A is to hopefully continue to fill the DC scheme and work it perhaps more adventurously as would do if it were a larger drawdown pot...and as others here have mentioned , perhaps view the DC as one's prawn cocktail.

I hope you get your short term issues resolved...and interested to hear how things progress.

jamesd

GSP wrote: »

Understand that most IFA's will not approve a db transfer under "normal circumstances" i.e. okay with health etc. Anyone know the best way to find one that will if I took that route.

That was the case but higher transfer values make it a better deal than it was so there is less reluctance. Either way, your circumstances are those which make transferring a sensible idea, so while you should ask about it you shouldn't expect it to be hard to get a transfer recommendation. You also don't need a positive recommendation, the legal requirement is to get advice and even if that is don't transfer you can proceed anyway.

GSP

Thanks James. I thought if the IFA did not approve the transfer, mainly as they are embroiled and duty bound by the FCA to distance themselves from any future comebacks or risks, I would not be able to transfer even though it is in reality my money.

GSP

Hi Hyperhypo. That's a decent db amount built up in relatively a short space of time.
Trying to get to grips there appears to be so many instruments and terms to think through. Appears everyone has different circumstances and aspirations. Personally I am more of a live for today, though don't want to rely or burden anyone in future, so would never want to leave myself short. Its like trying to reach a balance of having a good time, while not frittering away everything and leaving money for immediate family if this allows.
Jamesd has provided a lot of information I still need to understand, but believe he is suggesting my pension transferred should be enough to allow me to do the things I would like to do.

jamesd

That was the way before pension freedoms. Today you'll find some IFAs who'll still help to do the transfer on "insistent client" basis even after recommending against it. And others who won't. But your situation is one where it makes sense so while it's worth discussing before hiring you shouldn't find it unduly difficult to find an IFA who agrees that it makes sense.

hyperhypo

GSP

Quite understandable . I suppose point i'm trying to make is that with the sum of CETV values & DC other savings, reaches a certain level, it is tempting to go for the transfer option, particularly if done on a time basis rather than a fixed % feet .

Simply on the basis e.g a notional sum of over £500k should be sufficient to provide a modest amount of money to live on, regardless of taking into account health , longevity in family etc.

I guess that's the bit i don't understand as it seems to me to be a comparison of apples and pears in the capabilities of the two scheme types.


And that's the bit that brings me back to retaining DB.

I've put my numbers into cfiresim and firecalc as jamesd suggests here and they imply a positive outcome, ie worth doing, ...al

I'm looking forward to geting the view of the transfer specialist, which i'll share on here ...i'll also share the cost of the process ...which i don't know yet , although the analysis isn't costing me anything.

I've always assume that this sort of thing would be done on a % basis ... i don't think i'd countenance paying more than 1% to do mine ..(£4,200) but the idea of a time-based fee more appealing.

I'm guessing now ...3 days work at £1200 per day ?


That said nowhere better than here to help straighten / challenge assumptions and thus work things out ...best of luck with it &look forward hearing how you proceed.

jamesd

DB is useful but remember that while transferring is unfortunately all or nothing, what you do after transfer isn't.

I like guaranteed income, it's part of why I mentioned state pension deferral as well as eventual annuity buying.

But eventual isn't the only option. You could start to spend £10,000 a year on a level (no inflation increases) single life (no spouse pension, inheritance of pot and their own state pension deferring takes care of that) annuity each year. Or £20,000 every two years because £10,000 is a bit low for good pricing. Here's a list of current rates per £100,000 at various ages:

55 £3,966
60 £4,444
65 £5,098
70 £5,883
75 £7,183

What gradual buying can do is at ever-improving rates raise your guaranteed income level towards your floor, reducing the overall risk exposure to investments. After ten years of it you'd have spent £100,000 to buy about £4,200 of income that gradually declines in real value with inflation, then can switch to state pension deferring for inflation linked or maybe do both.

That cuts your average expected income but improves the worst case drop level.

Inflation is a very big deal over forty years and even two percent a year will cut the real value to 45% of the initial one. 3% is 31% real left, 4% is 21% and 5% is 14%. Some of the toughest investment times in cfiresim are so because of high inflation. That's one benefit of buying gradually. If there are a few years of 10%+ inflation in there the buying after it won't be hurt as much.

Yet spending tends to decline with age, so a significant amount of level isn't a bad thing, provided there's lots with inflation linking.

GSP

Thanks Jamesd and Hyperhypo. Starting to think more about this and been talking to my wife as to what are aspirations are.
Did say at first just wanted to get by until we die.
Then wanted to explore if that transfer was so good it would be "stupid" to ignore and was worth going after and would prefer that. Was thinking we would make use of the money as far as it would go age to 80. Thereafter as we slowed down we would have a 13/14 year state pension lump sum and each year thereafter to live on. Not in any calculations but expecting 3 x inheritance through relatives dying in todays money of £500,000, £125,000 and £80,000. These are "expected" but hope it will be later when relatives well into their 90's and 100's in less than 20 years.
So our "strategy" would be live life to best we can until 80, then survive on state pensions as stated. We are not expecting to leave anything to the kids in terms of cash (sure there will be something though), but they will have the house to sell. Some parts seem a bit dark in this and hard to imagine come the day, but have mentioned as will impact later on.
Would anyone know what best we may achieve up until age 80. Thanks

GSP

Just to add.
- How much tax free sum we would receive.
- How much monthly income to age 80 we would receive.
Thanks

GSP

Thanks for those links Xylophone, just read through them all. There seem to be a number of options available and quite what the best one is at this stage.