Taking DB pension and putting it into SIPP

greatkingrat

Lets say you do end up with 300k in a SIPP plus 15k pa pension.

Is that really better than say 150k in a SIPP plus 25k pa pension?

Pursuit

its 300k at 62 and hopefully 350k at 65. Is an extra 200k better than 10kPA....yes of course and probably the reason why most people take the lump sum and a significantly reduced pension.

Audaxer

Pursuit wrote: »

its 300k at 62 and hopefully 350k at 65. Is an extra 200k better than 10kPA....yes of course and probably the reason why most people take the lump sum and a significantly reduced pension.

At 65 an extra £10k a year on your pension, rising at say an inflation rate of 2.5% a year, would amount to £200k in 17 years. So its like the equivalent of a DB pension with a commutation factor of 17:1 and a decision whether or not to take the £200k lump sum. Not an easy choice in my opinion. Lots of things to consider. For example, do you have a spouse that would benefit from probably 50% of the higher pension in the event of your death.

Pursuit

This assumes the 200k does not rise. I do see some of what is being said as making cautious sense. I'm interested in the idea of exploring if both cautious and more risky worlds can be merged by recycling a DB pension. It looks possible but only if I can in fact recycle, if not the tax implications would be off putting as it would savage my pension at 40%

BoGoF

Pursuit wrote: »

This assumes the 200k does not rise. I do see some of what is being said as making cautious sense. I'm interested in the idea of exploring if both cautious and more risky worlds can be merged by recycling a DB pension. It looks possible but only if I can in fact recycle, if not the tax implications would be off putting as it would savage my pension at 40%

And you are assuming the £200k will not fall.

Would be a braver person than me to give up a guaranteed income. I see from your other thread that the original motive to free up pension cash was to help your son get on the property ladder. Is this still a factor?

Pursuit

I took the good advice I received on here and sourced the money using some other avenue. He moves into his first home in 2months time.


No I'm assuming this is a gamble that I can afford to take as I will be reasonably well off either way. Its a gamble that could well leave my children an inheritance among other things.

SonOf

its 300k at 62 and hopefully 350k at 65. Is an extra 200k better than 10kPA....yes of course and probably the reason why most people take the lump sum and a significantly reduced pension.

In many cases, it is actually better not to take the lump sum at the start and take the higher income. The breakeven point is often well before expected life expectancy. However, "many" people fail to calculate the differences and just see the lump sum as money in the bank and don't realise its actually the weaker option.

nigelbb

SonOf wrote: »

In many cases, it is actually better not to take the lump sum at the start and take the higher income. The breakeven point is often well before expected life expectancy. However, "many" people fail to calculate the differences and just see the lump sum as money in the bank and don't realise its actually the weaker option.

Many people want the cash lump sum for special retirement spending e.g. holiday(s) of a lifetime, motor home etc.

Pursuit

nigelbb wrote: »

Many people want the cash lump sum for special retirement spending e.g. holiday(s) of a lifetime, motor home etc.

Exactly, everything is not about what is financially the most prudent thing to do in the long term. It probably would make more sense to borrow the money for such things but generally people do not borrow, they take the cash.


I like the idea of leaving my children something, neither one of them has a pension worth a jot.

Audaxer

Pursuit wrote: »

Exactly, everything is not about what is financially the most prudent thing to do in the long term. It probably would make more sense to borrow the money for such things but generally people do not borrow, they take the cash.

If people have got plans for some big expenditure on retiring, like buying a motorhome etc, I think taking a lump sum to pay for it makes more sense than borrowing the money to pay for it. That is of course if you can afford to live on the reduced pension if you take the lump sum.