Thoughts about my pension please..?

C_Mababejive

Thanks all and MK62 talked about the important matter of being in control of how much tax you pay,,i mean ,who wants to pay tax ? not me. Paid it all my working life !

Terron- that is my thinking,, DB trustees must be loving it. All these people queuing up to cash in . They are paying off big future liabilities at todays rates and those people who are txing out are investing when most investment vehicles are screaming at all time highs .

The scheme im in is pretty mature. It was closed to new entrants at least 10 years ago. It only has maybe 2000 contributing members, and existing pensioners are dying at a rate of at least 1000 a year !

Ill bet the trustees dont mind some short term payouts because longer term, they will be quids in.

I really need to find a good IFA ,but i need to avoid one that may have an interest in "selling" me a tranfer and managing it ..

Alibert

I don't think you have quite grasped what the role of the trustees is, and what they do.

You seemed to be basing a lot of your plan on the notion that trustees are out to gull you , and can't be trusted. While at the same time being too trusting of vague promises of how easy and straight forward it is to realise 4% real return , post fees.

You are getting a lot of good advice here , but not sure you are really listening to it.

You need to find an IFA you trust , and get them to set out the pros and cons for you of transferring, and a recommendation.

I have a feeling what you are looking for is reassurance that the decision you are making is the right one. If that is the advice what you want to buy, you will surely find someone to sell it.

LHW99

You need to find an IFA you trust , and get them to set out the pros and cons for you of transferring, and a recommendation.

and they will need to have the right permissions to undertake a DB transfer.

grey_gym_sock

C_Mababejive wrote: »

the important matter of being in control of how much tax you pay,,i mean ,who wants to pay tax ? not me.

why not? the only way i can think of to avoid tax is to draw a pension equal to the personal allowance and no more. and you have a much higher pension than that on offer. (and the question is whether you can improve on that.)

basically, the more income tax you're paying, the higher your income must be, therefore the better off you are.

if you did decide to transfer out, you would think about tax a bit in managing the drawdown pension. that would probably mean drawing enough pension to use your personal allowance every year, but not so much that you pay higher rate tax, i.e. to stay somewhere within the basic rate band.

but then, the figures you've quoted for what the DB pension might pay would all land you in the middle of the basic rate band anyway. so i don't see how you can improve on that (from the point of view of tax management).

i'd also agree with the comment that the trustees aren't out to fleece you (either by encouraging people to transfer out, or by discouraging them). there are various rules trustees have to follow, which may oblige them to allow transfers out, and may also say how they must calculate the transfer out values. so i'm not sure they have much discretion about this anyway.

oscarward

This is a fascinating thread, I'm not sure which scheme the OP is in but a close relative had a similar decision to make.


Basically 35 years in LGPS and taking early retirement after VR.


So the decision was take a reduced pension with an enhanced tax free lump sum. Basically for each £20k LS they lost roughly £100 in monthly pension payment. Less tax long term but it gave them the cash to do things while they could, and spouse was still earning, and the guarantee of a steady income with state pension kicking in after 8 years to top up.


Working so far

bowlhead99

grey_gym_sock wrote: »

C_Mababejive wrote: »

the important matter of being in control of how much tax you pay,,i mean ,who wants to pay tax ? not me. Paid it all my working life !

why not? the only way i can think of to avoid tax is to draw a pension equal to the personal allowance and no more. and you have a much higher pension than that on offer. (and the question is whether you can improve on that.)

basically, the more income tax you're paying, the higher your income must be, therefore the better off you are.

Yes I generally agree with that GGS. If you had the 'flexibility' of self managing a £700k+ pot instead of the DB pension then sure, you could restrict your withdrawals to basic rate allowance in some years ... but as there is adequate finance within the pension to draw comfortably more than the allowance each and every year, if you restrict what you draw out to your personal allowance to avoid being taxed, you're simply storing up a problem for later. Because if you want to play 'catch up' by then drawing down £50k one year you'll end up with potentially a marginal rate of 40% instead of 20% which is counterproductive.

The idea of "being in control" of the tax you pay is ok but you don't want to leave a big unspent lump in the pension when you die because you have no heirs anyway (so far) so you are going to need to get it out; and getting it out means paying tax on it. It's far from a bad plan (especially if you only really want relatively low risk investments to allow you to cover the risk of being retired from 60 to 100) to just take the known DB amount each year falling in the middle of your basic rate tax band and therefore getting to use your personal allowance for some of it and basic rate for some of it and higher rate for none of it.

C_Mababejive

Yes i guess that makes sense bowlhead. As you say, the money has to be used up somehow so i guess if i leant toward low risk investments that would give some degree of feeling of security and i could top up from other sources.. ok i need to find an IFA who will be as independent as can be.. Thanks all

Shimrod

C_Mababejive wrote: »

Terron- that is my thinking,, DB trustees must be loving it. All these people queuing up to cash in . They are paying off big future liabilities at todays rates and those people who are txing out are investing when most investment vehicles are screaming at all time highs .

The trustees are legally bound to act in your best interests. It is the sponsoring company that likes all the transfers out - each transfer converts an unknown future liability into a known liability and removes it from the balance sheet. It's not uncommon for companies to make this as easier as possible for potential retirees by offering to pay for free financial advice to review all pension options.