Still got Pensions Dilemma....

happyandcontented

Audaxer wrote: »

Before it was possible to transfer your DB pension, if you were previously happy that you were going to get £26k per annum at age 65, and confident that the DB pension combined with your other pensions was going to provide you with a comfortable retirement, why complicate things and take more of a risk by transferring the DB pension, and putting all your eggs in one IFA basket?

Before it was possible, there was clearly no choice, so it wasn't a question of being happy it was a question of having to be happy!

I am not saying that is the route we will go down, but we do want to receive unbiased, impartial, individual advice and not someone who has a set blanket opinion.

The fact that such a pot would be inheritable is a factor for us too. We have had a several friends die young or be diagnosed with life shortening illness this year and no one knows what is around the corner.

I don't like the thought that all the hard work which went into building up a DB pension could be lost if one or both of us dies relatively young. What we don't use in our lifetimes we want to pass to our kids if that is a sensible way forward after all the options have been explored.

Audaxer

happyandcontented wrote: »

Before it was possible, there was clearly no choice, so it wasn't a question of being happy it was a question of having to be happy!

I am not saying that is the route we will go down, but we do want to receive unbiased, impartial, individual advice and not someone who has a set blanket opinion.

The fact that such a pot would be inheritable is a factor for us too. We have had a several friends die young or be diagnosed with life shortening illness this year and no one knows what is around the corner.

I don't like the thought that all the hard work which went into building up a DB pension could be lost if one or both of us dies relatively young. What we don't use in our lifetimes we want to pass to our kids if that is a sensible way forward after all the options have been explored.

Fair enough, I take your point - you are clearly looking at all the options which is good. It was just a suggestion as I had always thought it would be better taking a DB pension, but appreciate it may not be the best option in all cases.

happyandcontented

So had we, it may still be, but working on 26k per year from 65 we would both need to live to be 95 to get anywhere near the 810k it is worth now.

At 95 we would have used 780k if we both survived and received the 26k for 30 years. If the main pension holder dies the yearly amount goes to 13.5k for the survivor. Then it dies with the last survivor. So, as you can see it does give pause for thought.

Taking the transfer value of the pot means we can take the same amount out PA and it hopefully should grow too (if cautiously invested) and still leave what is left to our children.

coyrls

happyandcontented wrote: »

Yes, I am now wondering if the best course of action would be to transfer to the spouse the 400k DC pots, leaving the DB open to be transferred without breaching the LTA? No idea if that is allowable or not.

[FONT=&quot]It's not possible as far as I know to transfer your DC pensions to your spouse; it's not like savings, pensions can't be transferred in this way. You could get 50% of your pension transferred to your spouse if you divorced them![/FONT]

zagfles

happyandcontented wrote: »

Yes, I am now wondering if the best course of action would be to transfer to the spouse the 400k DC pots, leaving the DB open to be transferred without breaching the LTA? No idea if that is allowable or not.

Not unless you divorce!

zagfles

happyandcontented wrote: »

So had we, it may still be, but working on 26k per year from 65 we would both need to live to be 95 to get anywhere near the 810k it is worth now.

At 95 we would have used 780k if we both survived and received the 26k for 30 years. If the main pension holder dies the yearly amount goes to 13.5k for the survivor. Then it dies with the last survivor. So, as you can see it does give pause for thought.

Taking the transfer value of the pot means we can take the same amount out PA and it hopefully should grow too (if cautiously invested) and still leave what is left to our children.

Don't forget indexation - the DB pension will likely be indexed linked, at least partially (usually capped).

These days it's hard/impossible to get investments that will guarantee to keep up with inflation, you can likely do it if you take risks...but what some people end up doing is drawing down accounting for the worst case scenario and end up on living on less than they'd have got in DB pension!

Audaxer

happyandcontented wrote: »

So had we, it may still be, but working on 26k per year from 65 we would both need to live to be 95 to get anywhere near the 810k it is worth now.

At 95 we would have used 780k if we both survived and received the 26k for 30 years. If the main pension holder dies the yearly amount goes to 13.5k for the survivor. Then it dies with the last survivor. So, as you can see it does give pause for thought.

Taking the transfer value of the pot means we can take the same amount out PA and it hopefully should grow too (if cautiously invested) and still leave what is left to our children.

Yes, I can definitely see the benefits in your situation. However I assume that if you leave it as a DB Pension the £26k will increase every year with inflation? If so, you will have received over £800k probably well before you are 95. On the other hand if you transfer and invest the £810k, and drawdown say 3.5% per year that would be £28,350 per year with that also increasing as your investment pot grows, although it is not guaranteed.

I can therefore see the benefits of the transfer option, but if it was me I'd be wary of transferring it and putting it all in the hands of a small one man band IFA. I'm probably being ultra cautious but if the worst happened and your investment was lost through fraud, you would presumably only be covered up to £50k by the FSCS.

happyandcontented

Only as ultra cautious as we are being!! It is a big decision which could have life changing outcomes. I agree with you re the small IFA, we liked him, but something was niggling us and gut feel says No!

We have no other debts and are mortgage free. We have helped our eldest two kids through university and property purchases and they are both in professional jobs and self sufficient. Our youngest will be in his final year of uni next year and will then hopefully enter a very well paid profession, so all our financial responsibilities to them will cease.

I just can't foresee either of us/both of us living to 95, and of course also from age 66 we will have had an extra 17k PA between us from the state pension, and we have the DC pots to provide an additional income. Also, we are less likely to need so much as we age, we plan to do our travelling and spending in early retirement. If necessary, we can downsize to free up capital.

There is no major rush to make a decision (unless fate decrees otherwise!) so I think we will shop around some more. I am conscious though that we will, ultimately, have go with our gut and take the leap.

It is helpful going through the thought process on here and using others as a sounding board.

Monkey2801

happyandcontented wrote: »

Thanks for the vote of confidence in me but it is something I don't share:T The thought of being personally responsible for "balancing" a portfolio is terrifying and my other half is similarly diffident.

I do know what you mean though re layers of advice, I suppose ultimately, it comes down to whom you feel at ease with and have confidence in?

However, we are (now) leaning towards removing the DB pension, but the IFA we would otherwise have gone with (higher fees notwithstanding) didn't seem to like the idea. That leaves us wondering if;; A) he is a good fit for us and are we doing the right thing and C) if it is personal liabilities that are driving his inclinations or our best interest.

Your IFA needs an additional qualification to transfer safeguarded benefits, so if they're shying away from it they may not have this qualification (especially if a one man band), and as such might not be providing you with the ideal overall picture. Perhaps just ask if he does?

happyandcontented

Monkey2801 wrote: »

Your IFA needs an additional qualification to transfer safeguarded benefits, so if they're shying away from it they may not have this qualification (especially if a one man band), and as such might not be providing you with the ideal overall picture. Perhaps just ask if he does?

Thanks, both IFA's that we have seen had this qualification, that was something we ascertained before we chose one to see.