Transfer out 2 small DB pots?

notyourrealname

Hi all, I will try to keep this short but give you enough to go on...
I have 2 small DB pots from previous jobs. The CETV values are £27k and £20k.
So, my understanding is because these are both under £30k I can transfer out of them without having to speak to an IFA and add them both to my current DC pot.
Of course the question is, should I?
I am almost 40 and paying approx £700/pm (inc. emp. cont'b'n) into a DC scheme. Balance last time I looked was about £65k.
Would be great to retire at 60 and will probably go down the drawdown route as there is a history of heart disease in the family and neither of previous 2 generations of males have made it to retirement! However, I am fitter and healthier than they were, so fingers crossed I will last a bit longer.
In terms of overall household, my wife is in a DB scheme that, if she were to stay in until 65, would pay approx £25k/annum without taking a lump sum.
This amount would more than cover a furgal-but-OK lifestyle but I don't want to be reliant on that for all of the obvious reasons (leaves job, leaves me, dies) and also just becuase I don't want to be sponging off my wife.

I suppose my thinking is that the 2 DB pots would give such a small amount (approx £2k/annum from 65) of my overall pension provision that it might be better to move them to the DC pot and the money would (probably) grow more. On the flip side, I lose the guaranteed income, however small.

Thoughts?

xylophone

With regard to the DB pensions, when exactly were you working for these companies?

Do you have statements of deferred benefits for each at the time of leaving employment?

If so, what do they say?

Have you obtained a state pension forecast?

https://www.gov.uk/check-state-pension

What exactly does it say?

With regard to a transfer of these sub £30,000 pensions, regardless of the "no need to obtain advice", you may find that your chosen receiving scheme will not accept the transfers unless you do.

Silvertabby

CETVs are meaningless without details of the pension given up. ie, annual pension, indexation, NRA, etc.

Brynsam

notyourrealname wrote: »

I suppose my thinking is that the 2 DB pots would give such a small amount (approx £2k/annum from 65) of my overall pension provision that it might be better to move them to the DC pot and the money would (probably) grow more. On the flip side, I lose the guaranteed income, however small.

Does that include revaluation in deferment - and what about increases once in payment?

notyourrealname

xylophone wrote: »

With regard to the DB pensions, when exactly were you working for these companies?

Not sure how exact it needs to be but DB1 was from 2002-2004 +/- 2 years each way. DB2 was from 2008-2012.

xylophone wrote: »

Do you have statements of deferred benefits for each at the time of leaving employment?

If so, what do they say?

It has been a while since I looked at them, but from memory DB1 (which has the CETV of £20k) is about £800/annum from 65.
DB2 (CETV £27k) is about £1200/annum.
Hence my comment in the OP about them being worth about £2k/annum income, sorry if I didn't make that bit clear.

xylophone wrote: »

Have you obtained a state pension forecast?

[link removed]

What exactly does it say?

Again, this is not going to be 100% exact as it was a few months ago, but for the purposes of answering your question, it said I had about 15 or so years left of contributions to claim the full state pension from 67.
At the moment, I am not including the SP in my numbers since I suspect the retirement age may increase again before I get there.

xylophone wrote: »

With regard to a transfer of these sub £30,000 pensions, regardless of the "no need to obtain advice", you may find that your chosen receiving scheme will not accept the transfers unless you do.

That is a very good point, I suppose that should be my first port of call.

Thanks.

Brynsam

notyourrealname wrote: »

It has been a while since I looked at them, but from memory DB1 (which has the CETV of £20k) is about £800/annum from 65.
DB2 (CETV £27k) is about £1200/annum.

That is a very good point, I suppose that should be my first port of call.

Your first port of call should be finding out what they will pay at 65 - a point you've not answered. The dates you've given indicate that both pensions will revalue in deferment, so blithely saying they'll pay about £2K pa ignores both revaluation in deferment and increases in payment. Find out what you're giving up before you decide to give it up!

