Spouse element of DB Pension

westv

It may be superfluous today but can you 100% guarantee it will be in the next decade?

AlanP_2

JillyC8 wrote: »

I'm not going to make a decision now, but looking for thoughts/feedback on how valuable the spouse element is when it comes to a CETV. I don't see much point in hanging onto something that is superfluous if I can take advantage of it earlier to pay off mortgage.

I don't think the spouse element is particularly relevant to the CETV in as much as it can't be split out from the other benefits.

Most (if not all) DB schemes have a spouse element which is just part of the deal. For some people it has a personal "value" and for others it is "no value" but that won't make a difference to the CETV.

The question for you is "how valuable is the guaranteed DB income" going to be?"

vacheron

I have an old Rolls-Royce DB pension which will be worth £4,100 when I reach 67 (in 2041) and my wife will receive 50% (£2,050) per year if I drop off the perch.

The current transfer value for that R-R pension (as checked online 3 minutes ago) is £174,400.

This means I would have to live at least 42.5 years past retirement (to 110 years old) to break even on the transfer value assuming inflation etc is not considered for now.

If I died within these 42.5 years my wife would have to live between 43 and 85 years into retirement to break even on the transfer value (111- 153 years old).

However, despite the above, all the professional advice I have been given from our pension advisers is to wait until much closer to retirement before deciding which route to take.

JillyC8

I have another small DB pension and my current DC pension plus will have full state pension qualification in two years.
These boards seem to be overwhelmed by people leaving large DB pensions till old age, and although I can obviously see the sense in having security later on, there are other factors that come into play, such as clearing mortgages earlier, being able to pave a way into semi-retirement earlier than sixty seven etc, and general improved lifestyle at a time when it can be enjoyed more fully.
I guess I don't see myself jetsetting at 75 or pursuing an expensive lifestyle, so a case of finding a balance.

JillyC8

Vacheron: good that you can check online for a CETV, getting info out of my provider is painful but thanks for the info as it's comparable to my DB value-wise.

AlanP_2

JillyC8 wrote: »

I have another small DB pension and my current DC pension plus will have full state pension qualification in two years.
These boards seem to be overwhelmed by people leaving large DB pensions till old age, and although I can obviously see the sense in having security later on, there are other factors that come into play, such as clearing mortgages earlier, being able to pave a way into semi-retirement earlier than sixty seven etc, and general improved lifestyle at a time when it can be enjoyed more fully.
I guess I don't see myself jetsetting at 75 or pursuing an expensive lifestyle, so a case of finding a balance.

I totally agree, but the spouse element is irrelevant in that situation, it is your "balance" that matters.

JillyC8

Thanks AlanP, I had read before on here about the spouse element affecting the CETV, which is why I asked. Trying to gather as much info as possible to help me plan ahead (I'm a crazy forward planner) :-)

DairyQueen

I transferred my DB pension but then there were several factors in favour of so doing.

Firstly, I am married and OH has a generous DB scheme, plus we will receive 2 x full SPs. Also, we both have reasonable DCs and SIPPs. Plus my life expectancy is less than the norm. Also, I am reasonably competent at DIY-investing.

I understand why you would wish to forego the cost of a benefit that you will not receive but, for you, I think that the guaranteed income may be more valuable. First and foremost you must consider your income requirement in retirement. Leaving anything for the kids should be strictly optional if it compromises that first priority.

JillyC8

DairyQueen: I take your point... the driving factor for me is being able to improve my life (our lives) at a younger age rather than struggle along for another fifteen years to pay the mortgage and wait to build up to a more than comfortable situation later on in old age...

but of course its true I don't like the thought of a hard-earned pension disappearing when I do, if I pop off early ... I'd much rather pass the benefit on...

sandsy

JillyC8 wrote: »

Any views on the spouse element ..?

Assuming from your name that you are female, the spouse element is worth less than if you were male without a partner. This is because when valuing the spouse benefit for the transfer value, it will generally be assumed that you have a male partner who is older than you. But as a female, you would be expected to live longer than a male partner anyway so the chances of a spouse pension being paid are lower.