DB Pension value and transfer value

dave23

I have a deferred DB pension from a scheme I left in 2000. Without me asking the trustess have sent me a transfer value, they are also offering to pay for advice from an IFA that has links with the administration company.

I probably wont take up the transfer offer but how should I look at the future value of the pension and the transfer offer? The offer letter states the preserved benefit at leaving of £4275 a year and the transfer value of £203668. The pension has GMP, most post 88 increasing at 6.25%. They no longer send an anual statement but the last time I asked in May 2017 the pension had grown to £7570.

I am 57 in January and the NRD is 65 although the original documents say I have the right to take at 60 without actuarial reduction. I am not sure if this is still valid as the company I worked for has since been taken over.

kidmugsy

dave23 wrote: »

The offer letter states the preserved benefit at leaving of £4275 a year and the transfer value of £203668. The pension has GMP, most post 88 increasing at 6.25%. They no longer send an anual statement but the last time I asked in May 2017 the pension had grown to £7570.

I am 57 in January and the NRD is 65 although the original documents say I have the right to take at 60 without actuarial reduction. I am not sure if this is still valid.

In your shoes I'd try to establish whether it is still valid.

By age 60 it will presumably have grown to more than £8k p.a. So they'd be offering you less than 25 times its annual value which isn't a particularly good offer. (Someone hereabouts recently claimed that the BBC would pay him about 50 times. I'm not sure I believe him, but you certainly read about people being offered 40 times. Offers in the 30s seem to be fairly routine.)

Other questions: could you afford to leave it to 65? 6.25% is pretty good. Do you have a use for a widow's pension? Are you in good health; have you any objective reason to expect a short life? When would you like to take income from it? Would you like to commute part of it for a lump sum? What terms would you get?

Above all in importance, probably: how good is the index-linking? For example does it have an uncapped link to RPI? Or a link to CPI capped at 2.5% p.a.? Or what?

Have you considered using the Pension Advisory Service? Have you considered hiring an IFA?

dave23

In payment it will be CPI max 5% and 50% widows pension. Lump sum commute is 12.1 so not something I would consider. I am in good health but I dont plan to continue to work until my SPA, I need another 4 years of NI contributions to qualify for full state pension so my current plan is to retire at 61.

Thrugelmir

What's the current funding position of the pension scheme?

squirrelpie

I need another 4 years of NI contributions to qualify for full state pension so my current plan is to retire at 61.

You can always pay NI contributions even after you retire, so I wouldn't let the need for four more years of payment influence when you choose to retire. Other circumstances will be more important.

dave23

The last update was 80% with a funding plan in place to elimate the shorfall over the next 7 years

dave23

So is a transfer value based on the curent value of the pension or based on what it would be at 65?