Advice please

Scallypud

I am 56 yrs old looking to retire at 58.
I have a private flexi pension worth 158K at the moment. The plan is to live off 20K per year until i'm 65.
I have a final salary pension that will probably be worth 250K by the time am 65. I plan to take the cash offered instead of the guaranteed £7,800 yearly pension. I know its a gamble taking the money but my belief is if it's invested wisely it can last you longer and when I pass the kids would be left something.
Any thoughts?

sandsy

It's impossible to know what the transfer value will be in 9 years time - it could be higher or lower, and will depend on assumptions of economic and demographic variables at that time.

What makes you think you can manage the money better than the scheme?
Personally, I wouldn't gamble with my main source of guaranteed pension income and you'll be hard pushed to find an adviser who suggests otherwise.

tacpot12

£158K isn't quite enough to draw out £20k pa after tax, if you also want the £20k to increase with inflation, but it is very, very close so you can certainly do this.

Whether taking the cash at 65 is a good idea or not will depend in part on your life expectancy and your state pension entitlement. With a full state pension, you might be able to withdraw 5% or even 6% of your pot safely. 6% would produce £15K pa, add your state pension of c £8k and you will be living on about £23K pa. in 2027. 20K today will be the equivalent of 24K in 2027 so you will be taking a pay cut when you draw on your final salary pension. If this pension is really only going to pay you £7800 in 2027, then it is pretty essential that you transfer to a scheme that allows manage the pension yourself. I somehow doubt that it will pay you that little. So review the situation close to age 65 when it is clearer as to what this pension will pay you and whether pension transfers have gotten easier or harder by then.

tacpot12

sandsy wrote: »

....

What makes you think you can manage the money better than the scheme?
...

The scheme has to look after all members, whereas an individual managing their own pension can make decisions that the scheme trustees cannot. Also, when your very livelihood relies on own success, it tends to focus the mind - ultimately, a professional manager does not care as much as the individual does. And there is a view that passive funds reliably outperform the average of the professionals. So quite a few reasons might exist to make someone think they can manage their pension better than a professional manager.

Scallypud

Thanks for all the replies very much appreciated.


Sandsy - You are correct i'm only surmising what the offer will be for the final salary.


tacpot12 - My final salary pension is index linked. As you say it all depends on my life expectancy.
It's a gamble to take the cash offered but if I pass away sooner than expected my kids would be left with whatever in the pot. If I go for the final salary they get nothing.

camelopardis

tacpot12 wrote: »

The scheme has to look after all members, whereas an individual managing their own pension can make decisions that the scheme trustees cannot. Also, when your very livelihood relies on own success, it tends to focus the mind

This is quite true of course. However, I like the idea of relaxing and enjoying my retirement, without having to have my mind constantly focused on how my investments are doing.

AlanP_2

tacpot12 wrote: »

The scheme has to look after all members, whereas an individual managing their own pension can make decisions that the scheme trustees cannot. Also, when your very livelihood relies on own success, it tends to focus the mind - ultimately, a professional manager does not care as much as the individual does. And there is a view that passive funds reliably outperform the average of the professionals. So quite a few reasons might exist to make someone think they can manage their pension better than a professional manager.

There is a difference between comparing

1) DIY and using a professional manager
2) Keep DB pension or take CETV


Taking a CETV because you think you can do a better job than a professional manager sounds like a ridiculous assessment method to me.

I have no doubt at all that a professional manager could manage a DB scheme's assets over 2-200 years than I could.