Transfer out are we missing something

Bhodigirl

Hi  I would be interested in your opinion, hubby has a deffered DB pension from where he works, a number of his colleagues with the same pension have transferred out there cash value, they have taken advice and decided to do this, all are really happy and  say they are getting fantastic returns. Ww have been reluctant to go down this route as it makes us nervous not having a regular income. Some background , we are both 59, I have a pension of £5800 per annum which came from a DB penison and has annual incriments, when we retire we will have no debts, not much savings and about 70k in dc schemes we are currently paying into, we hope to retire aroung the 62 mark, below are the figures from hubbys pension, I suppose what I am asking is, are we missing out not doing what others are doing as they seem really happy, we are confused. The transfer value is 600K.
Retire Age 60  
Lifetime allowance  38.03%
,annual income £15047.04
Tax free lump sum £100312.97
Spouse pension on death £9702.24
PIE annual pension £16212.48
PIE lump sum £108082.00
Pie spouses pension £11250.00
PIE crossiver age 65 years and 10 months
PIE break even age  72 years 8 month 
Retire Age 65 
Lifetime allowance  50.03%
,annual income £19792.92
Tax free lump sum £131951.77
Spouse pension on detah £13400.76
PIE annual pension £20868.96
PIE lump sum £139125.30
Pie spouses pension £15124.68
PIE crossiver age 70 years and 10 months
PIE break even age  76 years 8 month 
I understand what pie is but not really how it fits with the crossover age, does it mean after he age of 70, he will start to miss out.
Just one more thing to add, the deferred DB scheme carries enhancement for ill health early retirement, hubby has a health problem at the moment which although is not life threatening in anyway could prevent him doing what is quiet a physical job in the near future, although we hope it doesnt come to that.
Thanks very much if you can offer any advice in any way. I know from reading other posts there is really knowledgable people on here.



 

Gary1984

If we assume he'd go at 60 (non pie) then once we allow for the £100k lump sum the choice is between £15k p.a. or £500k pension fund. To match the £15k you'd need to achieve a 3% drawdown increasing with inflation. This is doable but why take the risk? Look what's happened to the market's this week! 

The only reason I can think of is if you're worried you'd significantly outlive him but even then the spouse's provision is decent.

Might be worth checking what you get though if he dies before retiring? Some schemes are just 4x salary or a return of contributions. This is a reason why some people transfer but I think life insurance usually makes more sense.

If I were you I'd get him to take the pension and lump sum at 60 giving you a guaranteed combined income of £21k. Then use the lump sum and DC to take a further £19k a year giving a total income of around £40k. Replace the additional £19k with state pension when it kicks in. Get a state pension forecast and buy any missing years to get the full whack if you don't qualify already. Get him to retire this year, you'll never get the time back. This is doubly true if he's in poor health. 

ffacoffipawb

Out of interest, what is pie in this context?

How much escalation is being given up?

Dox

Pension increase exchange. See https://www.thisismoney.co.uk/money/pensions/article-5913849/Should-PIE-Pension-Increase-Exchange-Steve-Webb-replies.html

xylophone

what is pie in this context?

https://www.thisismoney.co.uk/money/pensions/article-5913849/Should-PIE-Pension-Increase-Exchange-Steve-Webb-replies.html

ffacoffipawb

Dox said:

Pension increase exchange. See https://www.thisismoney.co.uk/money/pensions/article-5913849/Should-PIE-Pension-Increase-Exchange-Steve-Webb-replies.html

Yes i worked that out. It seems a very small uplift to forego escalation. I would expect a level pension to be 40% higher than an indexed one. The increase here seems pathetic at about 8% plus an extra £8k tax free cash. No way would I take that unless there was some escalation to the pie pension.

xylophone

Ww have been reluctant to go down this route as it makes us nervous not having a regular income

Then are you suited to taking the risk of giving up the security of the DB pension?

tigerspill

Just out of interest, what are these "fantastic returns" and from where.
Remember when people make decisions like this, they will rarely admit they got it wrong.
I wonder how they feel this week and how their returns have gone.
Do what's right for you.  DB is low risk for you.  If you transfer, all the risk is on you.

Dazed_and_C0nfused

what I am asking is, are we missing out not doing what others are doing as they seem really happy,

They may not be quite as happy after this week's losses.

Albermarle

If you want to transfer then you need to find an IFA with the right qualifications- not easy and expensive.
Most likely they will advise against the transfer ,as the transfer value is not spectacularly high , he is married with no health problems and probably you have little experience of investing large sums of money.
Suggest you go to the search box at the top and put in DB transfer or Final salary or IFA transfer etc as the topic is debated a lot on the forum .
Also have a look at this linkhttps://www.royallondon.com/siteassets/site-docs/media-centre/good-with-your-money-guides/five-good-reasons-good-with-your-money-guide-2018-edition.pdf

ffacoffipawb

The PIE crossover age is the point at which your non pie pension is the same amount as the pie pension.

The break even age is when the total past payments are the same. Pie is worse after this age.