DB Pension cash in - sense check please

zagfles

Mickimus wrote: »

Thanks all for your replies which are helping to bring some clarity for me. My instincts are not to cash in but this is the second recommendation I have had to do this in 3 years and had me begin to doubt myself.

The prime objective for me is to retire at 55 - if this is do-able without the transfer then that is that - I can focus in on this with the IFA and see if the sums work. The £55k income would be nice to have but we can live on less if needs be and I'm quite prepared to top up with part time work or consultancy if necessary.

Secondary objective is to make provision for my OH - the DB pension has 50% spouse pension so that box is probably best ticked by leaving the DB in place (OH has no interest in controlling investments so safety first). Finally I figure there will still be plenty in the "inheritance pot" for my kids without the transfer so that shouldn't be a driver.

It's a difficult decison and only hindsight will be able to tell you whether it was right or not. But make sure the IFA is working to your objectives and not trying to impose objectives on you (eg kids' inheritance) which might be reasons (excuses) for them to use to justify recommending a transfer.

Presumably the kids would inherit the house and any other investments you have. Also DB schemes usually provide for kids while at university.

wjr4

zagfles wrote: »

It's a difficult decison and only hindsight will be able to tell you whether it was right or not. But make sure the IFA is working to your objectives and not trying to impose objectives on you (eg kids' inheritance) which might be reasons (excuses) for them to use to justify recommending a transfer.

Presumably the kids would inherit the house and any other investments you have. Also DB schemes usually provide for kids while at university.

Completely agree with this, please make sure they are looking after your interests and not theirs.

atush

The £55k income would be nice to have but we can live on less if needs be and I'm quite prepared to top up with part time work or consultancy if necessary.

Have you worked out your 'number'? Will you really need it all if you arent paying pension, NI, commuting exp?

I feel if going down the DD route with your 600K, a draw rate of 55K PA is too high.

ams25

My circumstances are broadly similar - age, income requirements, DB value/potential CETV and funds outside (SIPP/ISA/Cash). I've read tons on this subject (stopped working so have the time (and interest), but don't have the benefit of an IFA (though have seen a few). Most, if not all retirement gurus (Wade Pfau etc) will tell you having a balance of safety first income (state pension, DB, annuities) to cover your essential spending and investment assets to cover more discretionary spending (holidays etc) is a very good place to be. Having more in safety first income is no bad thing (except for heirs) but having little in safety first income is less desireable, espcially as you age and the responsibility for looking after large amounts becomes less practical, even with professionals if you are lucky enough to have a good one.

My CETV looks very enticing but given once SP and DB kick in, I will have c.50%+ of my income in safe income there is no way I will convert it. 50% for my spouse is also an important consideration.

I don't get a warm feeling that your IFA is 100% aligned with your best interests from your comments, but I may be wrong. Clearly they benefit if you transfer, but I am not seeing any compelling basis for you to do so, based on the information supplied.

"Just say no" might be too strong, but these words jumped into my head!

ams25

atush wrote: »

Have you worked out your 'number'? Will you really need it all if you arent paying pension, NI, commuting exp?

I feel if going down the DD route with your 600K, a draw rate of 55K PA is too high.

OP and spouse have £1.1m in investable funds (ISAs, cash etc) and c.34k in DB/SP income once in payment... i think 55k can work.

Mickimus

tacpot12 wrote: »

Are you aware of "Sequence of Return" risk? This is the risk that your investments in your DC pension fall in value just at the point when you need to sell them. Having some DB income that covers your day to day needs while being able to draw from the DC pension in times when the investments are doing well is a major bonus. Transfer the DB pension and your whole retirement plan is exposed to Sequence of Return risk.

To my mind, the only good reasons to transfer would be:

• if you have had a health issue and expect retirement to be shortened as a result, and the DB scheme won't provide any increased pension due to ill health
• if the company might be about to go bust (the Pension Protection Fund provides some protection, but not enough - I would want to move a pension exposed to such a risk)
• if the CETV is so high compared to the return needed that it becomes a "no brainer" e.g. if the critical return is 1% pa or thereabouts.

This is really helpful - having reached the point of having the number I have no intention of losing it through undue risk.

On the three criteria listed - health is ok (touch wood); the DB pension was transferred to an insurance company when my employer was sold so should be safe enough; the critical return will come out of the IFAs analysis so will see.

Mickimus

zagfles wrote: »

It's a difficult decison and only hindsight will be able to tell you whether it was right or not. But make sure the IFA is working to your objectives and not trying to impose objectives on you (eg kids' inheritance) which might be reasons (excuses) for them to use to justify recommending a transfer.

Presumably the kids would inherit the house and any other investments you have. Also DB schemes usually provide for kids while at university.

Thanks - my kids will get whatever is left when we are both gone and with careful management this could still be substantial without the DB pot. I think you may be right that there is some positioning from the IFA but if I can retire without the transfer then I will decline.

Mickimus

ams25 wrote: »

OP and spouse have £1.1m in investable funds (ISAs, cash etc) and c.34k in DB/SP income once in payment... i think 55k can work.

Yes - if I can get that to work this would be the ideal outcome. I think there is a bit of play in the £55k also as I am paying some uni costs in that for one of my kids which will drop away in a few years so I expect to tighten up on this along with trimming a few other current expenses.

Mickimus

ams25 wrote: »

My circumstances are broadly similar - age, income requirements, DB value/potential CETV and funds outside (SIPP/ISA/Cash). I've read tons on this subject (stopped working so have the time (and interest), but don't have the benefit of an IFA (though have seen a few). Most, if not all retirement gurus (Wade Pfau etc) will tell you having a balance of safety first income (state pension, DB, annuities) to cover your essential spending and investment assets to cover more discretionary spending (holidays etc) is a very good place to be. Having more in safety first income is no bad thing (except for heirs) but having little in safety first income is less desireable, espcially as you age and the responsibility for looking after large amounts becomes less practical, even with professionals if you are lucky enough to have a good one.

My CETV looks very enticing but given once SP and DB kick in, I will have c.50%+ of my income in safe income there is no way I will convert it. 50% for my spouse is also an important consideration.

I don't get a warm feeling that your IFA is 100% aligned with your best interests from your comments, but I may be wrong. Clearly they benefit if you transfer, but I am not seeing any compelling basis for you to do so, based on the information supplied.

"Just say no" might be too strong, but these words jumped into my head!

Thanks - I am a firm believer in trusting instincts and will proceed cautiously. The objective is to retire and preferably with a safe position.

Thrugelmir

Mickimus wrote: »

The CETV is also high at the moment which if I was ever going to do it now is the time.

CETV is high for good reason. How much of the capital are you prepared to risk in order to achieve a better return than the indexed DB pension?