Guaranteed Transfer Value

TBC15

kidmugsy wrote: »

Hm. You would be interested in keeping the DB pension only if you had objective reason to hope for a long life. So consider your Mirror pension after state pension age = £7,900 - £3,056.04 = approx £5k p.a.

Or you can swap it for approx £175k. Ratio = approx 35.

Tempting. Certainly would be worth paying an IFA to check your understanding and assess the proposition, even if it weren't compulsory.

I’d also be paying income tax on the majority of the £5000 effectively making it worth £4000 this gives a ratio around 43.

My thoughts were I could take the transfer into a sipp take out the 25% and draw down the remainder at £12650 a year over the next 8 yrs. reducing my tax bill at age 66 onwards.

TBC15

Does anyone have any idea of the IFA costs involved on a £174253 transfer and the best way to minimise them?

maximumgardener

see several IFA's in your area and negotiate the transfer cost with each.

(expect it to be around 1%........3 or 4% is pretty excessive IMO)

Then.....go with the one that you want

Linton

ukdw wrote: »

If I have understood the state pension reduction correctly their will be almost 40% drop in income when the OP reaches State Pension age. Does the make the CETV look better.

Have done some basic calculations based on the following assumptions:
State Pension age 66
Inflation 2.5% increases applies to DB pension income
Looks like the OP would need to make average investment returns of about 1.2% to match the benefits assuming lifespan of 86. If the OP managed to make 5% returns (inflation + 2.5%) then the investment could grow faster than the current DB drawdown levels - which could allow larger lump sum or larger drawdown.

Not a good basis for pension planning - there is a 50% chance of living longer than your drawdown. Suggest you use at least 96 with a 20-25% chance of living too long.

TBC15

maximumgardener wrote: »

see several IFA's in your area and negotiate the transfer cost with each.

(expect it to be around 1%........3 or 4% is pretty excessive IMO)

Then.....go with the one that you want

I’ve had a quote of 1% locally, anything to be wary of?

TBC15

IFA has carried out a quick run through with Transfer Value Analysis System (TVAS) on the basic information and the initial report is showing a Critical Yield of 20.24% pa needed by the alternative arrangement. Have I missed something? How on earth could this be the case?

If I thought it was worth half this I wouldn't waste my time.

ukdw

Have you been supplied with only one critical yield figure, or several based on different scenarios?

If the 20.24% figure is for an annuity based scenario then it would be understandable - as your £174k would need to grow by quite a lot in the next 2 or 7 years to provide the enough for you to then buy an annuity that is a direct replacement of your current pension benefits.

I would doubt 20.24% applies to any draw down based scenario - as your £174k pot would be growing by over £35k a year at this rate - which is a much larger amount than your highest £9.9k existing annual pension figure.

TBC15

ukdw wrote: »

Have you been supplied with only one critical yield figure, or several based on different scenarios?

If the 20.24% figure is for an annuity based scenario then it would be understandable - as your £174k would need to grow by quite a lot in the next 2 or 7 years to provide the enough for you to then buy an annuity that is a direct replacement of your current pension benefits.

I would doubt 20.24% applies to any draw down based scenario - as your £174k pot would be growing by over £35k a year at this rate - which is a much larger amount than your highest £9.9k existing annual pension figure.

Are IFAs allowed to look at any other scenario apart from buying an annuity?
As this sounds a little out of step with what’s going on in the real world.

ukdw

TBC15 wrote: »

Are IFAs allowed to look at any other scenario apart from buying an annuity?
As this sounds a little out of step with what’s going on in the real world.

Yes as far as I know then as long as annuity scenarios are included then drawdown ones are ok to include too.

My own initial advisors report has a table of 20 different critical yields based on different combinations of annuity, drawdown, retirement age and lump sum amounts. The highest annuity figure is 20%, highest drawdown figure is 0.8% with a number of the others being minus percentages which I think are a good sign.

For the OP's earlier retirement scenario, with no lump sum I was expecting to see something like 1.2% When you include the large state pension reduction figure.

TBC15

Thank goodness for that.

I!!!8217;ll see the IFA on Thursday and hopefully get a more favourable result when he runs the figures for drawdown.

I!!!8217;m planning on transferring to AJ Bell if all goes well. Any idea if I will have problems opening a SIPP as I!!!8217;m currently working overseas?