Thoughts on small FS pension pot?

Skinnydad

I was hoping to receive some advice if possible. I’m currently in receipt of 2 pensions and I have a medium sized SIPP (250K). I’m not in receipt of my state pension yet. I also have a very small FS pension. I can receive this pension at £1700 pa or reduced with lump sum at £1300 pa. The transfer value is circa 59K. What I was wondering is should I take £1700 pa or look at transferring the 59k into my SIPP if possible. My thoughts are that if I lived for another 25 years I’ll have taken 42,500 from the scheme. However if I die my spouse will receive 850 pa (£70 PW).

If I move it into my SIPP there may be greater access to the fund if anything happens to me.
I understand that there’ll be advice fees to be paid etc.

I can provide any further information if required.

Any advice would be appreciated…

Thank you..

Marcon

Which matters more to you (and indeed your wife): a guaranteed income in the shape or regular payments from your FS scheme, or flexibility without any guarantees?

Albermarle

I understand that there’ll be advice fees to be paid etc.

This could be as high as 10% of the transfer value.
If the advice is not to transfer , it can be tricky to go against this ( but not impossible)
The chances are that your current SIPP provider will not accept the transfer with a negative recommendation .

If I move it into my SIPP there may be greater access to the fund if anything happens to me.

This is true but you already have much larger SIPP fund anyway .

My thoughts are that if I lived for another 25 years I’ll have taken 42,500 from the scheme.

Normally the annual payment increases with inflation and you are not taking this into account.

Ceme3000

Skinnydad wrote: »

My thoughts are that if I lived for another 25 years I’ll have taken 42,500 from the scheme. However if I die my spouse will receive 850 pa (£70 PW).

Assuming your £1700 increases by 2% per annum then you have taken £54451 over 25 years. At 3% it would be £61980. Is your spouse younger, or likely to outlive you by a number of years? It's all worth considering.

Skinnydad

Thanks for the responses..you've given me food for thought. I'm just thinking along the lines of £140 a month is not a worldly sum and that I could make more positive use of it due to the high transfer value. this would push my SIPP above 300K and I'll be going into a drawdown phase soon...

With my spouses income we are financially solid..

Yes 10% would take 6K off the top..it's a quandary that's all..

I've not had any advice yet, I'm just looking for input..

xylophone

I also have a very small FS pension.

Have you reached Normal Scheme Pension Age ( or an age at which the Scheme permits benefits to be taken without actuarial reduction)?

Does the pension include any pre 88/post 88 GMP?

How does the pension increase once in payment?

Albermarle

due to the high transfer value

Often the Multiple is used as a guideline - means annual pension income divided by the transfer value .
Yours is nearly 35 . Probably a little higher than average but not uncommon.
This assumes that the pension increases with inflation every year and there is a 50% spouse payment on your death.
As the advisor cost will be relatively large compared to the size of the pot on offer , this will effectively decrease the multiple.

Skinnydad

Yes the schemes official Pension age was 60. I'm 62 this year. for every year I don't touch it. It'll increase by 7%

As far as pre 88/post 88 GMP is concerned I have no Pre 88 but have Post 88. I also see on the statement excess over the GMP pre 6 April 1997. Whatever this means

Not sure how it increases after payment. before aged 65, It'll increase each January based on RPI. 3% max 5%. After 65 approx. 3% fixed

The issue was do I take the pension till I die with a spouses pension of 50% till she dies or do I see if it is possible to transfer the money into my SIPP?

Thanks

LHW99

You could always take the pension but put the money into your wife's SIPP for future use, if its not needed immediately. Could give a middle option.

xylophone

When you left, you were given a statement of deferred benefits.

What is the figure shown for post 88 GMP and excess?

It is the GMP that is increasing by 7%?

Although the scheme NRA is 60, the excess is still increasing in deferment by a minimum of 3% and a maximum of 5%?

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

After GMP age the scheme has the obligation to increase the GMP in payment by up to 3% CPI.

Are you saying that the excess will increase by a fixed 3% every year regardless of inflation?

If you wish to transfer out to a DC pension, you need to find a Pension Transfer Specialist to advise on the transfer - this will not be cheap.

https://www.pruadviser.co.uk/knowledge-literature/knowledge-library/pension-transfers-conversions/

You would need to check whether your SIPP provider will accept a DB transfer, whether or not the PTS gives a positive recommendation.

Otherwise you would need to find a scheme to accept the transfer and then transfer on to your SIPP.

You might consider taking the monthly payment from the pension and (even if you have no relevant earnings) pay it into your SIPP as it would be less than £2880 per annum?

DairyQueen

Skinnydad wrote: »

Yes the schemes official Pension age was 60. I'm 62 this year.

It's a common rule of DB schemes that transfers are not permitted once a member is within a year of NRA (normal retirement age). As you are now two years above NRA it may be worth checking whether this rule applies to your scheme.