Transferring DB pension to DC pension.

Legacy_user

i write more later.

DaveJH

Personally I would never move a DB to a DC pension (hence I have 2 DB pensions from different firms I've worked for). However I am not a financial adviser, was it their recommendation that you move the fund?

dunstonh

If the difference between transferring and not transferring is the cost of the adviser fee then there transfer is unlikely to be suitable.

DB transfers are the highest risk transaction an adviser can carry out. It is a transaction that could bankrupt an adviser company. Indeed, a good number have gone because of it.

. The transfer value of my DB once
calculated i found out is missing 40 percents.

Can you clarify what you mean by that? Do you mean it is 40% lower than in 2016?

sandsy

There seems to be two issues here.

bluetifulguide wrote: »

The transfer value of my DB once calculated i found out is missing 40 percents.

Do you mean the value you have been offered has been reduced by 40% because the scheme is underfunded? That is normal practice for schemes which are underfunded. More than that, it's required by the regulator. The scheme isn't in a financially fit state to pay out more than a fair share to those who want to leave as it would be detrimental to those who remain in the scheme.

I didn't proceed yet to carry the advice from financial adviser because as soon I go ahead it will cost me 3 percent fee out of the fund I'm transferring.

You can't expect to receive advice for free. Just because you want to transfer doesn't mean you should transfer. The government requires you to take advice so that an expert can look at your personal financial situation and tell you what's best for you - to keep the DB pension or transfer it. That advice has to be given by a specialist adviser who has taken additional qualifications in precisely this area - giving up promised lifetime income for something that has no promises. The majority of people have very little knowledge on how to manage a large transfer value so that it can provide them with an income for the rest of their life (and most people underestimate how long that will be too!)

It's a complex piece of advice and the adviser should look at all the assets available to you for retirement as well as making a judgement call on whether you are the right type of person to be giving up a promised income - for example, would you be able to sleep at night if the value fell 40% once you've transferred? The adviser carries the liability for the advice you receive for a lifetime. You have to expect to pay a fair amount for that type of advice.

Brynsam

sandsy wrote: »

Do you mean the value you have been offered has been reduced by 40% because the scheme is underfunded? That is normal practice for schemes which are underfunded. More than that, it's required by the regulator. The scheme isn't in a financially fit state to pay out more than a fair share to those who want to leave as it would be detrimental to those who remain in the scheme.

Regulator consent is needed to reduce transfer values on the basis of underfunding. There's a very long and thorough process to go through before that consent is given and it doesn't happen very often, so saying it is 'normal practice' or 'required by the Regulator' is misleading. It only happens where the deficit is very substantial and the employer covenant (the ability and willingness to make good the shortfall) is poor.

The Regulator has certainly been muttering in recent months about over-generous transfer values, but that's not quite the same thing.

mgdavid

bluetifulguide wrote: »

...... What would you do? ........

I wouldn't transfer it

Silvertabby

bluetifulguide wrote: »

Thank you for your message. I considered to transfer going back 2016, the scheme is changing administrator almost every 2 years and I never hear how much is in investment and what's going on.. until I called and asked if they can give me a quote, the company never call me, months of delay before I received the quote, I just keep calling until I received. The calculation is with me. Last July 2018 I asked the pension scheme to work out how about if I take a lump sum when I get to 55 or I wait until I'm 65, the calculation is very poor.
Then last month I decided to transfer my work place to put in one pot, I just thought if I invested now in one pot hopefully it will give me a comfortable output, not going to be a rich woman but enough to pay my bills, it's only me I'm relying on and I have to look after my retirement plan. This month the calculation is lower and deducted 40 % comparing going back 2016.
Hence when they calculate last July when I asked what if I take the lump sum at age of 55 with this paperwork the whole transfer value is not included.
I just don't know what to do, yes I had financial adviser ready to act for me and his cheaper on the first one that I found going back 2016 his charging 8K, that's why I didn't go ahead 2016. I haven't got enough to transfer. This financial adviser I had now is he is acting with all my colleagues at work who's transferring in or out, he just charge a good value for money compare to the first financial adviser that I found.

Im confused and felt helpless...
Thank you for all your advice

Have I got this right? You had a quote for taking your DB pension at 65 then, last July, you asked for a further quote for taking your pension at 55 - and it is this quote that is 40% lower than the original?

If so, then that is perfectly reasonable. If you were to take your pension at 55 instead of 65 then it would be paid out to you for an extra 10 years, so the early payment reduction reflects this. This is the way all/most DB pension funds operate.

cloud_dog

It is unclear if the OP is referring to a reduction in the pension payment or a reduction of the CETV (or at least I am confused over what the OP is really trying to say)

Terron

It seems that maybe you are thinkng of the transfer value as if it represented a pot of money that would be used to pay your pension.
That is not how DB seems work. You do not have a pot of money in the scheme. Instead you have a promise made by the scheme that they will pay you a pension according to the rules of the scheme.
Obviously that promise will cost the schem money when it comes time to pay. So they are willing to pay you to release them from the promise. They will expect to gain from this.At the very least the risk involved will be transferred from them to you.


A DB pension can form a low risk base to your pensions allowing youto take slightly higher risks to get more from your DC pension.


Alternatively you maybe confusing the transfer value (CETV) with the value of the pension should you take it at 55 or 75 maybe taking part of it as a lump sum (often a bad idea).


Note that unless you left the DB scheme before 1997 the pension it will pay will be indexed linked.