Defined Benefit Pension Advice please

Deneb

Frank1962 wrote: »

The 5k a year I mentioned represent the contributions per year that are made to my pension. Have I misunderstood how this works? If I pay less in, I expect to get less out right?
At age 67 the forecast of the NHS pension is approx 120k. I've checked the NHS early retirement information and If I retired 5 years early I would lose approximately 21% of the value of the pension (I have a combination of 2008/2015 pension)

It would help if you can explain where this forecast of £120K is from, and how it has been arrived at.

NHS pensions do not have a pot of money allocated to individual members. They are a defined benefit pension which undertakes to pay you a specific proportion of your salary, annually revised in line with inflation, for as long as you live.

https://www.nhsbsa.nhs.uk/member-hub/membership-nhs-pension-scheme

Have you obtained an estimate of your pension entitlement?

https://www.nhsbsa.nhs.uk/member-hub/getting-estimate-your-pension

kidmugsy

Frank1962 wrote: »

Question - are there any tax advantages to having a dealing account with all the immediate family names on it?

That's an interesting one. I was thinking of a husband and wife account where HMRC might easily accept that you were each providing half the pay-in and so you'd share the dividends and capital gains equally. They'd probably be happy to suppose that funding from a joint current account would be fine.

If you added other family members (assuming that you found a platform/stockbroker that allowed that) then, if I were HMRC, I might want evidence that they were adding to the pot too. On the other hand, if the sums involved are small would HMRC much care?

In 18/19 your individual exempt amount for CGT is £11,700. That's big enough that it should be rather easy for most couples to avoid paying CGT. Remember that CGT is levied on the GAIN you make when you sell shares, not on the amount of money you receive for them.

Frank1962

Thanks Kidmugsy. The 5k loss of the NHS pension I refer to, is the amount that gets paid into it a year. So if I retire early. I will no longer be paying into it.

I have decided what I am going to do subject to a meeting with an independent financial advisor.

I have found out the DB pension (not the NHS pension) is worth 90k. So it will not provide much of an annuity. And my wife will only get about 1.5k per year after I die.

So I am going to transfer it into my SIPP. Where it will grow faster. Then use that for drawdown. I'm aware there are risks doing it this way, but 3.5 k a year annuity is not really viable for me. And my current SIPP Fund (which I monitor daily) is doing very well. Then the present pension company won't end up keeping most of the funds in the event of my early demise. My family will get it all. I am going to set it up so that they continue to get drawdown after I have gone which I think is a better alternative.

Thanks for all your replies.

Terron

Frank1962 wrote: »

I have found out the DB pension (not the NHS pension) is worth 90k. So it will not provide much of an annuity. And my wife will only get about 1.5k per year after I die.

So I am going to transfer it into my SIPP. Where it will grow faster. Then use that for drawdown. I'm aware there are risks doing it this way, but 3.5 k a year annuity is not really viable for me.

You will need to get financial advice before transferring the DB pension as the transfer value is over £30k.. You appear to need it, from how you seem to be equating it with an annuity.

DairyQueen

Excuse me jumping in. I appreciate that pension planning is a minefield. However, may I suggest that you search through this forum for DB transfer threads.

A few points:
- you may struggle to find an IFA (and it needs to be a suitably qualified IFA) who will be willing to give you advice on the transfer (lots of threads describe why)
- assuming that you find a willing IFA then expect to pay a few thousand for the advice
- the likelihood of you receiving a positive recommendation to transfer is small (plenty of threads on this too)
- finding a platform that will accept a non-recommended transfer may be problematic.

If you are able to transfer are you sure you are fully aware of the risks with DIY? There is no guarantee that it will 'grow faster'. There will be a crash at some point. The current bull market has been running for several years and a crash may happen sooner rather than later. How would you feel if your SIPP dropped 20%+? How would you feel if it took 5+ years to recover its value?

When do you intend entering drawdown? Soon? If so, then you need to be very cautious about making equity investments with cash that you intend drawing down in less than 5/10 years.

Will your drawdown plan include a cash buffer sufficient to cover income during bear markets (i.e. if you need to suspend drawdown)? Or do you plan a different drawdown strategy? I think I saw mention upthread that you have a cautious attitude to risk and that you are a novice investor. Are you sure you will sleep nights with a reasonable chunk of your pension pot exposed to market risk?

What kind of returns do your anticipate above inflation? Bearing in mind your cautious profile, you need to be quite heavily invested in equities (over the long term) to receive the kind of average return that is well above inflation.

Not my intention to confuse you, or to undermine your strategy. Just posing a few questions that may trigger more thought/research as your posts suggest that you may be looking at DIY too optimistically relative to the range of annual returns (including negative returns) likely with respect to your investment timescale and risk profile.

Good luck with the planning.

kidmugsy

Frank1962 wrote: »

my current SIPP Fund (which I monitor daily) ...

Why on God's earth do you monitor it daily? I don't think you understand about equity investment - so much so that you'd very likely be wise to leave it as a DB pension and enjoy a secure index-linked income.

dunstonh

So I am going to transfer it into my SIPP. Where it will grow faster. Then use that for drawdown. I'm aware there are risks doing it this way, but 3.5 k a year annuity is not really viable for me. And my current SIPP Fund (which I monitor daily) is doing very well.

The fact you monitor it daily is an alarm bell over investment risk, knowledge and understanding. Daily monitoring tends to be done by those that are not confident and more likely to panic when larger losses occur.

As the amounts get bigger, smaller percentage movements have a bigger monetary impact and a nervous, inexperienced investor is more likely to make bad investment decisions on the back of that.