Advice on lump sum pension portion please .

Marcon

alfmurph wrote: »

One other thing - my wife's company is offering to buy out her pension completely . What would be a good offer . /QUOTE]

I presume you mean they are offering a transfer value. If so, has the company offered to enhance it - and if so, have they offered to pay for independent financial advice?

If it's not enhanced, it will be on whatever basis the trustees have set for transfers. 'Good offer' doesn't come into it if so - it is what it is.

Apodemus

Marcon wrote: »

alfmurph wrote: »

One other thing - my wife's company is offering to buy out her pension completely . What would be a good offer .

I presume you mean they are offering a transfer value. If so, has the company offered to enhance it - and if so, have they offered to pay for independent financial advice?

If it's not enhanced, it will be on whatever basis the trustees have set for transfers. 'Good offer' doesn't come into it if so - it is what it is.

I would read the OP’s question as wanting to know whether the transfer would be sufficient to give a comparable long-term income equivalent to the current pension. For me, I would be valuing £12k annual + £80k lump sum, somewhere in the region of £380k-£480k cash equivalent, based on a likely sustainable drawdown of between 3% and 4%. (All my planning is based on 3%, so in this scenario, I would be hoping for a transfer at the £480k end of the scale).

Marcon

Apodemus wrote: »

I would read the OP’s question as wanting to know whether the transfer would be sufficient to give a comparable long-term income equivalent to the current pension. For me, I would be valuing £12k annual + £80k lump sum, somewhere in the region of £380k-£480k cash equivalent, based on a likely sustainable drawdown of between 3% and 4%. (All my planning is based on 3%, so in this scenario, I would be hoping for a transfer at the £480k end of the scale).

If the transfer is over £30K, as it will be, financial advice is a legal requirement - and that will include a transfer value analysis. The chances of being able to buy the same benefits, let alone better ones, is so remote as to be non-existent - it's a case of what better uses could the money be put to in, say, flex-drawdown.

Apodemus

Marcon wrote: »

If the transfer is over £30K, as it will be, financial advice is a legal requirement - and that will include a transfer value analysis. The chances of being able to buy the same benefits, let alone better ones, is so remote as to be non-existent - it's a case of what better uses could the money be put to in, say, flex-drawdown.

While I completely agree with what you say, this forum would be a pretty poor place if we simply stuck to “take the advice of your IFA” even if that might, technically, be the best response!

Albermarle

I would read the OP’s question as wanting to know whether the transfer would be sufficient to give a comparable long-term income equivalent to the current pension. For me, I would be valuing £12k annual + £80k lump sum, somewhere in the region of £380k-£480k cash equivalent, based on a likely sustainable drawdown of between 3% and 4%. (All my planning is based on 3%, so in this scenario, I would be hoping for a transfer at the £480k end of the scale).

MY DB pension forecast is £15.5K ( with no lump sum ) with an RPI ( max 5% ) link - and 70% to my wife if I die . I have just been offered a CETV of £475K so your calculation is spot on ! Also with free financial advice ( as the company is keen to get as many people out of the scheme as possible )
Anyway I am from the school of ' don't give up the certainty of a fixed income' especially if you have cash available from other sources, so they will have to be disappointed with my lack of response.

Audaxer

Albermarle wrote: »

MY DB pension forecast is £15.5K ( with no lump sum ) with an RPI ( max 5% ) link - and 70% to my wife if I die . I have just been offered a CETV of £475K so your calculation is spot on ! Also with free financial advice ( as the company is keen to get as many people out of the scheme as possible )
Anyway I am from the school of ' don't give up the certainty of a fixed income' especially if you have cash available from other sources, so they will have to be disappointed with my lack of response.

Although it's a very tempting offer, as £475k could give you an income of up to £16k a year from £400k invested with a £75k cash buffer, like you I would also take the certainty of fixed income.

Just out of interest is there a lump sum option with your DB pension?

Albermarle

Although it's a very tempting offer, as £475k could give you an income of up to £16k a year from £400k invested with a £75k cash buffer, like you I would also take the certainty of fixed income.

Just out of interest is there a lump sum option with your DB pension?

On the first point , I would have been more tempted if the rest of my pensions pots were not all DC.
By taking the CETV I would be 100% in the hands of the market developments , whereas by keeping the DB scheme there is a better balance and I will be less anxious if there was a stock market collapse etc .
When I do take the pension there will be a possibility of a lump sum. I have been given a figure if I was to take it now/early and the lump sum option had a commutation factor 1:22 so reasonably OK, especially as it would be tax free.

xylophone

Anyway I am from the school of ' don't give up the certainty of a fixed income

Indeed- a relative's uncle retired from a very senior post at the age of 60 (having worked for the employer for 30 years) - he drew his index linked DB pension for 35 years......

alfmurph

Another problem for us is my wife has had crohn's disease for around 15 years and but for a few flair up's it is under control with medication . She seems determined that her life expectancy will be below average so I am having difficulty telling her that not taking the big cash sum offered by the pension provider is the way to go . Infact her words are - I would even take 200k if offered .
I know she must consult a financial advisor before she can get the money but would he refuse this offer or just take his cut and move on .

colsten

alfmurph wrote: »

Infact her words are - I would even take 200k if offered .

How long will the cash sum(s) last, have you done the numbers? Has she got a plan for the scenario in which she lives to a ripe old age and runs out of money long before she dies?