DB pension benefits equivalent.

3stones

I have been discussing pensions with my working twenty something children. Between my DW and myself we have DB 4 pensions all with 50% spousal benefits, all are payable from 55 but we plan to take them at 60 as reluctant to take a 5% hit pa. My questions is how much at current rates approx would someone need in a SIPP or DC pension scheme pot to equal those DB benefits? I'm guessing around £400K they would need but I am not really sure.

Dazed_and_C0nfused

Neither is anyone else given you haven't mentioned how much these DB pensions would be paying at 60  

kuratowski

You didn't say how much the pensions are?  Anyway you can use annuity rates to get a rough idea.  I.e., a guaranteed income from age 60 increasing at 3% a year with widow's benefits will be £2,278 per £100,000 of pot (this is from the hargreaves lansdown best buy table).

So, if your combined pensions are now worth £20,000 pa then your children would need to amass £877,963 in order to approximate those DB benefits.

Triumph13

I'm not surprised you've lost count of your children if you have more than twenty of them!
(Sorry, I couldn't resist)

3stones

Twenty children, sorry poor grammer, what a berk!  The missus has the news on so having trouble concentrating.
Anyway DB benefits £24k tidy but appreciate not as much as many on here,

Dazed_and_C0nfused

So £1,053,555 then per kuratowski's HL best buy example.

kuratowski

Exactly as Dazed_and_C0nfused says.  The annuity price is the closest match for DB as it's a guaranteed income.

An alternative viewpoint could be to consider a drawdown strategy whose "safe withdrawal rate" would yield an equivalent income.  But then we would start the argument about what the safe withdrawal rate should be.  But it would always be cheaper than an annuity as you have no guarantee not to use up all the pot before you die.

Dazed_and_C0nfused

Your original £400k thought would only bring in £9,112.

Albermarle

An alternative viewpoint could be to consider a drawdown strategy whose "safe withdrawal rate" would yield an equivalent income.  But then we would start the argument about what the safe withdrawal rate should be.  But it would always be cheaper than an annuity as you have no guarantee not to use up all the pot before you die.

The OP asked what size of DC pot would be the equivalent of £24Kpa , so I think we should also provide an approx. figure of what size pot could be needed to operate  a reasonably safe drawdown strategy, as well as providing the guaranteed annuity sum needed. 

I think somewhere in the region of £700K to £750K ( for a drawdown strategy) 

JoeCrystal

3stones said:

Twenty children, sorry poor grammer, what a berk!  The missus has the news on so having trouble concentrating.
Anyway DB benefits £24k tidy but appreciate not as much as many on here,

Maybe not but having £24k plus the state pension will put you quite high up in term of income. It does highlight the value of these DB pension schemes, especially when it is the employers that bore a vast majority of the cost of it rather than the employees.

Albermarle

Your original £400k thought would only bring in £9,112.

As usual with other posters, the OP has vastly underestimated the value of his guaranteed inflation linked DB pensions.

It seems people hardly ever realise the value , and cost, of the inflation linking over 30 years +, amongst other points.