Thinking about DB Pension Transfer

philgee

blisteringblue wrote: »

I didn't take the decision lightly when I transferred both mine but it's the only way I can retire at 55 in 4 years.

I have a smaller 3rd DB pension and was only offered around 20x which I didn't transfer so will be a little extra when I hit 65.

Have you asked an IFA to run the numbers though? I got a pack for each transfer from mine detailing the numbers you are asking about. You will get a Transfer Value Analysis report of your CETV and the important numbers are the critical yield. That is the rate of growth needed from your transfer to match the DB scheme.

Not yet - they've said there appears to be merit in doing a full review, but the fees for this are obviously high, so I've not committed to doing so as yet.

Suffolk_lass

I meant to add, as I have just retired from employment,
I have just checked out my State Pension pension position. I have 4 years of NI Contributions I will need to cover to uplift my State Pension from the basic full pension towards the new state pension - I was opted out of Serps for a lot of years. Worth you checking this out in your forecast as many DB pensions went this way. This means voluntary contributions at £3 or £15 (current values) per week to find.

sandsy

I think it's quite a difficult to make a case for you to transfer at this point in time. You both have a good few years until you want to retire. During that time, you can build up further DC benefits. In due course, it might be possible to achieve the outcomes you want in retirement without transferring at all or by only transferring your wife's smaller DB pension.

A good adviser will see if you can meet your objectives without giving up the guarantees of the DB scheme unnecessarily.

Thrugelmir

philgee wrote: »

The figures are correct (well, I've rounded them for ease of posting) but my employers are known for the high CETVs. Several colleagues moved theirs before the rules were tightened and got large CETVs.

The £7900 is the DB pension quoted on the CETV pack, however, I think you may be right about the RPI increases, as reading the pack again it says this figure is at the date of leaving, which it gives in the notes as 2011. With RPI, this would now be £9875 or thereabouts

If annual increases are in line with RPI (as opposed to CPI). This in itself is a valuable benefit. Compounding over the years will make a sizable difference to your income.

Albermarle

With RPI, this would now be £9875 or thereabouts

This makes the CETV approx. 36X which is more normal, but still high.
I turned down a CETV offer of 31X . This was mainly because I have other DC pots /investments so I preferred to keep the balance between them and the guaranteed income of the DB scheme.

Thrugelmir

Albermarle wrote: »

This makes the CETV approx. 36X which is more normal, but still high.

As long as Government bonds continue to offer yields below the applicable rate of inflation. Then well funded schemes may well wish to offload liabilities. As risk then passes to the beneficiary.

enthusiasticsaver

I have decided against transferring my old DB pension which pays out next year but the transfer value is only 17 times the annual pension so the low transfer value weighs against the high cost of transferring (I have been quoted around £5k IFA costs for a much smaller pension than yours).


Whilst the CETV is very high for that size of pension as your DC pot is quite low and there are no guarantees with those I would think very carefully. As you say you have a health condition presumably meaning you will be active in the beginning of your retirement so I think it will be a toss up as to what the IFA will recommend but personally in view of your lack of other investments like stocks and shares isa's and relatively low savings I think it would be fairly risky to put all or almost all of that pension pot into a property abroad and give up a fixed income for life. No guarantee you will get a reasonable income from renting it out and not sure what the tax situation would be with that. The running costs of a second property can mount up too.

I think I am with your wife over this one and would be reluctant to give up the DB pensions.


As Suffolk lass has said have you checked your state pensions as you presumably were in contracted out schemes for at least part of your working life and intend to retire at least 10 years before your state pension age?

philgee

Thanks to all that have replied - your comments have been very helpful.
We've spent most of the weekend mulling this over and I think we've decided to not proceed any further. Spreading the risk between DB and DC pensions feels like the best approach to take, especially as we wouldn't have large sums to fall back on if things go wrong.
I've checked my state pension through the Government Gateway forecast and as I have been paying NI for the last 30 years, I need to contribute another 6 years in order to qualify for the full amount of the new state pension from age 67. I was contracted out for a few years and the forecast confirmed this but it expects that I would be entitled to the full amount.
Applying RPI to my DB pension since I left the scheme until now makes a decent difference to the overall amount that I could receive.
Crunching the numbers again, from age 67, my DB and state pensions should alone give me the sort of income that I'm looking for, so my DC pot should only have to cover me for a full pension from age 55 to 60 and then the difference from age 60 to 67 when my DB has kicked in (assuming I don't take this early). I've based this on medium growth, but even with low growth, it should be achievable.
If our DC pots perform reasonably well, I think we could still achieve our goal of buying a small property abroad in retirement, we just may have to dip into savings, shares and/or downsize a little earlier to make up the difference. If they don't, then we should still be able to have some holidays in retirement instead.
Thanks again for all your input
Phil

unkle

I transferred mine a few years ago, Barclays were paying roughly 38 times annual pension, so for me it was a no brainer at that level, at 25x or less I probably wouldn't have done it.


I struck a little lucky that the stock market was quite low at the time, so transferring 120k to my SIPP has not far off doubled in value, the FTSE was sub 6,000 and I put quite a lot into the US so exchange rate has helped also.


I liked the fact I was in control of the money and investments, also that it didn't die with me (granted it had a 50% spouse pension).