Cetv

sandsy

JillyC8 wrote: »

Maybe it is something to do with age ... I read that they generally increase as retirement looms ... but who knows. I thought companies were trying to offload old DB commitments but it doesn’t seem that way with mine ...

Even if they want to offload you, to pay you more would increase the risk of them not having sufficient funds for people staying in the scheme.

Transfer values go up and down in the opposite direction to expected investment returns. So if the trustees think they can earn a higher rate of return on the investments they hold to pay out your pension, you'll get offered a lower amount than if they think they can earn low rates of return.

If returns and life expectancy remained unchanged, then over time, transfer values would generally increase as members age and the pension (which revalues each year roughly in line with inflation) is nearer to being paid.

Thrugelmir

sandsy wrote: »

So if the trustees think they can earn a higher rate of return on the investments they hold to pay out your pension, you'll get offered a lower amount than if they think they can earn low rates of return.

Pension funds will try and match their assets to liabilities as far as possible. Current yields on UK Gilts are 10y 1.22%; 20y 1.64%; 30y 1.7%.

Hardly surprising therefore that they are happy to allow people to transfer out and take on the full risk of their individual funds.

Pension funds will of course hold shares. Though having a large holding in Apple and Amazon isn't the most comfortable of investment positions for the longer term. Far too much uncertainty. Apple one day will be overtaken by a new technology.

Malthusian

JillyC8 wrote: »

Thrugelmir: I want to transfer and draw on it to pay off my mortgage eventually, not invest it.

Paying off your mortgage is an investment. You give someone a lump sum and in return you get a regular income in your bank account (the interest you are no longer paying) - that's an investment.

Why do you want to give up a guaranteed investment with a very high rate of return that you can't get anywhere else and exchange it for a guaranteed investment with a very low rate of return? (Assuming your mortgage is currently on a low interest rate like most people's.)

JillyC8

Malthusian:
The reasons are:
I am a single parent facing a heavy income drop in the next few years due to children reaching 18 etc. Both plan to go to uni, hence I would like be able to support them to some degree although of course they will get student loans/part time jobs etc
I have a stressful job and long commute, which I would like to change for a More local job (but inevitably lower paid)
I have full entitlement to state pension in two years and also have another deferred DB pension and a DC pension
- I basically would like to pay off the mortgage and invest the rest into my current DC pension rather than struggle on for another twelve years

Of course cashing in a DB pension isn’t a good ‘investment’ decision, but other factors come into play, such as lifestyle quality now rather then later