Please persuade my wife not to cash in her pension.

DairyQueen

Chances are remote that she will be able to transfer out for the reasons already specified. Thera are a load of procedural, legal and costly hoops to jump through. Just finding a (suitably qualified) IFA willing to undertake the case won't be easy. IFA costs are high because they carry such a big liability with this kind of advice. Chances are high that she will pay the fees and be advised not to transfer.

A positive recommendation to transfer is likely to require one/several of the following personal circumstances:

1) Reduced life expectancy.
2) Sufficient other guaranteed household income to cover basic expenses.
3) Competence/willingness to self-invest, or the ability to pay an advisor to manage the pot.
4) No requirement for the widower/dependent benefits (you will forego the widower's pension if she transfers and she predeceases you).
5) A less-than-cautious attitude to risk.
6) A generous CETV offer.

Has she considered how you would manage if she predeceases you? She is effectively suggesting that you both forego a large chunk of your lifetime savings just to leave a generous inheritance to your son.

Ask her how she would feel if you cashed-in your DB? How would she cope money-wise if you predeceased her and your entire pension was no longer available to her? She would experience a significant drop in household income in order that your son can receive a substantial inheritance on your death.

I bet she would not be so keen if the boot was on the other foot.

As things stand, her state pension will die with her, and she is now suggesting that her entire DB pension should be unavailable to you on her death. Most of us are rather more considerate of our partners than your wife appears to be.

Bravepants

DB pension scheme providers love the idea of people "cashing out" because it removes the burden from them.


Consider the situation if you live another 30 or 40 years. Would she not rather have a guaranteed index linked income for life rather than a cash lump sum dwindling away every year because of inflation, sundry costs (needs and wants), or subject to the risks of the stock market?


It's the old marshmallow test (Google it). A similar thing happened to my old grandmother who, when her husband died in 1978, was provided with a monthly widows pension. She was offered the opportunity to have a sum that increased each year by inflation, or a higher flat sum that didn't. She chose the latter! All she had was SP, her widows' pension and cash that she didn't invest but saved.

Well 34 years later she finished her life skint when she died in 2012! No-one inherited anything anyway!


Don't fail the marshmallow test! You need to think about your future self, not your self now. Your future self will thank you, and your son would rather see you comfortable and care free rather than be worried that you might run out of money!

shinytop

I suspect the OP could quote all the facts, figures and cautionary tales he wants and it would make no difference. The OP's wife wants to leave her son money even at the expense of her own financial security. The desire to help our children is very strong. This is an emotional decision, not a financial one and may need to be countered with similar arguments. I think the son is the key to changing his mother's mind. Maybe helping him now (rather than in 30 years time when both parents die) combined with some sort of life insurance (as suggested) would help.



My OH would probably be the same if she had the option; fortunately she hasn't.

Audaxer

DairyQueen wrote: »

Has she considered how you would manage if she predeceases you? She is effectively suggesting that you both forego a large chunk of your lifetime savings just to leave a generous inheritance to your son.

I agree it is not a good idea to transfer out in this case for all the reasons mentioned, but if she did predecease her husband with most of the CETV value still intact, that may leave the OP better off than with 50% of her DB pension. However I still think in this case both of them keeping DB pensions and taking the lump sums is the best plan.

AnotherJoe

Without knowing the CETV there's no way to hazard a guess.
You say "investments too risky & complicated" but "it depends". What investments, what fixed term securities, how much, who manages, what does it cost etc etc.

And mostly it depends on the CETV.
Without that key figure, there's no way to even hazard an opinion.


You seem to be panicking about "risky investments", and want her not to do it without knowing any numbers, she seems to be looking 30 years ahead without having any numbers on which to base such a monumental decision.

IMO, neither of you are behaving rationally.

Sister_X

I work as a discharge nurse in a hospital.
Patients are living longer now and are much frailer and often have to sell their house to fund their nursing home. Currently if someone does not have any money and they live in their own home then social services will pay for a care package but i very much believe that in the future my generation will have to pay for carers using the equity of our homes.
My advice would be to consider downsizing and giving your son the money now when he needs it to purchase his own home if you are desperate to help him out or give him part of your lump sum. I certainly would never put myself in poverty just so that my girls could live a life of riley. God alone knows what is going to happen financially in the future. It's always better to have more regular disposable income than less and if it's more than you need you could help your son overpay his mortgage!!!
Even if you do both die suddenly and not require a nursing home you could easily live to be a 100 by which time your son would probably be in his 70s, mortgage free and retired anyway. If you've raised him to appreciate money he won't need yours anyway.
I'm sorry this is not helping you much, probably making it worse but it will help you both make an informed decision.

xylophone

Has you wife considered taking the larger lump sum from her DB pension and gifting that to your son?

She would still have a regular index linked pension, retain the protection for you should she predecease you and have the satisfaction of seeing your son use the money.

Slinky

Sister_X wrote: »

I work as a discharge nurse in a hospital.
Patients are living longer now and are much frailer and often have to sell their house to fund their nursing home. Currently if someone does not have any money and they live in their own home then social services will pay for a care package but i very much believe that in the future my generation will have to pay for carers using the equity of our homes.
My advice would be to consider downsizing and giving your son the money now when he needs it to purchase his own home if you are desperate to help him out or give him part of your lump sum. I certainly would never put myself in poverty just so that my girls could live a life of riley. God alone knows what is going to happen financially in the future. It's always better to have more regular disposable income than less and if it's more than you need you could help your son overpay his mortgage!!!
Even if you do both die suddenly and not require a nursing home you could easily live to be a 100 by which time your son would probably be in his 70s, mortgage free and retired anyway. If you've raised him to appreciate money he won't need yours anyway.
I'm sorry this is not helping you much, probably making it worse but it will help you both make an informed decision.

When people talk about downsizing, there's always the perception that selling a house and buying a smaller bungalow or flat will result in them having excess cash. The reality around here is that bungalows are like hens teeth and selling our 4 bed house, you could buy a 2/3 bed bungalow which would be smaller and easier to live in with mobility issues, for around the same money as the 4 bed house.


You can't assume that downsizing will be the cash generator you think it might be, unless there are lots of smaller properties/bungalows where you live. You may end up having to move to a cheaper area to achieve this result.

Albermarle

I am in almost the same situation as the OP's wife with my DB scheme and was offered not far short of half a Million Pounds. Of course it was tempting but when I checked the cost of buying an annuity with exactly the same benefits as the DB scheme, it looked more of a 50:50 decision.
Also a key point that has already been made was the potential anxiety of dealing with market turbulence /big drops, Potential for plenty of sleepless nights !

DairyQueen

Albermarle wrote: »

Also a key point that has already been made was the potential anxiety of dealing with market turbulence /big drops, Potential for plenty of sleepless nights !

... and a crash course in income drawdown would be a prerequisite. This is a pretty complex area of pension fund management. It requires knowledge and a strategy to undertake successfully. Not least to manage the dreaded 'sequence of returns risk'.

I think the OP's wife has yet to spot all of the worms wriggling in this particular can (and I have transferred out of my DB with eyes wide open).