If you are still intent on transferring out, your preferred receiving scheme needing a positive recommendation is irrelevant if you transfer to a stakeholder pension scheme (the only UK registered pension arrangement which must accept transfers from any other UK registered pension). You can then transfer from the stakeholder pension to your preferred arrangement - DC to DC transfer so no advice needed, and stakeholder pensions have no exit fee.

xylophone

The figures that you give in your post above are those shown on your statement of deferred benefits at date of leaving in 2004/2012?

Your benefits must by law revalue in deferment.

Are you receiving annual statements from each scheme?

The statutory factors are shown here


https://www.barnett-waddingham.co.uk/comment-insight/blog/revaluation-for-early-leavers/

but your scheme may be more generous. You will not have a GMP because your years of service post date 1997.

How does the pension escalate once in payment?

notyourrealname

Brynsam wrote: »

Does that include revaluation in deferment - and what about increases once in payment?

Silvertabby wrote: »

CETVs are meaningless without details of the pension given up. ie, annual pension, indexation, NRA, etc.

OK, dug out the paperwork.
DB1: Looking at a statement from 2016 "Deferred member benefit statement"...
Deferred pension at date of leaving (2005): £652p.a.
There is also a revaluation as at 2016 of £858p.a.
Says it will increase "in line with Scheme rules" both prior to and during retirement.

DB2: At time of leaving in 2012: £1383p.a.
Says it will be revalued "in line with Statutory Increases" up to 2.5%.

Is this what you mean by indexation?

In the DB2 scheme there is also a "Retirement account" which has a value of £5k. This appears to have come from AVCs but I confess I really didn't pay any attention to that at the time. Is that a DC lump???

So, I'm none the wiser as to whether any of that influences my decision!

The NRA for both is 65.

xylophone

Says it will increase "in line with Scheme rules" both prior to and during retirement.

And what are those rules? Do you have the scheme booklet? If not, ask the administrator.

"in line with Statutory Increases" up to 2.5%.

See link in my previous. How does it escalate in payment? Do you have the scheme booklet? If not, ask the administrator.

In the DB2 scheme there is also a "Retirement account" which has a value of £5k. This appears to have come from AVCs but I confess I really didn't pay any attention to that at the time. Is that a DC lump???

This rings a bell - were you with one of the banks?

At all events, you should check the scheme booklet to see how the "retirement account" can be accessed - only when taking main scheme benefits? Or at age 55? Or at age 55 if transferred to another scheme?

And how is it being invested in deferment?

notyourrealname

xylophone wrote: »

And what are those rules? Do you have the scheme booklet? If not, ask the administrator.



See link in my previous. How does it escalate in payment? Do you have the scheme booklet? If not, ask the administrator.



This rings a bell - were you with one of the banks?

At all events, you should check the scheme booklet to see how the "retirement account" can be accessed - only when taking main scheme benefits? Or at age 55? Or at age 55 if transferred to another scheme?

And how is it being invested in deferment?

I will do some more digging. Don't remember seeing anything more than annual statements so I'll probably have to contact the administrators.

In terms of your queries, what would be "good" outcomes? For example, indexed at RPI? Or something else?

xylophone

In terms of your queries, what would be "good" outcomes? For example, indexed at RPI? Or something else?

In one sense, the "good" outcome is for you to know exactly what your scheme offers before considering a transfer out!

However, it is possible that your scheme offers unrestricted RPI indexing.
Or unrestricted CPI indexing.

Or an increase of x per annum or RPI/CPI indexing whichever is the higher.

Or something else...

It is possible that the AVC could be taken before Scheme NRA - or possibly not..... research is required.

You need to consider what a guaranteed income (albeit modest) is worth to you in retirement.

And this is probably why some receiving schemes may refuse to accept an "advice not required DB transfer"... they can't be sure that the transferor has done any due diligence at all and don't want to be on the hook for a poor decision?