Final Salary Scheme - what to do with friends advice.

mbarge

A Pension pot of £1m will allow you to take about £40k per annum indexed with inflation at age 57-60...in drawdown... but at a cost. You will have to take considerable investment risk (60%-70% equities) such that you will have about a 20% chance of seeing your income reduce (in real terms) in retirement.

I have a DB pension which I know will pay about 25k pa in 3 years time... I also know I can cash it in for about 750k. I have no intention in doing so even though I know I can get much more income (with risk) outside the pension fund.

There's something about the peace of mind of knowing you have an income throughout life indexed with inflation, which far outweighs the lure of cash to invest. Every pension arrangement should have a defined benefit backstop and not just the state pension.

Don't do it!

LHW99

Final Salary Scheme - what to do with friends advice

Ignore it?

coyrls

mbarge wrote: »

Every pension arrangement should have a defined benefit backstop and not just the state pension.

For me and many others, a defined benefit backstop is not available.

JoeCrystal

mbarge wrote: »

There's something about the peace of mind of knowing you have an income throughout life indexed with inflation, which far outweighs the lure of cash to invest. Every pension arrangement should have a defined benefit backstop and not just the state pension

Unfortunately, such an arrangement would be out of reach for most of the private sector workers, especially with a vast majority of DB pension schemes are closed. Only 1.1 million private sector workers are still an active member of a DB pension scheme back in 2017 with half of the number is still in the open DB pension scheme compared to 7.7 million people who are the member of private sector DC pension scheme.

gonedownthepub

Be aware that even a Final Salary Scheme is not guaranteed.
I had 2 "guaranteed-no hassle" FS pensions schemes go into the lifeboat scheme-Pension Protection Fund with only 90% of benefits guaranteed(at the moment).
The other 3 FS schemes I have taken the very generous CETV`s and transferred into my SIPP to do with as I like and back under my control-not for everybody but has meant me cutting my working week to 30 hours at age 55-best thing I have ever done.

Paul_Herring

coyrls wrote: »

For me and many others, a defined benefit backstop is not available.

What they're trying to get at, I think, is what we used to have which is "you must buy an annuity with your DC pension."

If not, that's certainly how I read it.

JWM

I am in a similar situation OP.

I am lucky that I have Pension advice as one of my work perks - the advice is free but if I choose to transfer then the commission is 4% of my pot.

My main worry is that while the max lump sum and subsequent withdrawals are a good amount, if I die after my husband (likely as he is older), then the remaining sum will not be paid to DS, as only a child's payment up to age 21 is offered. My family have all died before 75, and I don't expect to be any different.

So I am considering moving the pot out and self managing. Lets face it, we will only know if this is the right decision (for anyone) once your date of death is known! For me its Security and Simplicity OR Take a chance and do it myself.

There s no right or wrong answer at this moment. If I stay with the Final Salary Scheme and retire at 60 - if DH dies, then I die the next day - I will have been paid very little of 'my' pot. However - if I transfer out, take the Tax Free lump sum and a regular good sum and then live to 100 - this would have been the wrong choice as I would have been better of staying in the Final Salary Scheme.

Any other thoughts or opinions welcome!

coyrls

Paul_Herring wrote: »

What they're trying to get at, I think, is what we used to have which is "you must buy an annuity with your DC pension."

If not, that's certainly how I read it.

If that is what was meant, then I disagree that every pension arrangement should have a DB or an annuity backstop in addition to the state pension. Mine doesn't.

Terron

BBH123 wrote: »

See I said exactly that but she says state and private funded folk live in the same care homes ,

Yes, but the privately funded folk get to pick the one they like and they are not all the same. I looked at several when my Dad needed one and most I would not have liked.

Terron

mbarge wrote: »

There's something about the peace of mind of knowing you have an income throughout life indexed with inflation, which far outweighs the lure of cash to invest. Every pension arrangement should have a defined benefit backstop and not just the state pension.

Of course many DB schemes are not indexed linked or have a cap to the increases.