I'm losing money beacuse I can't determine the way forward.

Julia1927

Made redundant earlier this year.
62.5 years old.
Have a deferred DB pension and began paying into new DC pension for about 18 months before redundancy.
Asked trustees to waiver the actuarial reduction and they agreed.

As I saw it my 1st priority was to bridge the gap between now and NRD.
With the advise of board members I paid a chunk of my redundancy pay into the DC pension (currently £41.5k) and received the balance tax free (currently £16k)

To bridge the gap (I currently need £17k per year with no wiggle room) I planned to use income from part time job, drawing on my tax free redundancy monies and drawing down the balance of my annual PA each year.

I have now been offered another job with more hours which will just take me over the PA each year. I should have a pot somewhere in the region of £25k remaining by the time I reach SPA after allowing for Birthdays, emergencies etc. The pension with new employer is a NOW pension where I pay in 2% and they pay in 1% currently.

All good so far except, having received the quote for the DB pension £9.3k per year or a cash sum of £39k and reduced pension of £5.9k per year, it made me question if I will benefit from taking the full pension now or should I consider the CETV which is estimated at £252k.

Of course one of the biggest questions is how long each of us will last and like everyone else, I don't know. Based on my own health issues, family history etc I have been trying to determine an income until a maximum age of 80 to be on the safe side, although it would seem another 10 years from now perhaps of quality of life is the expectation.

I have a very colourful life story that I wont bore you with, but am absolutely dazed with all the different scenarios I have run trying to determine the best way forward.

What I quickly realised was if I take the DB pension and gave up work at SPA these 2 incomes would just about match my income needs (I know its all guaranteed and indexed linked and have used this in my calculations). Which would leave me the 3.5 years between now and SPA to take the DB pension and pay this back into a SIPP whilst I continue to work although I will pay tax on all of this income, but would benefit from the tax relief within the SIPP.

If my health allows I am happy to continue to carry on working past SPA but of course I can't bank on being able to do that.

If I am able to continue working I could perhaps look at flexible drawdown or perhaps an annuity and delay drawing on them whilst I'm able?

For personal reasons I have 2 adult children and it is very important to me that I leave them some sort of inheritance (I currently rent my home so no benefit for them there).

I know I need advise. I believe I should talk to a Financial advisor. I have been avoiding doing this because I am going round in circles with where to start.

Thoughts gratefully received.

Linton

Unless you have medical advice to the contrary I think you would be foolish to base your plans on a life expectancy of 80. According to the Office of National Statistics the average woman your age would be expected to live until 90, with only about 20% dying by 80. The longest living 20% are expected to exceed 98.

If you want to transfer out of your DB pension you will need to talk to an IFA anyway. So it may be worth paying for one to work through and explain your options.

xylophone

If you wish to transfer out of your DB pension you will need to take the advice of a pension transfer specialist.

https://www.moneyadviceservice.org.uk/en/articles/transferring-out-of-a-defined-benefit-pension-scheme

https://www.royallondon.com/Global/documents/GoodWithYourMoney/COMPANY-PENSIONS-FIVE-REASONS-TO-TRANSFER-OUT-AND-FIVE-REASONS-NOT-TO.pdf

Mnd

Think about talking to pensionwise, they cantbgive advice but may be able tonexplain your options

kidmugsy

If you're worried about not leaving an inheritance consider life insurance.

kidmugsy

Julia1927 wrote: »

Asked trustees to waive the actuarial reduction and they agreed.

That alone would tempt me to start the pension into payment. Can you be certain they will offer the same boost if you transfer it or defer it?

Julia1927 wrote: »

DC pension (currently £41.5k) and received the balance tax free (currently £16k) ... I currently need £17k per year with no wiggle room

I planned to use income from part time job, drawing on my tax free redundancy monies and drawing down the balance of my annual PA each year.

I have now been offered another job with more hours which will just take me over the PA each year. I should have a pot somewhere in the region of £25k remaining by the time I reach SPA after allowing for Birthdays, emergencies etc. The pension with new employer is a NOW pension where I pay in 2% and they pay in 1% currently.

... if I take the DB pension and gave up work at SPA these 2 incomes would just about match my income needs ... Which would leave me the 3.5 years between now and SPA to take the DB pension and pay this back into a SIPP whilst I continue to work although I will pay tax on all of this income, but would benefit from the tax relief within the SIPP.

I suspect your notion of taking the better paying job and starting your DB pension is a good one. The CETV on offer isn't wonderful although if you have objective reason to expect a short life it might be a good bet. Do you?

As for your children, the first useful gift you can give them is the knowledge that Mum has enough to live on. The DB pension plus State Retirement Pension provide that. At least we assume it does: have you checked your official prediction of the size of your future SRP?

Julia1927

As always thank you for your guidance and thought provoking opinions.

Linton, although my health determines I am not an "average" woman, I absolutely get your point. After all, none of us want to run out of money in old age.

Xylophone, thank you for the links. I had already read both articles previously.

MND, I will give Pensionwise a call. It may help to give me some clarity. Thank you.

Kidmugsy, again thank you. Be assured, if either of my children knew I was concerned with leaving them something they would be mortified! Their only concern is me. FYI, I cannot improve my SP any further. I think my next steps are going to be to investigate the life insurance suggestion, book an appointment with pensionwise and actually request a CETV value after all that may make the decision very easy if it's poor value.

I guess what I am trying to achieve is a higher income to start with at SPA which would decline as I got older and more infirm, then if I do pop my clogs early then it would potentially leave something for the kids. But if the DB pension and SP are the right outcome then I will go with that. Thanks again.