To transfer final salary pension or not?

rob3001

So my final salary pension fund have offered me an enhanced transfer value to tempt me to transfer out of the scheme.  It is an extremely good offer, around 50 times my yearly pension.  £440,000 for a £8200 year pension.  It is also available to take at 50, which will be later this year. I was made redundant from the company when it closed and this was a condition put in place, and is protected if I transfer out. 
I know that the £8200 pension is guaranteed for life and that is the point advisers make but I can see a potential here to increase my retirement benefits or retire early .  I can transfer out of the scheme, take a 25% lump sum of £110,000 and take from that the same amount tax free as I would have got from the final salary scheme.  This would last me until I am nearly 65. If I stay in the scheme I  would pay 40% tax on the £8200 all the time I was still working which would reduce it to £4920.  At age 65 the £330,000 remaining after the 25% lump sum was taken would have been invested for 15 years so would have the potential to grow......or not.  If it was still worth £330,000 at this point then I could drawdown and take £16,500 a year which would take me to 85, if I was still alive.  At 85 my final salary pension is predicted to be around £12,000.

I have spoken to an adviser who said to stay in the scheme because its guaranteed. He did also say that there is potential for my pension fund to increase significantly but that does depend on future stock market performance, and that is what nobody knows and why they don't recommend it.
I have been buying and selling a few shares for 20 years so understand investments can go up as well as down.  The markets have dropped by 25 - 30% recently due to covid-19 , if I bought in now and the markets took 15 years to return to where they were at the beginning of the year that £330,000 could be worth around  £420,000.

 It seems to me like a good opportunity, the timing of the offer couldn't be better.
Am I looking at this wrong?

I should point out that this is not my only form of retirement income so I am not totally reliant on it. 

wjr4

What else will you be living on in retirement? Also, will you still be able to take at 50 if you transfer out?

Albermarle

It looks like quite a generous offer , although they tend to appear more generous when you are still quite a few years away from the normal retirement age as the annual pension has been reduced and the CETV has to last more years.
I guess you know that you will have to find an advisor who is a pension transfer specialist and pay them a few grand. Then most likely they will advise you not to transfer as this is the safest option. You can still transfer but many pensions provider will not accept the transfer . The problem is everybody is scared that your transfer will not work out and you will come back to sue them in 20 years time. There are some experts on the forum who will be better placed to comment on the detail.

rob3001

I have another pension that is not final salary which will be worth around £8000 a year, plus a couple of properties that are rented out. I also have £200,000 of ISA’s.
There will be no fee’s to pay if I did transfer out as these are being paid for by the company I used to work for.  The advisor I have spoken to is from a company that provides pension advice that has been appointed to Deal with this.  Yes the advice was to stay put as it’s the safe thing to do.  

Really dont know what to do

rob3001

Forgot to say that if I do transfer out I can still take pension at 50

Thrugelmir

Was the CETV given before the recent crisis came to the fore? 

Brynsam

rob3001 said:

I have spoken to an adviser who said to stay in the scheme because its guaranteed. He did also say that there is potential for my pension fund to increase significantly but that does depend on future stock market performance, and that is what nobody knows and why they don't recommend it.

If it's a final salary scheme, the investment performance of the fund won't alter the promise made to you in terms of the pension you would receive from the scheme. 

Advisers are running scared of advising in favour of transferring out, and are working on the basis that if they advise people to stay put, that's the safest bet for them as advisers. There will be a resounding chorus of disapproval on this website when I make the comment that such advice may not always be in the best interests of the member!

rob3001

In a previous comment I have said that the advisor recommended to stay in my present scheme because it is guaranteed but what I didn't word very well  was that he also said that if I did transfer out there is potential for the value of the fund to increase significantly but this depends on the future performance of the stock market.
Yes, the CETV was given at the end of January just before the crisis hit.

Prism

rob3001 said:

Forgot to say that if I do transfer out I can still take pension at 50

Are you sure about that. I was under the impression that if you transferred out of a scheme that allows early access like that you would lose those benefits once the money arrived in a SIPP or IFA managed pension.
Also you don't seem to be calculating future inflation into your calculations. You say for example you might take £16500 per year in around 15 years but that will likely be worth a fair bit less by then. Then you need to increase that amount each year in line with inflation. 
Also the markets have no longer dropped by 25-30% - a diversified fund is maybe around -7% this calendar year. Not that it should put off an investment, but its a very uncertain time.

wjr4

Have you actually received a written report with advice? As you’re leaving it really late as CETVs are usually only guaranteed for 3 months. 

How would you feel if your pension fund fell to say £250,000 after transferring (and after taking the tax-free cash)?

rob3001

Prism said:

rob3001 said:

Forgot to say that if I do transfer out I can still take pension at 50

Are you sure about that. I was under the impression that if you transferred out of a scheme that allows early access like that you would lose those benefits once the money arrived in a SIPP or IFA managed pension.
Also you don't seem to be calculating future inflation into your calculations. You say for example you might take £16500 per year in around 15 years but that will likely be worth a fair bit less by then. Then you need to increase that amount each year in line with inflation. 
Also the markets have no longer dropped by 25-30% - a diversified fund is maybe around -7% this calendar year. Not that it should put off an investment, but its a very uncertain time.

Yes I have double checked and because the retirement age of 50 is protected as long as the transfer is done as a block, with other pensions in the same scheme the pension can still be taken at 50.
I understand what you are saying about future inflation but after taking this into account it will still be £2000 a year more than my final salary pension is predicted to be worth at the same time.