Deferred DB pension with GMP and no spouse - should I transfer?

LBCW

I'm reasonably knowledgeable about pensions but am in a quandary about what to do with my deferred DB pensions. I have two, both with GMP. One is £5,200 pa (revalued as at 2022), the other is £12,300 pa (revalued as at 2020). The combined TV is around £420k. I'm 58, female, and, although I have a long-term partner, am unmarried. In the natural order of things, my partner will die before me and so, even if we were married, the spouse's GMP is effectively a 'lost' benefit. I was considering transferring both pensions to a PP and immediately buying a single-life, level annuity with a 10-year guarantee. That way, I'll get the benefit of the spouse's GMP portion and, if I do die first and within the guarantee, there will be something payable to my partner. I've gone for the level option as I know it can be years before an escalating annuity catches up with a level one. I don't want to consider drawdown - I'm very risk averse and know I would spend sleepless nights worrying about the value plummeting. I currently work part-time and would like to retire at 60.


Based on this broad info, is what I'm considering of any merit or completely bonkers? Have I missed anything which should be blindingly obvious? Many thanks.

Linton

Looking at annuity rates £420K would buy a fixed rate annuity at 60 with 10 years guarantee of about £20K. Your DB pension is £17500. At say 2.5% inflation the DB pension would exceed the fixed annuity after about 5.5 years. By the time you are 80 the DB pension would be 40% higher than the fixed annuity.


Are you sure you want to transfer your pension? Not allowing for inflation in the 30 or so years you have left does not seem consistent with your stated risk aversion.

Brynsam

LBCW wrote: »

I'm reasonably knowledgeable about pensions ....

I have two, both with GMP... In the natural order of things, my partner will die before me and so, even if we were married, the spouse's GMP is effectively a 'lost' benefit. I

But what about the excess over GMP? You're making it sound as if a spouse would only get benefits related to the GMP you've built up - possible but unusual.

hyubh

LBCW wrote: »

I'm reasonably knowledgeable about pensions but am in a quandary about what to do with my deferred DB pensions. I have two, both with GMP. One is £5,200 pa (revalued as at 2022), the other is £12,300 pa (revalued as at 2020). The combined TV is around £420k. I'm 58, female

What are the splits for pre- and post-88 GMP, pre- and post-97 excess? What increases in payments do any excess elements get? Also, presumably the 'revalued as at...' is because all your GMP revalues at fixed not full (S148) rate; however, why have you quoted different revaluation end dates? (All your GMP will become due when you are 60.)

LBCW

Linton and Brynsam, thanks for such quick responses. Linton, I'm not at all sure I want to transfer. It just seemed logical that I would get more from an annuity using the full TV because the spouse's pension will never be needed. My risk aversion is to the vagaries of the stock market which is why an annuity is attractive and I've always been a saver not a spender so a level annuity wouldn't bother me too much. That said, both my parents were long-lived and I did think it would be about 15 years before an escalating annuity caught up with a level one so you've definitely given me pause for thought. Brynsam, you're quite right - the spouse's benefit would be 50% of my full pension, not just of the GMP portion. My mistake for badly wording the question. I really need to talk to an IFA but that's another issue altogether... Thanks for your help.

xylophone

You could be drawing an index linked DB pension for a very long time.

I have now known several people who retired at 60+ and have been drawing their pensions for over thirty years.

If you are risk averse, are you not better off with your DB pension?

Audaxer

LBCW wrote: »

the spouse's benefit would be 50% of my full pension, not just of the GMP portion.

The spouse's benefit is also likely to be 50% of what your full DB pensions would have been, even if you can take a tax free lump sum and reduced DB pension(s). So that could be consideration especially if your DB pensions have good commutation factors.

LHW99

Unless your spouse is in por health or much older than you don't assume you will automatically outlive them.
My grandfather assumed he would pass first, as his father died at 56, but he lived to 88 and outlived his wife, causing much dismay as he had given up some of his pension to provide for her outliving him

kidmugsy

LHW99 wrote: »

causing much dismay as he had given up some of his pension to provide for her outliving him

If he had played the odds intelligently there was no cause for dismay. Lots of rational decisions don't succeed; that's life.

atush

You could get cancer 6 weeks after retiring- my BIL did. So if our annuity doenst pay out to your partner they will be out of luck.

I'd just get married

LHW99

If he had played the odds intelligently there was no cause for dismay. Lots of rational decisions don't succeed; that's life.

Quite agree, but that's difficult to explain to an 80+ year old who thought he could have back the money he'd given up, as "it hadn't been paid out yet"