Defined Benefit transfer recommendations - Media article

Malthusian

shinytop wrote: »

Also, being slightly mercenary, as someone who hopes to have a long and healthy retirement, my scheme needs help from a proportion of members popping off before I do (and vice versa of course) so I'm not sure I want people with reduced life expectancy leaving (extreme cases excepted).

A fair point about people with reduced life expectancy leaving. However, someone taking a CETV out that doesn't reflect the full value of the guarantees is just as good for the remaining members of the scheme as someone dying before their actuarial life expectancy.

It is rarely cheaper to get rid of people than after a ten-year bull market when the scheme's assets will be at record values. It is much cheaper for a DB scheme to hand someone a £200,000 CETV than it was five years ago.

It is worth noting that someone who was terminally ill would (or at least should) have transferred out of a DB scheme long before pension freedoms was a thing. Consequently, DB schemes have never been able to rely on people dying of terminal illnesses without spouses and consequently getting a pittance back.

Anyone in that position who had enough time on the clock and took proper advice would have taken a CETV and transferred it into a personal pension which could then have been cashed in to fund the bucket list or passed on to their heirs 100% tax-free. That's been the case ever since personal pensions and CETVs existed.

However not many people get terminal illnesses. So it isn't a huge factor in the actuarial calculations. People dying a few years after they reach normal retirement age are the main source of mortality cross-subsidy, not people who die very young but don't take CETVs.

shinytop

It is worth noting that someone who was terminally ill would (or at least should) have transferred out of a DB scheme long before pension freedoms was a thing. Consequently, DB schemes have never been able to rely on people dying of terminal illnesses without spouses and consequently getting a pittance back.

Of course not and nor should they.

DairyQueen

xylophone wrote: »

Not really in any professional sense - circumstances required me to look into it fairly thoroughly at one point and I continued to read up afterwards.

Your modesty is most becoming but credit where credit is due

Two years ago, and with the utmost patience, you took a great deal of time to explain all of the intricacies of my convoluted DB. I began not knowing the meaning of 'GMP' and ended knowing sufficient to critique the advice of the IFA.

Thank you. I doubt I could I have made the right decision without the information that you kindly provided. It was much appreciated then; it is even more appreciated now. :beer:

DairyQueen

jimi_man wrote: »

Actually I think my point still stands and in fact your post merely reinforces it. Whether or not it was more beneficial to you, and that won't become apparent until the final reckoning, by your own admission the pension made little difference to you as it was a small part of your retirement portfolio. Therefore if the option to transfer had been removed, you wouldn't have been much better or worse off so no real harm done.

If, by not having the option to transfer, the majority of people are prevented from making a stupid costly mistake, with the very small side effect that a tiny minority MAY possibly be denied the opportunity to make a couple of extra pounds, then it's definitely worth it.

I would be worse off and so would my family and beneficiaries.

Firstly, the DB would have taken a reasonable chunk of my personal tax allowance. add-in the SP and I have little/zero flexibility to drawdown within my tax free allowance. Using UFLPS I can take approx 16kp.a. tax free in drawdown before SP kicks-in .

Secondly, the widowers benefit (which OH doesn't need) would have added to his taxable income after my death leaving him little wriggle-room in drawdown before incurring HRT.

Thirdly, I am now able to leave the balance of my pension to my beneficiaries on my death (free of tax if I die before age 75, and outside of IHT regardless).

Fourthly, our retirement plans include being able to exploit my max UFPLS drawdown before OH's DB and SPs kick-in.

Everyone's circumstances are different and, in my case. the transfer was a no-brainer. I and my family will benefit from taking the transfer. Others' circumstances will be very different.