Cash rich pension poor...

Flim

Hi all, I am trying to decide what to do with my CETV,s. I have 2 “old” frozen pensions which have a combined CETV of approx £320k. If I take these when I Am 65 they will pay out about £14k pa, but there is no index linking once they start paying out. Alternatively I have had some budget quotes fo an index linked annuity which would give approx. £7.5k.
At 66 I will then have a state pension of about £8k and another small pension (which is index linked), worth about £2k.
My spouse has an index linked pension of about £15k, and will get a state pension of about £7k.
Ie at 66 we should have a combined index linked pension of £32k, (which is more than we currently spend in an average year). We have no debt and a reasonable pot of cash invested in S&S ISAs.
Just looking for anybody else’s thoughts on whether it would be better to go for a lower pension that is index linked, or the higher initial pension.
Thanks for any advice..

LHW99

How old are you now?
These must be DB schemes if they have a CETV (?) so they will revalue between now and retirement.
You would have to use a pension transfer specialist to do a transfer, and that's not cheap.

Flim

Hi and at for the reply. I am currently 61 so they have 4 years left, ( unless I take them early). I get a CETV every year and they have not changed that much, (have gone down slightly over the last few years)....and yes I think they are DB schemes that have been “frozen”.
I appreciate the answer to my question depends on what you “think” may happen to inflation over the next couple of decades? I assume I also have the option to transfer (to a SIP?) and then it would be subject to variations in the stock market? However being a little risk averse I am tempted by a guaranteed income even if it is lower to begin with, particularly as we probably have “enough” with our other pensions.

xylophone

and yes I think they are DB schemes

You don't know?

Are you willing to name the schemes?

And they shouldn't be "frozen" - are they not revaluing in deferment?

If they are DB and accrued between 1978 and 1997, do you have a statement of deferred benefits for each scheme showing the GMP component(s)?

Have you obtained a new state pension statement?

https://www.gov.uk/check-state-pension

Dox

Flim wrote: »

Hi all, I am trying to decide what to do with my CETV,s. I have 2 “old” frozen pensions which have a combined CETV of approx £320k. If I take these when I Am 65 they will pay out about £14k pa, but there is no index linking once they start paying out.

If the figures you are getting are headed 'Cash Equivalent Transfer Value' they are indeed DB schemes, but I suggest you find out for sure. Always helps to know what you're dealing with!

Are you quite sure that both your DB pensions are indeed frozen and that pensions don't increase once they are actually in payment?

If you had left both schemes before 1 January 1986, and they were not contracted out of SERPS, then they would indeed be 'frozen' (unless the rules dictated otherwise) - but that seems rather unlikely.

For pensionable service before April 1997 there was no statutory obligation on DB schemes to increase pensions in payment - but there was a requirement on schemes that were contracted out of SERPS to provide indexation capped at 3% on benefits built up from 1988.

If you could gives the dates of pensionable service for each scheme, happy to help work out where you fit in to the above.

Flim

Hi, yes they are old / “deferred” DB pensions from an old Company I used to work for and are currently being managed by “Pension Insurance Corp.” The bulk of them accrued between the above dates and I have projections based on retiring “now”, and if left until I am 65. It states pre April 97, no increases after payment commenced (which is the bulk), and 2.5% post April 97...but that only applies to a couple of hundred pounds.
Yes I have a SP forecast..

Linton

Since you appear to have enough inflation linked income from 66 I suggest you take the flat rate DB pension. At an inflation rate of 2.5% it would take over 25 years for the annual income from the inflation linked annuity to overtake that from the fixed rate DB pension. The time to overtake it in overall total would be much longer. Your life expectancy at 65 is roughly 23 years.



If you invest the excess income in your S&S ISA the advantage of the fixed rate would be even greater.

DT2001

You say your other pensions/investments cover your current expenditure. Do you need/want more in retirement? My thoughts would be that a SIPP, if you do not need the money/income post 66, would give you more flexibility. Maybe retire earlier if that is a desire? A low level of risk is possible to accommodate within a SIPP. I have children and am looking to help fund their retirement pots by passing on my SIPP which maybe a factor?
What are your key objectives? This will help point you in the right direction.

Flim

Hi all and thanks for al the replies. I like Linton’s idea of taking the flat rate pension then putting away the sum above the index linked value. In answer to DT, we have already retired, (doing some part time work), and we are currently living off this income topped up by cash savings.
Not really looking to have any more in retirement, just interested in “protecting” what we do have.
After “saving” for decades we are finding it hard to start spending it...but I guess that’s another thread.
Thanks agin for the input...food for thought...