DB to DC transfer - difficult decision

bolwin1

Apologies for the long post in advance. I've recently received an un-solicited CETV quote for one of my defined benefit pensions & it's made me re-consider my approach to pension planning. I would appreciate any thoughts (or pointing out anything I've missed)

Me - age 54. Plan to retire at 60. 40% tax payer.
Wife age 49. Plan to retire at 55. Works part time & gets paid just under the tax allowance.
No mortgage - kids have both left home.
Target income at retirement £40K p.a. although £50K would allow for more / better holidays....

Both of us will receive the full state pension (£8.8K each) at 67, providing we work for 2 & 3 more years respectively. (checked on government website).

I have 2 DB pensions.
DB Pension 1 - currently valued at £11.9K p.a. Will increase between now & 60. Payable from 60 with no reductions. 50% widows benefit. Increases at RPI up to 5% p.a. No longer contributing to this scheme
DB Pension 2 - currently valued at £9K p.a. Will increase between now & 60. Payable from 60 with no reductions. 50% widows benefit. Increases at CPI up to 5% p.a. No longer contributing to this scheme
Wife has a NHS DB pension - circa £5K p.a. due to start paying from 65 (some comes in at 67)
I'm currently contributing just over £12K p.a. to a DC pension fund. This is on track to be circa £300K by the time I hit 60. It's in fairly standard global tracker finds - 100% equities.

By the time I'm 60, will have circa £80K of savings (cash ISA, shares ISA & a £10K AVC linked to DB pension 2)

Both of us have underlying medical conditions, which although not definitely life limiting, would mean on average we probably won't last as someone who doesn't have them.

Initial plan was to draw all DB pensions when they come 'fully' due, fill in the gaps using savings for the first 3 years & then draw the gaps from the defined contribution pot. Once the state pensions & NHS pension kicks in, the gap will be very small.

However, I've now received an un-solicited CETV from DB Pension 1 provider. They are offering £409K in exchange for the £11.9K p.a. pension.

I've tried multiple scenarios on my pension planning spreadsheet & even in some pretty bad scenarios (25% crash on the day the pension is taken out, 20 years of just 2% growth etc. etc.), the numbers seem to stack up in favour of taking the transfer (including the scenario where I die before my wife)

So I guess the high level question is £20.9K p.a. DB + £300K dc pot or £9K p.a. DB + £700K dc pot ?

If I went down this route, I know I'd have to have to pay to get an IFA to review the plan / approach & sign off any advice. I'd also probably get them to look after the new DC pension as I'm not that well versed in investing.

Would very much appreciate any input / feedback on this. Thanks :-)

Albermarle

There are numerus threads asking a similar question , so maybe a search of the forum could be a good start. To start here is a recent one :
https://forums.moneysavingexpert.com/discussion/6013260/query-around-defined-benefit-pension-transfer
Plus you could read these:
https://www.moneyobserver.com/final-salary-pension-transfers-scenarios-when-you-should-consider-transferring
https://www.savvywoman.co.uk/2016/12/pros-cons-transferring-final-salary-pension/

If I went down this route, I know I'd have to have to pay to get an IFA to review the plan / approach & sign off any advice

IFA cost will be at least £5K, if you can find one to do it . If they recommend against transferring , which is likely , you can still transfer but your choice of pension provider will be very limited .
You could well find that your current DC provider will not accept a transfer with a negative recommendation.

shinytop

Your CETV is good at 34x but not spectacularly so. Mine was 26x and I didn't even think about transferring. You could get more money before you die taking the transfer but it depends on how much you value the security of a DB pension. My DB/DC proportion is similar to yours without the CETV and I'm glad it's that way round.