Big DB Multiplier

ffacoffipawb

Asked one of my deferred pension providers for an early retirement quote. Pension is £9,200 approximately.

PCLS of £48,000 and reduced pension of £6,900 available instead.

Transfer value has been provided, wait for it ... £399,000 approximately.

That's a 42x multiplier.

Given I have just crystallised 70% LTA this would take me over LTA which I wouldn't do anyway.

However could get a pension of £16,000 from this transfer value assuming a 4% SWR.

This multiplier must be a record?

MallyGirl

my only DB pension is offering 48x
£1875 pa or transfer value of £90,000.

The advice I would have to pay for (if I could find anyone to do it) would eat a big bite out of that so I haven't bothered

jamesd

Not a record but well at the upper end and far above the 30 or 32 times I might currently use before I know actual values.

Likely to have some combination of these to get that high:

1. high spousal benefit
2. scheme members with high life expectancy: office working professions rather than manual labourers
3. no or little GMP without inflation increases
4. RPI explicitly specified so CPI can't be substituted or maybe something more generous

ffacoffipawb

jamesd wrote: »

Not a record but well at the upper end and far above the 30 or 32 times I might currently use before I know actual values.

Likely to have some combination of these to get that high:

1. high spousal benefit
2. scheme members with high life expectancy: office working professions rather than manual labourers
3. no or little GMP without inflation increases
4. RPI explicitly specified so CPI can't be substituted or maybe something more generous

1 yes, spouse is £7,000 regardless of option taken
2 yes, boring office job
3 yes, GMP is about 15% of the total, 4.5% fixed rate revaluation
4 yes, RPI linkage in deferment and payment, GMP different obviously

Full house, lol

Seems strange that PCLS is only £48,000 whereas 25% of the transfer value is about £75,000. Seems inconsistent.

Albermarle

Is it correct to calculate the multiplier from a pension that will be taken early and therefore reduced ?
I thought you had to base it on the projected pension at NRD ?, which would reduce the multiplier .

The CETV offered is the same whether you want to take it early or not .

Audaxer

ffacoffipawb wrote: »

1 yes, spouse is £7,000 regardless of option taken
2 yes, boring office job
3 yes, GMP is about 15% of the total, 4.5% fixed rate revaluation
4 yes, RPI linkage in deferment and payment, GMP different obviously

Full house, lol

Seems strange that PCLS is only £48,000 whereas 25% of the transfer value is about £75,000. Seems inconsistent.

The PCLS at £48,000 is actually quite good if you did decide not to transfer. Going by your figures the commutation factor works out at 20.87, which means you are getting nearly £21 of lump sum for every £1 of pension given-up.

It is however a tempting transfer value, but I would think its safer considering it on a SWR of 3% rather than 4% as there is sequence of returns risk to consider, especially if we have a poor first decade of returns.

ffacoffipawb

Albermarle wrote: »

Is it correct to calculate the multiplier from a pension that will be taken early and therefore reduced ?
I thought you had to base it on the projected pension at NRD ?, which would reduce the multiplier .

The CETV offered is the same whether you want to take it early or not .

Yes. Compare the CETV now and a withdrawal rate with the early retirement pension, also payable now.

Makes less sense to compare a known CETV now with an unknown projected pension to a future date.

ffacoffipawb

Audaxer wrote: »

The PCLS at £48,000 is actually quite good if you did decide not to transfer. Going by your figures the commutation factor works out at 20.87, which means you are getting nearly £21 of lump sum for every £1 of pension given-up.

It is however a tempting transfer value, but I would think its safer considering it on a SWR of 3% rather than 4% as there is sequence of returns risk to consider, especially if we have a poor first decade of returns.

Only have £320k of LTA left, so an LTA charge on the rest. No thanks.

FatherAbraham

ffacoffipawb wrote: »

Asked one of my deferred pension providers for an early retirement quote. Pension is £9,200 approximately.

PCLS of £48,000 and reduced pension of £6,900 available instead.

Transfer value has been provided, wait for it ... £399,000 approximately.

That's a 42x multiplier.

Given I have just crystallised 70% LTA this would take me over LTA which I wouldn't do anyway.

However could get a pension of £16,000 from this transfer value assuming a 4% SWR.

This multiplier must be a record?

4% is a WR. Not a SWR.

ffacoffipawb

FatherAbraham wrote: »

4% is a WR. Not a SWR.

I did use the word "assuming".

jamesd

ffacoffipawb wrote: »

Only have £320k of LTA left, so an LTA charge on the rest. No thanks.

If all 320k was available for exclusive use for the 399k it could still be quite attractive. But that spousal benefit is also excellent and merits careful consideration