Defined Benefit Pension Transfer - Help!

AlanP_2

I had no trouble getting advice when I looked into it last year, fixed fee with recommendation to transfer and no ongoing unless I wanted them to manage it.

I decided to leave it where it is for now as I am in no rush to burn my bridges at the moment.

HappyHarry

BengtLagander wrote: »

Mr Happy Are you another IFA I wonder.?

I guess you are not a consumer who can help with post

If a CETV has been given on 2.5pct defeereed pension growth requiring £100 to produce £3 at 60 yrs.old on a growtn ratre of 5 pct who are you to that a self managed pension coukd not easily after costs produce a higher annual pension than under DB?

Am waiting your reasoniing?

Yes, I am an IFA (as per my signature), and a pension transfer specialist.

I would agree with dunstonh that most DB pensions should not be transferred. I would be interested to see any argument otherwise, and would, in all probability, pull it to pieces.

You appear to have misinterpreted dunstonh's comments to read that no DB pensions should be transferred, which clearly isn't true.

The brief figures you've provided on your scheme above don't set any alarm bells ringing. The fact you've done your analysis and drawn a considered conclusion as to the outcome is a positive sign.

No one here is suggesting such a transfer would be a bad thing for you. In fact, we know nothing of your circumstances, objectives, details of your scheme or details of your proposed investments. How could we know if a transfer would be good or bad for you?

You appear to have taken some constructive, educating comments as attacks on your plans, completely unnecessarily. We are generally a friendly and helpful lot on these boards, and you will find a plethora of different views and ideas about almost any of the posts on these boards.

Good luck with your search.

HH.

BengtLagander

Happy Harry

These are not my figures per sae they are common across many CETV quotes all of them rely on a current annual defferred benefit, inflation rate, discount /growth rate and security rate.

The assumption that most DB Pensions should not be transferred are flawed where the growth rate is assumed to be 5pct or less. Why because the lower the assumed growth rate the higher the CETV. If the growth rate post transfer is actually higher the annual pension increases all other things being equal.

Now the biggest threat to growth over long period is cost. If FCA believe that 5pct is at high end of annual growth return paying someone 1pct per annum be it IFA whoeber is a huge chunk.of that return.

So either an IFA does think he can add value to the portfolio return above 5pct in which case not transferrring (other things beings equal) is risky or he does not think more than 5pct is achievable in which cost becomes a huge factor and case for investing in low cost sipp ETF's becomes very strong.

Of.course there are other factors such as dependents and health but again for someone with no dependents they be crazy not to transfer out and have SIPP form part of their estate.

So the default 9/10 not suitable.is in my opinion hum bug. IFA's cant have both ways and all ways!

Rip me up with some substance please!

PS Thanks to thos that have PM me with your ideas much appreciate it

xylophone

https://www.thisismoney.co.uk/money/pensions/article-6239351/Savers-better-help-final-salary-pensions-says-FCA.html

may be of interest.

dunstonh

HappyHarry wrote: »

Oh, I would love to see that argument. Any chance of posting that dunstonh?

I won't post it at this stage but it reads like a Daily Mail reader who knows it all after reading the headline. Along with a dose of rudeness telling me that I should not be posting on this site.

BengtLagander

Dunston

I have 30 years experience as an investment banker. Not an IFA.

You got involved in the post not to help but to seemingly add to the general sense of paranoia.

And at the smae time seemingky half given your business some.exposure through the eye ball traffic here.

Now just as I have put to Happy Harry

A CETV is calculated using

Deferred annual.pension
Inflation to Pensionable age
Rate ie £1 in £100 to secure pension
Growth rate discounted to give NPV ie CETV

Therefore a higher assumed .growth rate will give a lower CETV.. The other variables are likely to be similar re inflation and bond yields.

Fact is self management produces a higher growth ratr post transfer the annual.pension will be higher not lower than annual .pension in DBF.

Lets have some substance please rather than dismiss my points as that of a Daily Mail reader.

Same challenge to Happy Harry perhaps we cam all learn something

HappyHarry

BengtLagander wrote: »

Happy Harry

These are not my figures per sae they are common across many CETV quotes all of them rely on a current annual defferred benefit, inflation rate, discount /growth rate and security rate.

The assumption that most DB Pensions should not be transferred are flawed where the growth rate is assumed to be 5pct or less. Why because the lower the assumed growth rate the higher the CETV. If the growth rate post transfer is actually higher the annual pension increases all other things being equal.

Now the biggest threat to growth over long period is cost. If FCA believe that 5pct is at high end of annual growth return paying someone 1pct per annum be it IFA whoeber is a huge chunk.of that return.

So either an IFA does think he can add value to the portfolio return above 5pct in which case not transferrring (other things beings equal) is risky or he does not think more than 5pct is achievable in which cost becomes a huge factor and case for investing in low cost sipp ETF's becomes very strong.

Of.course there are other factors such as dependents and health but again for someone with no dependents they be crazy not to transfer out and have SIPP form part of their estate.

So the default 9/10 not suitable.is in my opinion hum bug. IFA's cant have both ways and all ways!

Rip me up with some substance please!

PS Thanks to thos that have PM me with your ideas much appreciate it

I can see why you think that. You are from an investment background, with a strong knowledge of investment features, an understanding of inflation, growth rates and even an understanding of how a CETV is produced. If every person with a DB pension had that understanding, then there is no way the 9/10 figure would stand scrutiny.

It would still be high though. Until 5 days ago, a key variable to be considered by an adviser was the critical yield of a CETV. i.e. the rate at which a DC pension would need to grow each year, to provide (via an annuity) the same benefit as that provided by the ceding DB scheme. These critical yield figures were usually in excess of 9% per year. Difficult to justify to a non-experienced investor.

The individual's circumstances and objectives were key to the decision, this is not something you have mentioned. Why would it be better for a client to give up a secure, guaranteed inflation-linked income for life, for a pot of money with no guarantees associated with it. Is that best for a client now? Will it still be best when they are 80 years old and in the middle of a global recession? What happens if they take too much money out and run out of funds when they are 85? How can you tell a client like that, now living in poverty, that it was a good thing to take the CETV because the discount rate was low?

I don't have the time, or patience to detail all the drawbacks right now. However, I will say, quite clearly that;

Swapping a guaranteed inflation-linked income for life, for a pot of money in a DC pension with no guarantees would not be in the best financial interests of most people.

mgdavid

Seems an unusual name round these parts. I wonder if it's the same one that google produces the priceless search quote for:-


"First, thanks to all PT (PropertyTribe) members who have posted on Bengt's thread. Almost to a man, you understand some very simple points that Bengt fails to understand or grasp. This from a man who told me he buys '20 properties a month at auction'."


The whole thread is 6 years old but it has many hallmarks, it's a hoot....

Paul_Herring

It does bear some similar tones of sea-lioning...