Guaranteed Transfer Value

TBC15

I’m currently working overseas and looking into retirement at 60. I’ll be 58 this July. I’ve had a State Pension estimate of £175. My non-working wife 62 has had a State Pension estimate of £145.

We have no mortgage and own our own house and have investments of £800000.

I have a deferred pension with the Mirror Group Pension Scheme (MGPS)/MGN Past Service Pension Scheme (MGNPSPS) that has a normal retirement age of 65. I requested an estimate of what pension would be payable at age 60 and 65 and this is the information I received.

Age 60
(A) A pension amounting to £7,900 pa OR
(B) A residual pension amounting to £6,100 pa plus a tax free lump sum of £41,600

Age 65
(A) A pension amounting to £9,900 pa OR
(B) A residual pension amounting to £7,350 pa plus a tax free lump sum of £49,900

Included in the pension above is an amount representing the Guaranteed Minimum Pension (GMP) for the period for which you were Contracted out employment in the Mirror Group Pension Scheme. From State Pension Age(SPA) the GMP which we estimate to be £3,056.04 pa will be paid to you by the Department of Works & Pensions (DWP) and accordingly we will, when you attain SPA, reduce our pension by this amount.

I also asked for a transfer value and received the following information

Guaranteed Transfer Value MGPS/MGNPSPS* £174,253.88

The above figure relates wholly to pre 6 April 1997 service. There is no GMP included as the State took over liability of paying the GMP to the member at SPA.

I’m tempted to take the transfer and once in a SIPP (any suggestions as to whose SIPP is the most cost effective at this level) take out the cash free lump sum invest it and drawdown the rest at just under my personal tax allowance.

Would an IFA recommend this and what would be fair fee?

Does this sound prudent?

Regards

chiefie

Looks poor value to me

ffacoffipawb

chiefie wrote: »

Looks poor value to me

Fair value would be about £250k I think.

Perhaps scheme still underfunded thanks to Captain Bob bob bob ...

Stubod

Looks like a poor CET Value to me. I have 3 old pensions that between them will give about £9k / yr at 65, and the last combined CETV I had for the 3 is over £300k....

errolt1

Poor transfer value.
Should be around 30 the value so around £240k at 60.

ukdw

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.

AlanP_2

Annual pension & CETV value broadly in line with the value I have had from my deferred DB and I won't suffer a hit from a reduction due to GMP when I get to SP age.

Your scheme is offering a much higher commutation to Lump Sum rate than mine does, looks like yours is ~ 1 to 23.

To transfer out you would need to use a suitably qualified IFA for advice.

Personally, and speaking as non-expert, I would be tempted to commute some annual pension to the Lump Sum as rate is high and keep the guaranteed income to provide at least a floor level in retirement.

You mention other savings / assets of a high value so you shouldn't be destitute by any means.

kidmugsy

TBC15 wrote: »

We have no mortgage and own our own house and have investments of £800000.

How much of the £800k is sheltered in pensions? In ISAs?

TBC15

kidmugsy wrote: »

How much of the £800k is sheltered in pensions? In ISAs?

About £424,000 in wifes ISA, £15,000 in wifes pension. The rest in my name, to be sold before return to UK.

kidmugsy

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.

macca1974

I would second that it certainly looks worth speaking to an IFA about bearing in mind the reduction at state pension age. You can't just base things on the multiple as that doesn't take everything into account. If you see an IFA, you would be shown how much fund growth you would need to match your scheme pension and can make a decision from their taking into all of the other factors.