Excited but Nervous - Transferring Final Salary Pension

ianthy

I am slightly further down the track having completed the IFA sessions and waiting for the transfer to be completed in the next couple of weeks;-). I will be 55 in July and personally can’t wait to move on. Yes – there is the responsibility of managing your own investments and ensuring that you make the funds last. As other posters have mentioned, providing you have other forms of guaranteed income or manage it carefully until you get you both state pension age.. just a few more years for your husband, then you should be fine. There is more to life than work.

xylophone

http://www.thisismoney.co.uk/money/pensions/article-4645104/Should-rush-cash-final-salary-pension.html

might be worth a look.

Malthusian

You should be nervous - or at least cautious - about transferring a final salary pension as it is a one-way transaction, means you will be shouldering all the risks of managing your retirement fund and is a mis-sale unless proven otherwise. That said, if the IFA has proven otherwise and early retirement makes the trade-off worthwhile, brilliant.

If your husband is skilled is there any scope for him to go self-employed, given that there will be no pressure on him as you have enough to live on regardless? If he wants to work and use his skills it seems a shame not to. For the sake of staying active and healthy in his late-middle-age more than any financial reason.

blisteringblue

I also say go for it. It can be a ride and prepare for the pot to grow and drop but you have to hold your nerve, a drop of 25% isn't unheard of. I watched my early DC pots do this through the 2008 crisis, but the flip side my current work DC pot has grown almost 60% in the past 6 years and that is on cautious / balanced funds (also Scottish Widows btw), agree they aren't the cheapest but we moved from Friends Provident to Scottish Widows because they were ridiculously expensive.

I've just moved 2 final salary into DC too as the CETV is too good to pass up at the moment. I've swapped about 13K of pension to close to 500K too, but my overriding aim was to retire at 55, most of that 13k I would not get until I was 65 and the 13k valuation is at 65. Current value is under 10K.

I'm doing nothing outlandish, keeping balanced / cautious funds and I fully expect to be close to LTA come my 55th birthday in a few years.

Plus I have another small FS that was a poor CETV and will get full state pension at 67 so that is another 11K.

AnotherJoe

I think all those saying "dont swap" are missing the value of getting 9 years of retirement in now.

blisteringblue

AnotherJoe wrote: »

I think all those saying "dont swap" are missing the value of getting 9 years of retirement in now.

Spot on, sat down with my IFA and these were the discussions before we even talked about any numbers. I can't retire at 55 without cashing in. That is the bottom line.

p00hsticks

AnotherJoe wrote: »

I think all those saying "dont swap" are missing the value of getting 9 years of retirement in now.

No, but I think there are concerns about how the OP is going about it. We don't have any info on whether the husbands pension is DC or DB, but given how much closer to State Pension age than the OP he is, I would query why it sounds like it is the OPs pension pot that is going to be used to live off rather than the husbands, allowing the OPs final salary pension to be preserved.

If the OP gives up work now, then the husbands £250k pot and SP in three years should provide enough until the OP reaches 66, and then gets both her private and state pension.

craig1912

Transferred mine earlier this year as I wanted to retire early next year age 57 and wanted flexibility. Still paying into employer DC pension at the moment and total pot is circa £1m. I recognise my fund could drop by 25% or more but over the next 30 years taking 3-4 % I should be fine. Also have wife's FS pension to give some security.

gonedownthepub

I am in my 50`s and transferring from a DB pension at the moment.
One thing I have learned over the years is that the rules on pensions are constantly changing-in 5 years time there may not be 25% tax free lump sum option
For some people with large CETV`s the 25% sum is a life changer.

bostonerimus

bowlhead99 wrote: »

You mention your transfer value is £267k but the alternative is an £8.5k pension (presumably inflation linked) for perhaps four decades. So, it doesn't sound a 'no brainer' if you're in reasonable health but does give you some flexibility to make it through to state pension age if you no longer want to work and are happy to spend your pension money to get out of the rat race several years earlier. Remember the cost of retiring earlier is not just the cash you spend in those years without an income, it's the extra savings / investments / pensions you don't build up for those years too.

However, depending on your joint income needs you could feasibly use your DC and husband's pot to bridge the gap to state pension age while keeping the powder dry on your final salary one. It doesn't have to be an all-or-nothing solution on the whole £550k.

The OP should be planning for at least 40 years in retirement......given the official life expectancies. So if we assume 2% inflation then she'd need to average about 3.5% annual return from the £267k portfolio to match the pension income. That should be doable and she could start out with a 3.2% withdrawal and match the pension. If the OP can invest and manage the pension pot sensibly, then on balance I think cashing out is the way to go. But she must be aware of both fund and IFA fees as they could easily eat 0.5% to 1% which could be almost a third of her annual income.....and then cashing out would be a bad choice.