What to do and why

wp1234

Need to make an important decision this year .
I’m 60 and my Final Salary pension starts paying out next year ,no significant other income streams planned after retirement i.e I really do want to retire.
Without going into too much detail the pension fund in question is pretty well bomb proof so the tax free lump sum of circa £200k and the annual pension of £30K ( £22k for my wife if I die first ) is of course guaranteed for as long as we both live. So the quandary is do I play safe and accept the final salary pension as it stands or think about taking the Transfer Value ( £1.2million )instead and get a draw down income from that sum by investing it in a wide variety of safe funds .The obvious upside of using the TV sum is the fact that the money doesn’t just disappear when my wife and I die and the kids benefit, the down side is the financial market risk I would be exposed to , thinking here of what happened in 2007.
The Financial Advisers I’m using aren’t being very helpful and are very much sitting on the fence basically telling me that its Ok to go down the flexible drawdown route but advising against it at the same time, its possibly because they don’t want a claim from me if it goes horribly wrong.
I was hoping that others that have gone down this route could advise on the subject , how did they decide in the end , has it worked out as planned, what did you invest in , is it helpful to get someone to do some stress testing on the scenario ? how can I get the stress testing done ?

Thanks all

Mrs_pbradley936

wp1234 wrote: »

Need to make an important decision this year .
I’m 60 and my Final Salary pension starts paying out next year ,no significant other income streams planned after retirement i.e I really do want to retire.
Without going into too much detail the pension fund in question is pretty well bomb proof so the tax free lump sum of circa £200k and the annual pension of £30K ( £22k for my wife if I die first ) is of course guaranteed for as long as we both live. So the quandary is do I play safe and accept the final salary pension as it stands or think about taking the Transfer Value ( £1.2million )instead and get a draw down income from that sum by investing it in a wide variety of safe funds .The obvious upside of using the TV sum is the fact that the money doesn’t just disappear when my wife and I die and the kids benefit, the down side is the financial market risk I would be exposed to , thinking here of what happened in 2007.
The Financial Advisers I’m using aren’t being very helpful and are very much sitting on the fence basically telling me that its Ok to go down the flexible drawdown route but advising against it at the same time, its possibly because they don’t want a claim from me if it goes horribly wrong.
I was hoping that others that have gone down this route could advise on the subject , how did they decide in the end , has it worked out as planned, what did you invest in , is it helpful to get someone to do some stress testing on the scenario ? how can I get the stress testing done ?

Thanks all

I would leave it entirely alone! Final salary pensions are like gold dust and so just enjoy and not be greedy!

Drp8713

Your final salary pension is risk free for the lifetime of you and your wife, index linked, valued at £800k for lifetime allowance purposes so no tax charge, and you can leave money to your children by buying some life insurance.

Or you can transfer out, pay an IFA, pay a platform charge, pay a fund fee, take on all the investment risk, fluctuating income and pay a lifetime allowance tax charge for the £200k excess over the £1m limit.

NotSkint

I would stick with the final salary pension for the guarantees it provides. Why take on the risk when you don't need to?
I can understand wanting to leave some inheritance; assume you own property? Or could you invest some of the 200K lump sum with that in mind? Wouldn't that be enough?
The future is always uncertain, but your priority is looking after yourself and your wife. Enjoy your retirement and don't take on unnecessary stress!

moneyfoolish

I had the almost the same choice and figures when I retired and I wouldn't even consider giving up my final salary pension.

System

Kids don't need millions but would still usually get something if not much claimed, you do need peace of mind valuable especially when you're eventually too old to manage your investments. Encourage the kids to invest themselves, that'd be enough for them to keep up with house prices, there's not a whole lot of need for returns above that

OldMusicGuy

I am retiring next year at 60 and will have a DC pot and savings of just over 1 million. I would love to replace that with the kind of final salary scheme you have. There is no such thing as "safe" funds and we are in pretty volatile economic times. IMO you are mad to even contemplate such a transfer when you such a cast iron pension at a pretty good level. You will get some SP as well to top that up at some point.

And like a previous poster said you will be subject to a lifetime allowance tax charge as well.

coyrls

OldMusicGuy wrote: »

I am retiring next year at 60 and will have a DC pot and savings of just over 1 million. I would love to replace that with the kind of final salary scheme you have. There is no such thing as "safe" funds and we are pretty volatile economic times. IMO you are mad to even contemplate such a transfer when you such a cast iron pension at a pretty good level. You will get some SP as well to top that up at some point.

And like a previous poster said you will be subject to a lifetime allowance tax charge as well.

Agreed, if it was an option, I'd buy it off you.

badmemory

I hope those financial advisors are actually independent FAs. Ask their advise on what to do with your large lump sum and then walk away from them. Perhaps it would be a good idea to sit down without the £ signs flashing in front of you and look at what you actually have.

xylophone

If you want to make a gift to your children, why not do it now from the lump sum and see them enjoy it and then yourself enjoy the security of your DB pension?

ianthy

I have only just transferred out of my DB scheme with circa £930k I am aged 55, pension quotation was £24k per annum. We have no kids and husband has a civil service pension of £20k. We have other investments including investment properties and I was previously self employed so I and currently running down what remains of my company funds ...at the current level of spend it will take another 5 years and then HMRC will give me at tax rebate of £45k. I thought long and hard about transferring out, it wasn’t about leaving money for the kids as we don’t have any. It was about having more control/flexibility over the flow of income from the pension and what happens after the pot when I die. You don’t mention if you have much experience investing, as this is important. The value of your funds will almost certainly go up as well as down over your the period of your retirement, so you would need to be comfortable with this. You really need to look holistically at all of your investments/assets and involve your OH too.

For investments, I have £450k invested/managed via my IFA and the balance £300k managed by myself and the balance is the tax free lump sum. I don’t expect to draw down from my pension until maybe mid 60’s, if at all. Every situation is different and you need to take as much advice as possible before proceeding. I found this site extremely valuable as there is always something to learn about retirement and investing. You can also use the search facility to find more information from forum members, who considered or have also transferred out DB pensions.