I transferred my £570,000 final salary pension – and regret it'

Malthusian

Pun wrote: »

Scaremongering. Compensation for misselling doesn't come from the taxpayer, so unless you are heavily invested in PI insurers, or companies which may have to pay redress, you don't need to worry your little head about it.

The cost of PI insurance is paid by everyone who uses a financial adviser. If the PI insurer withdraws cover, which means that the cost of redress will probably end up with the compensation scheme, then it will be paid by everyone who uses financial services, whether they use a financial adviser or not.

Either way the cost of redress will fall on the wider population, just as if it had been paid by the taxpayer.

Silvertabby wrote: »

That's only a fraction over 20 X. Surely no reputable IFA would have recommended that?

Whether a transfer out of a final salary scheme is appropriate depends on a lot more than the multiplier. If it is unsuitable for someone to transfer out of a final salary scheme at a CETV of 20x the annual pension, it will probably still be unsuitable if the CETV is 30x. Same thing applies in reverse.

Naturally a higher CETV makes it more likely that the punter will be better off, but it doesn't matter if they're going to panic the first time the stockmarket goes down and stick it all in cash; they will be worse off regardless of how good the CETV was.

ex-pat_scot

PeacefulWaters wrote: »

It's an interest free mortgage apparently. Get in!

"Interest only" mortgage, I think!


A perfectly valid tool, if used wisely.


And at the moment, given where rates are, it's almost "interest free" anyway.

Paul_Herring

ex-pat_scot wrote: »

A perfectly valid tool, if used wisely.

Indeed.

However, given how he's been treating his SIPP of late...

blisteringblue

Silvertabby wrote: »

I can't read all of the article, but looks like he swapped a pension of £28K per year for £570,000.

That's only a fraction over 20 X. Surely no reputable IFA would have recommended that?

I take all tabloid stories (Telegraph included) with a pinch of salt.

Totally agree with Silvertabby, my IFA would not have signed that off. One of my CETVs @ 33x was almost a no but my ultimate desire to retire at 55 was my main driver.

End of the day I swapped 9K a year at 60, and 5K a year at 65 for best part of 500K, I've 200K in my live DC pot (over 1k a month going in but will step up final couple of years) and I've 4 1/2 years left to get close to LTA, but my numbers are good at 800 - 850K total.

I've another 4K at 65 from a poor CETV and full state pension at 67.

I will take my chance thanks very much.

Blackbeard_of_Perranporth

dunstonh wrote: »

3 years and only £10k growth? What on earth is he invested in!

My limited SIPP went up by £13,000 last year and increased in value by 63%! I don't have as much as this engineer, by my judgement at 56 is far better.


Oh, and my DB scams are still with the providers! They are currently set to pay around £12,000 per annum and I wont take the money and run!

westv

ukdw wrote: »

Based on the last 3 years of exceptional FT100 growth I would also be disappointed if I had made a small loss - rather than a >25% gain.

The FTSE 100 was around 7,000 this Month three years ago.
It's now around 7,500. A 7% increase. Hardly exceptional.
The big rise has been over the last 2 years.

bostonerimus

ukdw wrote: »

I agree that a 20x CETV multiplier is quite low.
Based on the last 3 years of exceptional FT100 growth I would also be disappointed if I had made a small loss - rather than a >25% gain. However I wouldn't yet be completely disappointed with the decision to transfer out.

If we assume that the £1.2m is an absolute figure, 15 years of 3% inflation and a Safe Withdrawal rate of 3.5%, then I can see where £1.2m pot would be required.
To get to £1.2m in 15 years you would need an absolute growth of about 5.4% PA, or real terms growth of about 2.4% which isn't that unreasonable.

There is no mention of inflating the 28k pension, it's just stated that he will get 28k at age 65. If you inflate the 28k by 3% until he reaches 65 then the pension would be 40k and he'd need around 1M to generate an inflation linked 40k for around 30 years. The confusion might come down to details being left out of the article rather than poor maths on the engineer's part. Still to have had such poor investments returns over the last 3 years takes a considerable amount of effort and/or bad luck. As you say he'll need an annual growth just above 5% to make his plan work, that's doable with a sensible portfolio, but there is obviously some risk and I'm not sure I would have taken quite such a big gamble.

bostonerimus

ex-pat_scot wrote: »

"Interest only" mortgage, I think!


A perfectly valid tool, if used wisely.


And at the moment, given where rates are, it's almost "interest free" anyway.

Yes I assumed it was "interest only" rather than "interest free".......if I'm wrong i want to know where I can get one of those interest free mortgages.

So the Telegraph engineer will need a stash to pay off that loan. I assume he is thinking of downsizing once the kids are gone. The property market looks as if it is slowing down and even reversing in some areas so let's hope he sells at the right time.

ukdw

bostonerimus wrote: »

There is no mention of inflating the 28k pension, it's just stated that he will get 28k at age 65. If you inflate the 28k by 3% until he reaches 65 then the pension would be 40k and he'd need around 1M to generate an inflation linked 40k for around 30 years. The confusion might come down to details being left out of the article rather than poor maths on the engineer's part. Still to have had such poor investments returns over the last 3 years takes a considerable amount of effort and/or bad luck. As you say he'll need an annual growth just above 5% to make his plan work, that's doable with a sensible portfolio, but there is obviously some risk and I'm not sure I would have taken quite such a big gamble.

Agreed. I had assumed the £28k figure was the value 3 years ago, which would have risen due to normal deffered DB pension inflation rises to about £43k by age 65 NPA. If the £28k is instead a projected absolute figure at NPA then this would mean the 3 years ago the pension value would have been about £18k. In this case the CETV multiple would have been a more healthy 31x

bostonerimus

ukdw wrote: »

Agreed. I had assumed the £28k figure was the value 3 years ago, which would have risen due to normal deffered DB pension inflation rises to about £43k by age 65 NPA. If the £28k is instead a projected absolute figure at NPA then this would mean the 3 years ago the pension value would have been about £18k. In this case the CETV multiple would have been a more healthy 31x

Yep....I think your assumption that the pension will be worth around 40k by the time he's 65 is probably correct as it makes the engineer's maths sensible. The article doesn't really give enough detail. If the 28k pension at 65 is correct the engineer probably did the right think to take the CETV, if it's the 40k value then the decision is highly debatable.