Transfer valuation from DB Pension - advice

Mick70

Evening all,
I posted a few month ago about dilemma I have and now I have final figures. Any advice is really appreciated.

I have protected rights in a DB pension scheme, recently made redundant after 32 years service (luckily joined pension age 17), I turn 50 Next year and my DB pension will be triggered then . I am still in work currently.
The package will be a £79k lump sum and an annual pension of £26,200 which will rise with RPI each year. Spouse pension is £15,500..

However , I have also received a transfer valuation of £1.7M and i think i only have 3 months if want to take this option. I am aware of the LTA tax for funds over £1.055M although I still don't fully understand how it works and its impact . Obviously if this was transferred to a DC pot then I would access it at 55 not 50. As say i'm unsure the LTA impact on the pot and also all the other fees etc involved .
My aim is to retire age 58, when my wife will turn 60.
My wife is self employed and only has a small old DC £12k pot and we have £50k savings set aside, target is to try get about £180k (£12k pa pension for say 15 year). We both have state pension when late 60s.

I am just wondering what peoples opinions are on the DB / DC figures and what you would do in this predicament as well as any posters who have already been through similar scenarios and if they transferred out or not.

Thanks for taking time to read this.
Mick

Dazed_and_confused

I turn 50 Next year and my DB pension will be triggered then . I am still in work currently.
The package will be a £79k lump sum and an annual pension of £26,200 which will rise with RPI each year

Do you mean you can have the DB pension paid from age 50?

If it is paid from age 50 will the annual pension be £26,200 or will it be a reduced amount?

If £26,200 can be paid from age 50 will the pension increase (other than for inflation) if you defer it for a few years?

Mick70

The pension is protected so Is unreduced (no penalties) And triggers next year (age 50) it cannot be delayed , will be £26,200 p.a and will rise each April with RPI

k6chris

How much income each year do you need for your desired retirement?

Aegis

If your figures are right (not doubting you, but I would want to confirm this with the trustees because of the following), this would be one of the most generous transfer values I've ever seen, almost certainly because of the (very rare) protected retirement age at 50. That certainly isn't the sole basis for looking at a transfer, as flexibility, requirement for both income and lump sum, death benefits, risk tolerance, other provisions, etc, all play major parts, but the transfer value does seem extremely generous indeed.


The easiest way to consider the impact of the lifetime allowance is to work on the assumption that you pay your 25% lump sum to HMRC instead of receiving it tax free.

GunJack

ISTR the OP had a lengthly thread about this not long ago, and even then the unconfirmed CETV was pretty impressive.....

shinytop

If my (similar) DB pension offered £1.7m as a CETV I'd have the transfer forms printed off before you could say "IFA Pension Transfer Specialist"

Albermarle

I am aware of the LTA tax for funds over £1.055M although I still don't fully understand how it works and its impact

A DB pension is treated much more leniently for LTA purposes than a DC one. Especially a DB pension that is taken at a younger age than usual.
Your pension of £26,200 will be multiplied by 20 = £524 K so no issues with the LTA limit.
If you take the CETV , it will take you over the LTA and effectively ( as already mentioned ) you will eventually pay tax on all of it rather than getting 25% tax free as usual with a DC pension.

Personally I have turned down a DB transfer for the usual reasons but with a transfer value that incredibly high , I would have made a different decision. To help me sleep at night I would probably buy an annuity with some of it as soon as I reached 55, rather than leaving it all invested.

Brynsam

shinytop wrote: »

If my (similar) DB pension offered £1.7m as a CETV I'd have the transfer forms printed off before you could say "IFA Pension Transfer Specialist"

..which just goes to demonstrate the wisdom of mandatory advice where the CETV is £30,000+....

jsinc

Very nice dilemma to have - well done for winning at pensions. Do they offer partial transfers?

shinytop

Brynsam wrote: »

..which just goes to demonstrate the wisdom of mandatory advice where the CETV is £30,000+....

sorry, I tried to make a joke. I should have remembered that pensions and humour don't mix.