Transfer preserved final salary pension to SIPP or not?

GazzaBloom

coyrls said:

That's your perspective.  Personally I don't think that doubting that the 20 year returns on your chosen funds will be repeated over the next 20 years is cynical, pessimistic and dismissive.  Your expected returns are relevant to your original post, as that is a critical fact when looking to transfer out of a DB pension.  It is my opinion, although you will not like it, that you are being naive and optimistic but you will see that as cynical, pessimistic and dismissive.

What is naive about believing I can beat 3.5% returns on a small DB pension? A S&P500 tracker will return 6% on average.

What logical reasons you have for doubting that the good funds I have chosen will not continue to perform well? The ASI UK Smaller Companies fund uses a Matrix system for choosing between 30-50 stocks to hold from circa 750 of the UK SmallCap index, it's the same process that has been used over the last 20 years to deliver 14% returns through several economic cycles by recycling stocks through the portfolio. Why would it suddenly fail to deliver now?  Why would good companies selected through this process suddenly stop performing?

We have just been through perhaps the most catastrophic event in the economy and funds took a dip but are recovering or thriving better than ever in the case of 2 of the funds I invest in. There may be another dip, but things will recover, good companies will prosper and good funds will back them with investors money.

Short of the collapse of capitalism and nuclear war, there is little risk.

Prism

I don't think there is any harm in being positive and looking for good funds to help you get the best returns. However do have a plan for what happens if timing catches you out. One of the worst ways to start drawdown is to have a long bad period that drains your pot a fair bit when you take your first payments. You will likely need a plan for these times, such as a 2-3 year pot of cash or diverse investments that behave differently to equities.
The other problem that I see is that you are going to struggle to get anyone to do your transfer for you, and they are very unlikely to let you use a SIPP or make your own fund choices. You would most likely need to pay for advice and then do your own transfer.

GazzaBloom

Prism said:

I don't think there is any harm in being positive and looking for good funds to help you get the best returns. However do have a plan for what happens if timing catches you out. One of the worst ways to start drawdown is to have a long bad period that drains your pot a fair bit when you take your first payments. You will likely need a plan for these times, such as a 2-3 year pot of cash or diverse investments that behave differently to equities.
The other problem that I see is that you are going to struggle to get anyone to do your transfer for you, and they are very unlikely to let you use a SIPP or make your own fund choices. You would most likely need to pay for advice and then do your own transfer.

Thanks. Yes I have factored in sequence risk into my planning, I will have a few years alternative funds to allow suspension of drawdown to allow equity funds to recover. 

If it's too difficult or costly to release the DB pension I will keep it as is. It's not the mainstay of my retirement income. I will make sure I squeeze everything out of it though and take it at 55.

gm0

I'd take a "value of insurance" - cross portfolio risk view on the transfer value (net of advice, reinvestment fees and hassle (not inconsiderable per other discussion) on the regulations and unintended consequences, PI costs etc. etc. 
And I am not seeing a compellingr reason to trade it in.

I don't have any "guaranteed income" at all beyond SP but from reading about drawdown, variable income and risk management over 40 years drawdown MSWR etc. I can see the value of some GI in the mix (supporting a floor to variable income).
I won't buy a terrible annuity though - but if I had some GI - I likely would not sell it cheaply - I'd want a pretty big risk premium up front (not based on projecting my future investment returns).

So if I had this GI and the numbers were meh I'd likely keep the indexed GI against the downside risk of poor markets / SORR and just dial up my risk a notch on the invested DC portion if it wasn't already maxed. 

And I'd use the backtesting / 40 year long term equity returns and inflation numbers in making the compare.

Now you may have a higher risk appetite and already have DC risk maxed out. So the extra bit of DC may make sense for you where it wouldn't for me. We are all different.  If you put a "duff market" and or some inflation through your model during your early retirement you could compare these for a range of statistics.  FlexibleRetirement planner could be used for this quite easily I would think.

Thrugelmir

Why is this forum so doubting, cynical, pessimistic and dismissive? 

I'd say across the collective wisdom of the regular contributors....... experience and first hand knowledge of various kinds and sources.  Only time can buys you these.