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IFA needed to transfer small pension pot!!!
Comments
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It is far from bonkers! An often quoted figure is that the average real return on the stock market is 7% so using that figure £418 would become £3182 in real terms after 30 years. Then, after subtracting the lump sum of £125, that would give a pension of £92pa (using your figure of 3% for an index-linked annuity) so an 84% higher pension!
The £50 pa is index linked so based on average inflation of 3% would be around £120pa in 30 years time and the lump lump sum will have grown to £300, so yes I think bonkers still applies.0 -
All the figures were in real terms! In 30 years, with indexing the lump-sum will be £125 in real terms and the pension will be £50pa in real terms (ie in today's money). If you want to use nominal figures (increasing the pension by 3%pa) then you also have to increase the return on investments by 3% so it would be a 10% nominal return (a real return of 7% and inflation of 3%). The conclusion of the analysis would be exactly the same whether you use real values or nominal values. You cannot compare the pension in nominal terms with the investment (of the transfer) in real terms.Keep_pedalling wrote: »The £50 pa is index linked so based on average inflation of 3% would be around £120pa in 30 years time and the lump lump sum will have grown to £300, so yes I think bonkers still applies.This is a system account and does not represent a real person. To contact the Forum Team email forumteam@moneysavingexpert.com0 -
The average real return on the S&P500 between 1950 and 2009 was 7% pa: http://www.simplestockinvesting.com/SP500-historical-real-total-returns.htm
So you think that comparing an American index in a time when the US was effectively an emerging market is realistic for the future?I am an Independent Financial Adviser (IFA). The comments I make are just my opinion and are for discussion purposes only. They are not financial advice and you should not treat them as such. If you feel an area discussed may be relevant to you, then please seek advice from an Independent Financial Adviser local to you.0 -
Assuming the 4% rule for income is being used, the £50 income requires £1250 and the tax free lump sum another £125, for a total real value of £1375 at age 68.
For £418 to grow to that over 34 years takes a real return of 3.6%.
That's not a very challenging investment target given that the long term UK market return has been about 5% plus inflation minus charges.
The transfer looks like a good move, with a high probability of delivering greater income and greater flexibility along with the increased ease of management from not having a small pot to deal with.0 -
I can the benefits of going either way on this from a pure cash value point of view, I don't think there is a great deal in it.
For me, and I do work for a local authority, the decision would be stay with the LGPS DB because if the OP ever went back into the public sector, and rejoined the LGPS for example, they could add this previous service to their new scheme and get the benefit of linking the "time employed" to a much higher salary in the new job.
May not happen I know, but who knows. I joined the PS after 30 years in the private sector.0 -
I might ask you if it is sensible for an IFA to give advice about a pension transfer (post #5) without knowing the age of the OP?So you think that comparing an American index in a time when the US was effectively an emerging market is realistic for the future?This is a system account and does not represent a real person. To contact the Forum Team email forumteam@moneysavingexpert.com0 -
I might ask you if it is sensible for an IFA to give advice about a pension transfer (post #5) without knowing the age of the OP?
Nothing on this board is advice. It is comment and discussion. Nice attempt at trying to deflect though.I am an Independent Financial Adviser (IFA). The comments I make are just my opinion and are for discussion purposes only. They are not financial advice and you should not treat them as such. If you feel an area discussed may be relevant to you, then please seek advice from an Independent Financial Adviser local to you.0 -
I am not trying to deflect, but you are trying to avoid the question! I have justified my assumptions and I was attempting to find out what assumptions you used to come to the unequivocal 'opinion' that the OP should not transfer their pension without knowing their age. So is it sensible for an IFA to give an 'opinion' without knowing the age of the OP?Nothing on this board is advice. It is comment and discussion. Nice attempt at trying to deflect though.This is a system account and does not represent a real person. To contact the Forum Team email forumteam@moneysavingexpert.com0 -
I have justified my assumptions
You have explained your assumptions. They are not justified though.So is it sensible for an IFA to give an 'opinion' without knowing the age of the OP?
yes.I am an Independent Financial Adviser (IFA). The comments I make are just my opinion and are for discussion purposes only. They are not financial advice and you should not treat them as such. If you feel an area discussed may be relevant to you, then please seek advice from an Independent Financial Adviser local to you.0
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