How would you take these pensions?

tony4147

Ok, resurrecting this thread for people’s thoughts as we have received a CETV for the HBOS pension.
Just a reminder my wife is 57, normal pension age for HBOS is 62.
If she were to retire TODAY she can have either -
A full pension of £4,700 / year OR
Reduced pension of £3,600 / year OR
CETV £185,500.


As in the original post my wife will have a TPS and at present is planning on not retiring until 60 therefore not drawing any pensions, at 60 the TPS will be approx £13,400 PA and £40k TFLS Or £10,750 PA and £71,600 TFLS BUT based on the HBOS what do people think?
As the HBOS is index link with death benefits, and in our minds there is no risk, whereas if she took the CETV and invested in a SIPP there will be an element of risk.

Dazed_and_confused

Appreciate it isn't quite as simple as this but with the buffer of the TPS pension and a pretty decent State Pension the £185k seems like a viable option.

4% drawdown is often quoted as achievable and that would give roughly double the current DB entitlement.

Plenty to think about!

bluenose1

I am no expert but would definitely take the £185,500 CETV.
We want to spend our money while we are young and fit enough to enjoy it. From 67 when SP starts we well be comfortably off so our priority is maximising income until then.

arnoldy

Well done Tony, the CETV is on the face of it a very good (best?) option. At the moment the FTSE All share is yielding circa 4% or £7.4k on the £185k, Take of charges of say £500 and you have £6.9k pa - at least a quarter of which is tax free. And you have the luxury of treating two DB pensions differently to get a Hovis 'best of both' result. I'm pleased for you.

tony4147

If she were to do nothing now and wait until 60, the DB payout will increase, will the CETV value increase?

arnoldy

I dont know if your CETV will increase or decrease. My hunch is it will be about constant. BUT the £185k would increase to £220.3k at 6% pa compound return if you took the transfer and invested it now until your wife was 60. But you really need to get expert IFA advice. It does seem you have a good transfer value. Is your scheme really inflation proofed? Often they have a cap, and thats most certainly not proofed. Also the wifes pension is often half waht you get if she passes. Lots to think about.

tony4147

I've spoken to my IFA regarding the CETV for my wifes HBOS pension and his initial advice is leave as is. The reason being as we all know pensions over the last 12 months have not being doing very well which I see with my own DC pension.
The IFA feels initally that my wife having 2 DB pensions and we both will get near enough 2 full SP that there is a huge amount of certainty in what we will receive when we retire and then my DC will be the pension where there is uncertainty.
As my wife is 57 and isn't planning on retiring for at least another 3 years the IFA feels that there is a reasonable chance that the CETV will increase and therefore no point in doing anything now. Also he would be looking for £500 for a report, and then 3% of the CETV if she were to transfer into a SIPP.