Transfer a Final Salary pension or not.

Victor_Meldrew

I can take my final salary pension at 55.
9.2k (rises with CPI/RPI?) with 60k tax free lump sum.

Or I can transfer out with a value of £375k - which gives approx. 95k tax free lump sum and £280k left for drawdown.


My quick question is - is the transfer out to flexi-access drawdown a better option than the 9.2k from the final salary scheme? I wouldn't need to draw much for the first few years while I'm still working and I reckon I could beat that 9.2k easily. Or am I being daft?

Alexland

Personally I would rather have the assured and inflation linked income for the rest of my life. Still much depends on circumstances and you would need to get professional advice from a specialist IFA to determine if such a transfer is suitable.

SonOf

I can take my final salary pension at 55.

With or without penalty?

Thrugelmir

Victor_Meldrew wrote: »

I reckon I could beat that 9.2k easily.

What's your proposed investment strategy?

Dox

Just look at the length of the threads where other people have asked this question...

You will need to take proper advice (the sort you pay for, from a regulated individual with the right permissions to advise), so why not do that if you are serious? Will cost upwards of £5K or so, if that helps the decision process.

tacpot12

Whether this decision is correct for you will also depend on what other pension provision you have, your state pension entitlement, what you need/want to have to live on in retirement, and your life expectancy.

Wanting more than £9.2K pa is a reasonable aspiration, but at what expense? Giving up a certain, inflation-proof, income when you don't need to is generally a bad idea, unless you have a low life expectancy. You will have the stress of having to manage a portfolio of investments, with no safety net if it goes wrong. Do you have any experience of managing investments?

Albermarle

The same , or very similar question , is asked on a regular basis . The answer is largely a matter of opinion , depending on circumstances and personality .
Suggest you search the forum ( search box at the top ) for CETV & Defined benefit transfer and read the relevant threads .
Also you could read this:
https://www.moneyobserver.com/final-salary-pension-transfers-scenarios-when-you-should-consider-transferring

cisamcgu

I see it as either ~£10K a year for ever or ~£300K to invest and draw down.

Now, ignoring inflation and assuming a 2% return on the investments (2% of £300K is £6K) I think you could happily beat £10K a year for the rest of your natural life.

But if something went wrong, your investments tanked, the stock market went down and down ...

I would prefer the £10K a year I think, but it is not cut and dried...

Audaxer

Victor_Meldrew wrote: »

I can take my final salary pension at 55.
9.2k (rises with CPI/RPI?) with 60k tax free lump sum.

Or I can transfer out with a value of £375k - which gives approx. 95k tax free lump sum and £280k left for drawdown.


My quick question is - is the transfer out to flexi-access drawdown a better option than the 9.2k from the final salary scheme? I wouldn't need to draw much for the first few years while I'm still working and I reckon I could beat that 9.2k easily. Or am I being daft?

If you include the £95k tax free lump sum as part of your investments, i.e. have the whole £375k invested, then draw income at the rate of 3% per year rising with inflation, that would give you £11,250 per year. So definitely possible with the right portfolio, but if the portfolio has poor returns in the first decade, then you might not be able to draw as much income as that. In my view it is still risky compared to the guaranteed income you get with a final salary pension.

Presumably at 55 you would be taking the pension earlier than your normal retirement age and therefore it would be subject to actuarial reduction. As you plan to keep working would you not be better to leave the final salary pension until your normal pension age? Do you also have the option at normal pension age of a higher annual pension if you don't take the lump sum?

xylophone

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/

ffacoffipawb

Victor_Meldrew wrote: »

I can take my final salary pension at 55.
9.2k (rises with CPI/RPI?) with 60k tax free lump sum.

Or I can transfer out with a value of £375k - which gives approx. 95k tax free lump sum and £280k left for drawdown.


My quick question is - is the transfer out to flexi-access drawdown a better option than the 9.2k from the final salary scheme? I wouldn't need to draw much for the first few years while I'm still working and I reckon I could beat that 9.2k easily. Or am I being daft?

Same pension as I have quoted in my thread just now, same age, but my transfer value is slightly higher. Sort of consistent as values anyway.

https://forums.moneysavingexpert.com/discussion/comment/76018066#Comment_76018066