Small pension - is it worth me transferring out?

Phaser

THANKYOU So much for answering Xylophone, Kidmugsy & Dunstonh.
Reading through how you have broken up points has made me see that my simplistic use of pensions calculators online was like the tip of the iceberg. Rightly or wrongly, I never saw the pension as an amount that would sustain much in old age. We have property & as I’ve said - life events showing more than ever that life is so short have given us a different attitude. This is what posed the question in the first place. Yes, if I could find a comparable product that gave more access in years to come then I probably would move it. And although I know the penalties are huge I still would like to take it early. I never knew you could divide it. And I never knew that a PTS (?) had to recommend.
I will need to see an IFA - but are all IFA’s truly independent (no offence meant).
You can tell I’m very green at this - hence the q’s.

xylophone

And I never knew that a PTS (?) had to recommend.

Because you have a Defined Benefit Pension valued at greater than £30,000, you are required to take advice from a Pension Transfer Specialist. This advice will need to be paid for and is not cheap.

You are not required to follow that advice.


However, without a positive recommendation, your choice of receiving scheme is likely to be restricted.

https://www.professionaladviser.com/professional-adviser/news/3015853/martin-tilley-sipp-providers-accepting-insistent-clients-is-questionable

dunstonh

I will need to see an IFA - but are all IFA’s truly independent (no offence meant).

The I in IFA means independent. The non-independent ones are banned from using the word independent and are FAs. If an adviser ever skirts around the issue of independent (such as refusing to use that word or it doesn't appear on any documentation) then they are not. Although they may use other words that sound similar (impartial, whole of market except in.... etc) in a way to make you think they are. Research has found over half of people using an FA think they are using an IFA.

AnotherJoe

Phaser wrote: »

Within the present scheme, if I started to draw on it at 55 I would get just short of 4.5k a year if I don’t take a lump sum or 2.9k a year if I took 20k tax free.

As said by others, the second option would be be crazy.
Going to the first option," if I started to draw on it at 55 I would get just short of 4.5k a year"
What happens if instead of 55, you draw on it age 56 or 57or 58 etc? How much does it go up?

Because you appear (apologies if I've misread) to have been blinded by the sum of £150k and not even considered taking it later, other than at age 67. I would imagine, i could be wrong, that is not the sole choice, take it at 55 or take it at 67.

As you are someone who is self confessedly "risk averse" and also currently earning, so not on the breadline, do you need it right now either as single payment or income?

Suppose another option is, £7k a year at age 60? Or £6k at age 58. etc. Would those be more attractive?

I think you need to look at wider options and to do that you need to understand what they are. I strongly suspect 55 is just the very earliest age you can start taking income, and older ages you could consider are also available to you, at higher incomes.

Phaser

Thank you Another Joe.
I have asked if it’s possible to get a forecast for a few years time instead of 55 or 67 because yes, if I thought it may grow to that then I would reconsider. But that’s not possible (crystal ball and all that). And you are right in a way - not blinded - but when the transfer value was that, I did consider that maybe another route may give a better return.
I have never questioned it until lately, just sort of accepted that that is the scheme etc. And wondered if transferring it would give more flexibility without loss as the current one is restricted as I mentioned.
I don’t need to take it now - but as I’ve said, lots of life changes and passing around me has made me think if I could use it to change tack slightly.
Appreciate any input.

AlanP_2

Phaser wrote: »

Thank you Another Joe.
I have asked if it’s possible to get a forecast for a few years time instead of 55 or 67 because yes, if I thought it may grow to that then I would reconsider. But that’s not possible (crystal ball and all that). And you are right in a way - not blinded - but when the transfer value was that, I did consider that maybe another route may give a better return.
I have never questioned it until lately, just sort of accepted that that is the scheme etc. And wondered if transferring it would give more flexibility without loss as the current one is restricted as I mentioned.
I don’t need to take it now - but as I’ve said, lots of life changes and passing around me has made me think if I could use it to change tack slightly.
Appreciate any input.

You can estimate what it will pay out per year by applying whatever the scheme rules are in terms of increases for deferred members.

Typically CPI / RPI with or without a Cap.

Won't be totally accurate but if you worked on 2.5% a year increase it won't be far out unless inflation goes crazy.

xylophone

Have you read the scheme booklet?

What is Scheme Normal Retirement Age?

Do you have a statement of deferred benefits on leaving?

If so, what does it say?

Phaser

xylophone wrote: »

Have you read the scheme booklet?

What is Scheme Normal Retirement Age?

Do you have a statement of deferred benefits on leaving?

If so, what does it say?

Waiting on full booklet.
Normal Retirement age in this plan - 65.
On the option statement it says taking early with no lump some would use up lifetime allowance of 8.57%
Taking early with the lump sum 7.22%.

xylophone

When you left, were you given a statement showing

Pre 88 GMP

Post 88 GMP

Excess

Is this scheme a company scheme?

What is the actuarial reduction for taking the pension early?

AnotherJoe

AlanP wrote: »

You can estimate what it will pay out per year by applying whatever the scheme rules are in terms of increases for deferred members.

Typically CPI / RPI with or without a Cap.

Won't be totally accurate but if you worked on 2.5% a year increase it won't be far out unless inflation goes crazy.

I wasn't thinking of inflationary increases (which are fake increases anyway, eg just standing still). £100 now or £103 ina year if inflation is 3% is the same amount.


I was thinking that if the scheme retirement age of the OP is say 65, then to take the pension at age 55, ten years early there is likely a yearly decrement*. Lets say its 5% a year, so for taking it 10 years early the OP is giving up 50%, or taking it 5 years early 25%.


Phaser, the booklet or if not, the trustees, should (must?) be able to tell you how much they reduce the pension by each year you take it earlier than the scheme retirement age.



What you then need to do is look at what that means in real terms. Lets say its 50% lower. However you'll also pay lower tax and you'll get it for an extra ten years. If you cant do the maths to work out the numbers post the raw details here.



* if there wasn't you'd just take it as soon as you could.