Could anyone comment on taking a CETV who has done it??

DairyQueen

happyandcontented wrote: »

However, when we analyse it the issue with the DB pension is that it is our money but we will have it drip fed to us and have no control over it and at 25k PA we would only break even if the holder lives for over 30 years.
...

For argument's sake if we simply stuck the whole lot into (several) interest bearing accounts or even premium bonds (which we won't do!) it might gain us 2%PA which would just about keep pace with inflation and be safe from the vagaries of the markets but give us control over how and when we use it. Ditto, very safe, cautious investments inside a SIPP. The returns may not set the world alight but we would have control and relative safety for the cash pot. Conservation of the pot not growth would probably be our main concern if we went down the transfer route.

But you aren't taking inflation into account. Assuming the £25k is index-linked (up to 5% seems to be the standard), and assuming average inflation at 3% over the course of the holder's life, then you will hit 'break even' at around 21/22 years after it goes into payment.

Also, if transferred the £800k would remain pension-wrapped. You could take the £200k TFC and invest at retail savings rates but the rest would be subject to the measly rates available within the SIPP wrapper. Unless you took a gigantic tax hit and withdrew the lot, and also lost the exemption from inheritance tax.

Some platforms give zero return on cash and others (like HL) only offer around 0.25%. The balance in the pension wrapper would therefore be ravaged by inflation.

In order to compare the real value of the two options you need to be very realistic. I know it's tempting to egg the outcome that you favour but it may cost you dear.

happyandcontented wrote: »

Spousal pension is 12k if the pension is already in payment and simply the return of premiums if death occurs before that.

I agree that the widow/er couldn't live on 50% of the income but add the survivor's own SP and a drawdown top-up from the remainder of the pot, and it would still give a pretty decent income.

happyandcontented wrote: »

So, in essence, although the probability may be that one or both of us lives to extreme old age we are gambling a lot of money on that premise. We may actually fall into the same category as several of our friends who had short illnesses from a previously healthy base and died prematurely.

The inverse is that, against the odds, you would be betting that neither of you live into late 80s and beyond.

Likewise, you aren't gambling a lot of money, you are gambling a secure, risk-free income whose real value will likely be maintained until the survivor of you dies. Leaving it in cash isn't an option if you wish to maintain its value. It will require managing through all of the markets ups-and-downs and for as long as you both live. It will require some heavy equity-lifting to maintain its real value over the course of your lives.

happyandcontented wrote: »

Logically, that is probably not the way to look at it, and maybe for the very financially savvy they ring alarm bells, but try as we might those thoughts do intrude.

I sense that you know that you are talking-up the risky option. I found myself doing exactly that when it was my turn. The difference being that I am highly unlikely to live to see 80, and 75 is optimistic. Plus we have OH's comfy DB and the SPs. Those two factors dramatically change the odds and the level of risk for us.

You are in an excellent position - £400k of current assets, plus mortgage-free house, plus the prospect of another £200k (condolences, btw, I just lost my mum-in-law), in addition to around £43k guaranteed income. You can do everything you want and without taking a big risk on the mainstay of your retirement income. If you both die younger than anticipated there will still be an inheritance but if you match/beat the longevity odds you may be thanking your 60-year-old self if you resist temptation.

Is it worth a chat with an IFA? I think if you went through the advice process it may be worth the few grand it would cost as s/he would better illustrate the pros and cons. This will be the most important decision you ever make and you need to be as well-informed and neutral as possible.

Good luck.

[Deleted User]

DairyQueen wrote: »

Is it worth a chat with an IFA?

Good luck.

Let me save you ten grand.

No.

shinytop

ZingPowZing wrote: »

Let me save you ten grand.

No.

Although I may not agree with what you say I thought this was quite funny .

savingholmes

I have DB pensions myself so find all this interesting. My understanding is that you are required to take IFA advice before you are allowed to transfer anyway. I think if you are so risk averse that you would want to put your funds into low yield accounts to keep them safe - you are likely to struggle with market volatility. Our current plan is to build up a DC pot in a SIPP so we can have the freedom you are talking about. Like you I find the lack of inheritability of a DB plan frustrating - so will keep that under review - however it is lovely to know that we will have a portion of our retirement income that should be guaranteed despite fluctuations in the stock market

happyandcontented

As I have said previously we have had a chat with 3 advisors and they all 'informally' advised us differently.

Our DC pot is with HL and it isn't performing brilliantly as far as I can see, and given the advice further up the thread re issues arising with HL( some of which mirror our own first-hand experience with them this far)I feel it is unlikely we will use them for the mandatory DB review.

LHW99

With any DC pot, whether with HL or another, its firstly what the pot is invested in, who it is with tends to be secondary.
That said when we asked an IFAto look at our provision a few years back, changing to a cheaper DIY provider than HL was a suggestion.

jamesd

DairyQueen wrote: »

But you aren't taking inflation into account. Assuming the £25k is index-linked (up to 5% seems to be the standard)

Can be 0, 2.5, 5, unlimited (most public sector). Many will have GMP at 0 as part. It's something to check to make a better comparison.

DairyQueen wrote: »

The inverse is that, against the odds, you would be betting that neither of you live into late 80s and beyond.

State pension deferral and eventual annuity buying can often cover that well. Each deferring for five years probably increases each state pension from £8767.20 to £11309.68 or £13852.17 after ten years. If some of the DB has no inflation increases that could be matched with an annuity at quite a young age.

DairyQueen wrote: »

Likewise, you aren't gambling a lot of money, you are gambling a secure, risk-free income whose real value will likely be maintained until the survivor of you dies. Leaving it in cash isn't an option if you wish to maintain its value. ... It will require some heavy equity-lifting to maintain its real value over the course of your lives.

That can be change to increasingly guaranteed over time. 50% equities is sufficient and that implies 25% maximum drop in a bad year.

232607

Going back to the original subject title.
I’m satisfied with the transfer I did about 4,1/2 years ago.

Our Co shut down the BD & replaced it with a generous DC scheme.
As part of the transfer process, I sat on a committee to oversee the change & this was the best decision I ever made.
The Co encouraged us to spend about 10 hours P/W over a 3 month period, taking time to become familiar with pensions and answer members questions.

This time spent along with help from this forum & book reading helped me become confident enough to build my own portfolio & manage things myself.

I transferred out approximately £280k & didn’t have to use an IFS. The receiving scheme (Standard Life) had a brief window where they accepted transfers without IFA involvement just before it became mandatory.
I did loads of calcs myself & was happy with the figures & the critical yield needed to match the DB

Fast forward to today & the pot is sitting at £505k courtesy of £150K investment growth & new money added.
This puts me nicely on track to finish at 55 (just over 2 years time) as my target for then was £500k. There’s still about £50k of new money to be added over this period so there would have to be a drop for me to have to continue after 55.
Always possible but hopefully not.

I’m fortunate that I have a section 32 pension to take at 65, then the full SP at 67 and this will form my core income.

For me the 2 key points in doing the transfer we’re:-
(A) Making sure I had core guaranteed income so I couldn’t end up in the soup.
(B) Make sure I’m fluid in my plans until the section 32/SP kicks in, IE I could reduce my withdrawal rate and/or return to work in some capacity if the DC was being depleted too rapidly.