Defined Benefit Pension Advice please

Frank1962

Hi, one of my old pensions is a defined benefit pension. Everywhere I have looked/researched, says I should not transfer it. However, I no longer work for the company I had it with (I left in 2009). I wanted to transfer it into a SIPP that I have. My concern is that should I die before my wife, she will only get a small amount of pension, whereas, if I transfer it into the SIPP it's all there (subject to tax of course) and would probably grow more with the funds I have researched and invested in, until I finally retire. Any advice or suggestions would be greatly appreciated. Thanks in advance.

dunstonh

What does your adviser say about this?

campbell19925

Frank1962 wrote: »

Hi, one of my old pensions is a defined benefit pension. Everywhere I have looked/researched, says I should not transfer it. However, I no longer work for the company I had it with (I left in 2009). I wanted to transfer it into a SIPP that I have. My concern is that should I die before my wife, she will only get a small amount of pension, whereas, if I transfer it into the SIPP it's all there (subject to tax of course) and would probably grow more with the funds I have researched and invested in, until I finally retire. Any advice or suggestions would be greatly appreciated. Thanks in advance.

If you have a DB scheme over 30k you need to take professional advice before you can move it.

https://www.pensionwise.gov.uk/en

AnotherJoe

You simply haven't posted anywhere near enough info.
Your ages, other pensions and savings, date the DB would start paying, the amount the DB pension would pay, what lump sum they will pay you instead (the CETV), your health, what experience you have managing investments - for starters.

sandsy

As your main focus is death benefits, have you considered taking out some life assurance instead?

Life insurance for a fixed term is relatively cheap if you're in good health. But taking advice on moving your DB pension and then all the fees you'd pay after it was moved (if, indeed you were ever advised to do so) would probably cost substantially more.

Brynsam

Frank1962 wrote: »

Hi, one of my old pensions is a defined benefit pension. Everywhere I have looked/researched, says I should not transfer it.

Nowhere does it say you should not transfer; you are simply looking at generic comments.

Any idea what the transfer value might be (i.e. have you ever asked for one)? If not, what was the value at the time you left active membership of the scheme/when you left the employer (you will have received a leaving service statement) - and how old are you?

mgdavid

Also, how much is the Widow's pension in your Scheme? 50% , 60% or some other figure?

Frank1962

Thank you all for your replies. I have not spoke to an advisor yet. I wanted to find out more for myself first, so that I was more informed when I have the meeting.

I am 56 (so is my wife). I am in reasonably good health, though diabetic. Our house is paid for.

The transfer value on this particular pension is approximately 70k. (I am waiting for the current statement for this year). The pension is set to run until I'm am 60, and says the value at that time is estimated to be approximately 90k (though this can run longer if I want to retire later). I also have an NHS pension that runs until I am 67 which should be valued at approximately 120k.

I also had some private small pensions I took out in the late 80's/90's with Pearl that were later assigned to Phoenix Life now worth 20k. and have been performing very poorly considering the amount of time they have had them. So I transferred them into a SIPP in the hope of doing better than 1% a year. I am new to investing privately this way and wish I had shown more of an interest earlier in my life.
I have chosen the funds myself after researching various websites and they are performing reasonably well in the short term at 3.4% since the middle of May 18. I am also investing monthly in a stocks and shares ISA to try and boost my funds further. And am presently looking at AVC's at work too.

If I die whilst working, my wife would presently get 49k from NHS plus approximately 1k a year. Plus almost 2k a year from the DB pension. Plus any investments in the SIPP/ISA

I am hoping to retire at about 62/63 or earlier if possible.

The main concern for me is that the DB pension would pay very little to my wife considering the value of the pot and I want to make sure she is well provided for if I should go first (before retirement). Whereas if I transferred it into a SIPP and maximize an ISA every year, this should boost my pot further for my retirement, where I could do a drawdown whilst it continued to grow. Also my wife would get most of it in the event of my demise, to continue investing it for herself.

My wife has her own pension from working with a Bank for 25 years , plus the pensions she transferred into it from previous employment.

The life insurance suggested had not crossed my mind, but will also give this some consideration too now.

Essentially I want to make sure my family are provided for by not losing most of the value of the DB pension.

Hope the above info helps.
Many thanks

kidmugsy

Frank1962 wrote: »

I also have an NHS pension that runs until I am 67 which should be valued at approximately 120k.

That doesn't sound right. NHS pensions can't be transferred out. Maybe you got a CETV quoted before the change in rules?

Since you are going to have to take the NHS pension as a pension you probably want to look at it in detail. For example, how big is the actuarial reduction if you draw the pension early? Is it possible to commute some of the pension for a tax-free lump sum? How big a widow's pension does it pay? What inflation-protection (i.e. index-linking) does it include?

Frank1962 wrote: »

I am also investing monthly in a stocks and shares ISA to try and boost my funds further.

Might it not be wiser to contribute to a SIPP or other personal pension for your wife?

Further question: is your wife still working?



I throw this question open to everyone: could it be an attractive strategy for someone who is still working, and whose wife is perhaps still working, to draw a DB pension early and use the new income to make DC pension contributions for himself and, particularly, his wife? (I'm assuming that usually he would contribute enough to his own pension to ensure he avoids 40% tax and would thereafter maximise his wife's contributions.)

Deneb

kidmugsy wrote: »

I throw this question open to everyone: could it be an attractive strategy for someone who is still working, and whose wife is perhaps still working, to draw a DB pension early and use the new income to make DC pension contributions for himself and, particularly, his wife? (I'm assuming that usually he would contribute enough to his own pension to ensure he avoids 40% tax and would thereafter maximise his wife's contributions.)

Well, I didn't take my DB pension early, but I had a PPA of 49 and took it in full from 54. I carried on working for a further 6 years, in which time I contributed to SIPPs for both of us, negating a 40% tax liability, and am now happily retired with a disposable income as good as, if not slightly better than any I had throughout my working life.

I call that a good result, and it probably wouldn't have happened were it not for the information I picked up from avidly reading numerous posts by several good folk on this forum :j

Another thought for the OP. Would you be happy committing yourself, and you wife should you predecease her, to a lifetime of stressing about investment returns and the risk of substantial reduction in value of your pension, or would you rather not have that worry and feel secure in the knowledge that you will both receive a defined income for the rest of your lives?

You may both be the type of people who can live happily with investment risk, periodic falls in value of your fund, and both have the knowledge to manage your investments. Whilst I am happy to do that with money which is surplus to our required basic income, I was not prepared to give up the certainty of either of my DB pensions - not that I could have transferred out of one of them anyway.

Frank1962

Hi thanks for the reply. I'm only considering transferring the DB pension I had from when I was working in the private sector, as I had discovered that the NHS pension cannot be transferred anymore.

There will be a reduction in the NHS pension if I retire early and that would lose approximately 5k for each year of early retirement. That should be partly offset by the DB pension growing if I leave it running longer (as long as I don't transfer it) as the DB pension is set for retirement at 60.

My wife still works and the NHS widow pension is presently 49k lump sum on death plus approximately 1k a year. Plus 2k a year from the DB pension. Not certain if it is index linked on the widows pension. Though it is linked to the CPI index as a pension for me until retirement.

I'm putting any spare money into an ISA now invested in funds, as this is tax free. Rather than putting any of my spare money into the SIPP, as an alternative to contributing any more into her pension.

Regarding your open question. I had also considered drawing the DB pension now and using the lump sum to put into an ISA in joint names. But I am not certain if I have to 'officially' retire to do this. Can you still draw the DB private Pension and carry on working full time? Does any one here know the answer to this?

Many thanks