Reasons to cash in a DB pension?

Marine_life

Thrugelmir wrote: »

What makes you believe that the investments you choose will produce a better long term return ? As you (and potentially wife) age do you want the hassle of personally managing them.

Will you be resident in the UK or overseas. If you reside in the UK this part of your pension provision won't be subject to currency fluctuations.

Those are definitely the reasons NOT to do it.

One of our (biggest) concerns is mitigating inheritance tax and therefore anything we can do to shelter assets (e.g. in a pension fund) would potentially save us 40% IHT (on top of the income 40-45% income tax we will inevitably pay on the DB pension when it starts paying). Thats a lot of tax which I am estimating will more than offset any shortfall of DB versus DC. At this stage it mainly seems to depend on what the CETV looks like.

dunstonh

My rationale being as follows:
1. It isn't the largest portion of my pensions.
2. I would likely pay tax at the higher rate once the distributions start.
3. I would like to have the flexibility to leave the money as an inheritance.

1 - Irrelevant as a justification.
2 - How much of it will be over the threshold?
3 - Potentially a reason but not the only way to achieve that.

Does it have to be expensive? i.e. are those fees regulated / dictated?

£5k to £10k typical. No the fees are not regulated.

I have requested the CETV just waiting for it to arrive.

They could now cause you to incur a cost when the adviser goes to the scheme and requests one. The first CETV in a year is usually free. Subsequent ones usually have a charge.

Albermarle

Probably worth a read:
https://www.royallondon.com/media/good-with-your-money-guides/five-good-reasons-to-transfer-out-of-your-company-pension-and-five-good-reasons-not-to/
https://www.moneyobserver.com/final-salary-pension-transfers-scenarios-when-you-should-consider-transferring

Also be aware that it can actually be hard to find a financial advisor to the work , even if you pay them a few grand . Then if they advise you not to transfer, and you still want to , most ( but not all ) mainstream pension providers will not accept the transfer
.

sandsy

Is it pension no. 4 from this old thread from 2010?

https://forums.moneysavingexpert.com/showpost.php?p=39705556&postcount=49

Not entirely clear to me which of the others are DB or DC from the way that post is worded?

bluenose1

Not sure if this is feasible but have you considered taking the pension at 55 with an actuary reduction if the scheme lets you?
You could then invest the payments into a SIPP.

mark55man

dunstonh wrote: »

1 - Irrelevant as a justification.

So my challenge is my DB is 75% of my pension provision therefore if I make the wrong choice I'm affecting 75%. I get the impression from Marine_Life that the pension he is thinking about is much less of a percentage. Therefore the risk of a bad decision may be the same, but the impact of that risk is much less. So I think that is a relevant factor - especially if it the financial risks are outweighed by softer or longer term benefits

Marine_life

sandsy wrote: »

Is it pension no. 4 from this old thread from 2010?

https://forums.moneysavingexpert.com/showpost.php?p=39705556&postcount=49

Not entirely clear to me which of the others are DB or DC from the way that post is worded?

Thats the one.

Marine_life

mark88man wrote: »

So my challenge is my DB is 75% of my pension provision therefore if I make the wrong choice I'm affecting 75%. I get the impression from Marine_Life that the pension he is thinking about is much less of a percentage. Therefore the risk of a bad decision may be the same, but the impact of that risk is much less. So I think that is a relevant factor - especially if it the financial risks are outweighed by softer or longer term benefits

That's right - probably around 15%

sandsy

Marine_life wrote: »

That's right - probably around 15%

Without knowing what income is needed in retirement or what other guaranteed income is available, it's impossible to know how important this pension is, in the scale of things.

mark55man

True but equally my point is it’s much less likely to be a singnificant part of the answer if it’s only a small fraction of the assets available.