Pension/investment advice

GSP

Hi Phil,
How about this one into the mix.
I guess you are in a defined benefit pension but how about transferring out to a dc pension to drawdown on. First things first if your scheme allows you to you need to obtain a CETV figure. This will be a number calculated and offered unique to you for transferring your pension out. If your scheme was generous, on your db figs quoted I would guesstimate you may be offered between £700-£850k.

This is a whole new world and many on here would say keep your db scheme, but it is another option if the numbers are right. Yes, the latter carries risks but with careful management you should be able to receive much more than £19k a year, perhaps £30k. With a db pension the money dies with you and your spouse. With the dc drawdown, you live on a pot of money that can be passed onto your loved ones.

So rather than the £10k you suggest for your children, you could be leaving them a large pot of money when you both die. Don't like mentioning death, but there it is.

Again, you need to speak to those that look after your pension and find out about transferring out. You could do so much more with £30k a year.

bostonerimus

GSP wrote: »

Hi Phil,
How about this one into the mix.
I guess you are in a defined benefit pension but how about transferring out to a dc pension to drawdown on. .

I would not recommend this at all given the OP's stated lack of financial knowledge. The DB pension and the lump sum can provide diverse sources of income and the risks of drawdown are often downplayed too much when the size of the CETV is seen.

Trinity_Phil

Wow...thanks for all the input guys, I really do appreciate it.
To try and answer some questions...the wife is 56 years of age (yep, I'm a toy boy ) and if I didn't take the lump sum then my pension will be around £26k per year.
There's lots of intriguing suggestions that you have come up with (some of which I'm struggling to get my head round tbh), but like I said I really haven't a clue about any of this.
Our lifestyle is by no means extravagant and I think that we can maintain our current lifestyle on my £19k pension plus the wife's job plus my new p.t. job ??
With Brexit looming, I am thinking savings rather than investments will be my safest option as I really don't want to risk losing my hard earned pension pot !!
What are people's thoughts on the Premium bonds idea ??

bluenose1

My husband retired from the police 2 years ago at the age of 49 after 30 years service. Payout similar to yours.
Originally he invested his surplus in a premium Bonds until I read (probably on here) that the likelihood of winning was less than what we could get by saving the money. Think Martin Lewis had done a comparison.
We then decided to invest in a few £100k buy to let properties, we got mortgages for approx 70% to get a low rate. So each one cost about £30k of his lump sum.
After paying the interest only mortgage/ expenses we make approx £4,000 per property before tax.
We did a lot of research before we did this and have rented out ourselves rather than using a letting agency. We purchase landlord cover insurance, in case of a tenant defaulting.
We just felt that this was the best use of our savings. Saying that we live in an area where you can get a decent terrace for approx £100k, so are local if any issues.
If we had our time again we would not have put anything in Premium Bonds, saying that my BIL has £50k in Bonds as he likes the thought of a big win. If we hadn't bought property we would have invested in ISAs/ the best savings rate etc.

atush

Our lifestyle is by no means extravagant and I think that we can maintain our current lifestyle on my £19k pension plus the wife's job plus my new p.t. job ??

Will the 19K be enough when you both ctually retire? Or will you work until you are gettimg SP?

With Brexit looming, I am thinking savings rather than investments will be my safest option as I really don't want to risk losing my hard earned pension pot !!
What are people's thoughts on the Premium bonds idea ??

Savings at todays rates is NOT a safe option long term. As you will be hard pressed to meet much less beat inflation much less make anything on top.

So you would really need to invest some of the money- by all means keep some in cash sread around interest earning current accts and regular savers.

as for premium bonds, it is fine to have a few K in them, but i wouldnt expect them to earn much (certainly I would not expect them not to meet/beat inflation)

bostonerimus

bluenose1 wrote: »

We then decided to invest in a few £100k buy to let properties, we got mortgages for approx 70% to get a low rate. So each one cost about £30k of his lump sum.
After paying the interest only mortgage/ expenses we make approx £4,000 per property before tax.
We did a lot of research before we did this and have rented out ourselves rather than using a letting agency. We purchase landlord cover insurance, in case of a tenant defaulting.
We just felt that this was the best use of our savings. Saying that we live in an area where you can get a decent terrace for approx £100k, so are local if any issues.
If we had our time again we would not have put anything in Premium Bonds, saying that my BIL has £50k in Bonds as he likes the thought of a big win. If we hadn't bought property we would have invested in ISAs/ the best savings rate etc.

I think you should have at least considered a a multi-asset fund for part of your lump sum. Going so heavily into BTL is putting a lot of eggs in one basket. You have locked up your capital and with interest rates going up the cost of your interest only mortgages will go up too. I also don't like that form of financing as you are left with a large sum to pay off.

xylophone

I guess you are in a defined benefit pension but how about transferring out to a dc pension to drawdown on.

He is in an unfunded public sector scheme.

https://www.unbiased.co.uk/life/pensions-retirement/public-sector-pensions/

Many public sector pensions are ‘unfunded’ schemes – that is, there is no central fund, and they are paid for only by the taxpayer. The pensions of teachers, firefighters, NHS workers, the police and the armed forces all fall into this category. This means it’s not possible to transfer from this kind of pension into a DC scheme.

bluenose1

bostonerimus wrote: »

I think you should have at least considered a a multi-asset fund for part of your lump sum. Going so heavily into BTL is putting a lot of eggs in one basket. You have locked up your capital and with interest rates going up the cost of your interest only mortgages will go up too. I also don't like that form of financing as you are left with a large sum to pay off.

Considering I wouldn't even know what a multi asset fund is I'm not so sure!!!
Seriously Bostonerimus the rent we receive is approx £550 per month per property and the interest only mortgage is approx £150 per month per property with a fixed rate for 3 years. So interest rates would have to go up a lot for us to be significantly affected. Our intention is to keep them until we are 65 then consider selling. They sell quickly in the area we have bought so even if we just recoup what we have originally paid we should have a good return on our investment.
Maybe we should have done something different but our logic was for an outlay of £70k we will receive income of approx £6,500 after tax per annum. Plus with our lack of investment knowledge we didn't feel confident investing in funds etc.
We are also saving an additional considerable sum in my works D.C. pension scheme so hopefully building up another basket of savings.
Hopefully will be better than the Premium Bonds we originally had money in.

Audaxer

Trinity_Phil wrote: »

Wow...thanks for all the input guys, I really do appreciate it.
To try and answer some questions...the wife is 56 years of age (yep, I'm a toy boy ) and if I didn't take the lump sum then my pension will be around £26k per year.

With most final salary pensions, the spouse would still be entitled to half of the full pension in the event of death of the pension holder - £13k per year in your case. That would be even if you take the full lump sum and the lower £19k pension. So I would check the small print of the pension to see if that is the case with your pension. If that is the case, and your wife doesn't have much other pension provision herself, that might be a good reason for taking the lump sum and investing part of it.

DairyQueen

GSP wrote: »

Hi Phil,.
I guess you are in a defined benefit pension but how about transferring out to a dc pension to drawdown on.

Unfunded public sector = no transferring-out permitted.

Had it been a possibility I add a big +1 to Boston's comments except mine are prefixed with "Are you crazy?".

The little we know about the OP already screams that he is one of the last people in the UK who should ever consider a transfer away from such a valuable DB.

Encouraging people to contemplate such an option without understanding the first principles of the (few) circumstances when it's worth considering is bordering on the irresponsible.