Defined Benefit Nonsense

Eleflump

I am 58 years of age and although daily health is good I have number of serious underlying health conditions all of which would increase my annuity expectation upon retirement.

I have a large Defined Benefit pension pot from a previous employer. Unfortunately my wife and I recently ran up some debts helping the children out.

I am fortunate enough to have a number of pension pots from previous roles and have these invested with some private providers. I decided for three reasons to move my defined benefit scheme to one of these and take my tax free lump sum.

My rationale was:

Given my ill health should I die prematurely my wife would only receive a fraction of my money in the DB pot.

Should this happen in the short term (next 5-10 years) some of my debt would still be present and need payment from my estate which with the point above would further reduce her financial security.

Finally I am still working in a very well paid Job with very large 6 figure bonuses due in circa 5 years time. Provided we don't have the worry of the debt it would make tax sense and personal sense to "restore" any amounts taken tax free back into a pension pot and in fact I believe I could double any amount taken tax free as a minimum possibly more.

So now the problem - none of my existing Pension Managers want to touch this.

In addition speaking to some friendly IFA's they are unwilling to touch this because of the risks on their indemnity insurance and the huge levels this has recently been increased by.

The net result is that unlike the Government plan I still don't really have control of my Pension in the way I want as a responsible Adult. Surely this is a nonsense ???

I would welcome any advice or thoughts folks.

Dazed_and_confused

Although the ill health element has the potential to make this a more sensible proposition the lack of any actual numbers makes it difficult for anyone to make much of a meaningful comment.

wjr4

Why don’t you repay the debt using your salary if you are in a very well paid job? When you say ill health, is this life limiting?
FYI, If you die within 2 years of transferring your DB pension, knowing you are in ill health, it can be included in your estate for IHT purposes.

Eleflump

Thanks I am still waiting on final confirmations but I believe the fund transfer value to be in the region of £400k with a potential pension of around £15,000 PA at age 65.

In the event of death payment is 5 times annual payment amount so 5 x £15,000 plus a 40% pension payable to my wife.

Does that help.

Eleflump

Thanks and ultimately that is possible but will be over time.

My concern is that looking at the death benefits should something happen to me in the next circa 5-10 years there is a huge loss of fund for my wife. Death Benefit is circa £75,000 plus a pension of circa £6,000 per annum from a Pot I believe to be in the region of £400,000.

So it would take 54 years for her to get access to the amount we currently have in the pot which seems nuts (although I am not that bright so may be missing loads

xylophone

Why not combine the DC pensions and just take the 25% PCLS, leaving your DB alone?

LHW99

Death Benefit is circa £75,000 plus a pension of circa £6,000 per annum from a Pot I believe to be in the region of £400,000.

A DB pension is not a pot, it is a promise to pay in the future. You are offered a sum of money (CETV) to give up that promise.
Is your spouse likely to be happy being left with a large sum to manage as she gets older, does she have experience of investing?

Eleflump

Hi Thanks that’s a helpful and fair point. I am still getting my head round this but we have some investment property and my wife is quite switched on. Much of our death planning is in trust with appropriate advisors so I would hope that the idea is maximise options. I guess the main thing for me is that I am not sure I would live past 80 so given that we would maximise the investment by taking the money now. Don’t know if that makes sense? And thanks for your constructive reply.

Brynsam

If the 'friendly IFAs' to whom you've been speaking won't undertake the necessary work (assuming they are actually authorised to do so), find another one who will.

Don't understand your comment about your 'current Pension Managers' - you may have pension providers and fund managers, but it's rather premature to say they won't touch it before you have received the appropriate financial advice. How do they know it is unsuitable for you to transfer? Not the sort of call providers make (and the fund managers aren't party to such a transfer anyway).

SonOf

The net result is that unlike the Government plan I still don't really have control of my Pension in the way I want as a responsible Adult. Surely this is a nonsense ???

There was no Government plan with DB schemes. The changes were about DC schemes.

Historically, in 9 out of 10 cases, people were better off staying with the DB scheme. There was a period between 1988 and 1993 when people thought it was a no brainer to transfer and it was only with hindsight that it turned out not to be the case.

So now the problem - none of my existing Pension Managers want to touch this.

What do you mean by a pension manager as its not a recognised term?
If you mean product provider then they wont touch it without an IFA or FA signing off on it.

In addition speaking to some friendly IFA's they are unwilling to touch this because of the risks on their indemnity insurance and the huge levels this has recently been increased by.

Only around 1 in 10 IFAs will do DB pension transfers. So, statistically, you may need to speak to a good number to find one that does.