DB pension question

crv1963

I fully agree with the comments about the DB Survivors Pension. In our planning the wifes' survivor pension will make the difference between my wife having a "just enough to live" income to a "comfortable income".

We are today going to write out the plan in a form she understands completely of how she accesses what pension savings and when, as she finds tracking the different pots and draw down rates complicated now, before we even get to the point of retiring, let alone as a seventy or eighty year old widow!

To simplify things we will likely combine her different pots at some point in the future so it all comes from one provider (her pots), plus SP, plus her Survivors DB income. It may not be the most cost effective way, but will be the most understandable way for her.

relishy57

I had some challenging decisions to make. My best advice is not to rush into things and as you are doing make sure all paperwork is easily accessible and understandable.

jamesd

Albermarle wrote: »

Jamesd, I know you are an expert on these matters but still this seems a rather strong statement , when we have no idea what the CETV multiple is . Normally they can be anything from 20X to 40X so it can obviously make a big difference to any calculations .

We don't know the multiple or age but we do know "I smoke and I drink, so probably won't live long enough" and the range. Around twice seems likely to me but if we get more facts it'll be possible to do better. At which point I may recant if the situation is much worse than usual.

To see how to get to around twice the DB as starting income:

1. assume 30x multiple on the whole 500k so 16.6k income
2. assume 5.5% initial Guyton-Klinger income of 27.5k for a 40 year plan: 1.65x
3. adjust for lower life expectancy
4. factor in the effect of the state pension

Lots of unknowns so a very coarse estimate is all it can be.

jamesd

PennyForThem wrote: »

As a widow who receives half DB pension and annuity, both of which increase by an inflation %, can I say how important that is to me as a sound basis of receiving known, non reducing income with absolutely no risk?

relishy57 wrote: »

Another widow here who values the 50% of pension guaranteed payment from late husbands pension coming in each month. ... I was 12 years younger than him so that redresses a little his overall losses.

crv1963 wrote: »

I fully agree with the comments about the DB Survivors Pension. In our planning the wifes' survivor pension will make the difference between my wife having a "just enough to live" income to a "comfortable income".

Guaranteed income is useful but it's worth considering the alternative scenario:

1. At the moment drawdown can normally be expected to provide when he's alive between 1.5 and 2.5 times the defined benefit pension.
2. Drawdown continues paying 100% after death. 50% widows makes this between 3 and 5 times the income after his death.
3. Any portion of the pot can be spent to buy annuities in your own name after his death to provide guaranteed income. Normally this would happen in your 70s or later when annuities provide much more income per Pound spent. But not always - life insurance can be used to cover the early death case.
4. No restrictions on marrying again or cohabiting.

Transfers haven't always paid as much as they can today but the 100% widow's income and option to use some of the capital for annuity buying has been a consistent way to improve the likely outcome for a widow and a reason for wanting to transfer.

It wouldn't have worked for relishy57 but one of the best deals around is the woman increasing her eventual state pension by deferring claiming it while he's alive. But it can still be done when you reach that age to efficiently convert capital to guaranteed income.

Overall the expected outcome of not transferring out of most schemes a less financially provided for widow. But there are exceptions, notably some government pensions.

segovia

I am hearing some IFA's are increasingly declining DB transfers, insurance premiums are too high and there are already litigations going through the courts for poor/bad advice. We looked at it and a guaranteed income for the rest of your life doesn't sound too bad. I wouldn't count on your lifestyle predicting an early demise, you could live to you are 100