DB Transfer thoughts

L9XSS

Good evening, have been a regular to the pension forum and the MFW site too.
Just looking for some thoughts on my current situation. I’m 53 years of age and my current role will become redundant in Feb 2021. I have requested a CETV from a previous employer for the last 3 years. The most recent figure has risen by £86,000 from last years quote. 
The offer is £565,585 to transfer. The benefit I would be giving up would be a pension of £18,700 from age 65. RPI rises yearly, maximum of 2.5%.
pension reduction % to take pension early is quite significant. (7.5% for 1 year early to 19% for 3 years early). I have a private pension and a work pension that have £148,000 in them.
My redundancy figure is circa £11,000. Ideally I wanted to work till I was 57 (4 years time) then retire/semi retire.
Im divorced and would like to leave money to my two children as my DB pension would not give me provision for this. My mortgage will be paid off at 57 and I have ISAs of approximately £32,000. I’m pretty savvy with investments and would be happy to manage my pension fund stocks through the Vanguard platform. Obviously I’m looking to get an independent IFA to start the process rolling.
just looking for some advice.
Thanks Lex.

coyrls

One thing to be aware of is that if you use the Vanguard platform, you wouldn't be able to draw a pension from it, as it doesn't currently support any form of withdrawal.

Marcon

L9XSS said:

Good evening, have been a regular to the pension forum and the MFW site too.
Just looking for some thoughts on my current situation. I’m 53 years of age and my current role will become redundant in Feb 2021. I have requested a CETV from a previous employer for the last 3 years. The most recent figure has risen by £86,000 from last years quote. 
The offer is £565,585 to transfer. The benefit I would be giving up would be a pension of £18,700 from age 65. RPI rises yearly, maximum of 2.5%.
pension reduction % to take pension early is quite significant. (7.5% for 1 year early to 19% for 3 years early). I have a private pension and a work pension that have £148,000 in them.
My redundancy figure is circa £11,000. Ideally I wanted to work till I was 57 (4 years time) then retire/semi retire.
Im divorced and would like to leave money to my two children as my DB pension would not give me provision for this. My mortgage will be paid off at 57 and I have ISAs of approximately £32,000. I’m pretty savvy with investments and would be happy to manage my pension fund stocks through the Vanguard platform. Obviously I’m looking to get an independent IFA to start the process rolling.
just looking for some advice.
Thanks Lex.

The advice is 'listen to the advice your IFA gives'. Endless threads on here about the wisdom of transferring out of a DB scheme (have a look at some of them), but as every situation is different, the general cry of 'don't do it!' may not apply to you. Until your IFA has done the groundwork, try and keep an open mind. The only comment I would make is to keep in mind that the DB pension is primarily to provide for your old age, not to provide for your offspring. With £148K in your private/workplace pensions, leaving them money via those might be a more secure route to go in terms of providing for yourself in retirement while leaving them a significant legacy.

DairyQueen

No offence intended OP but if you are sufficiently investment savvy to manage a portfolio on which your essential income depends you would not choose Vanguard as the platform for a portfolio of that size even if it offered drawdown (which it doesn't).

Taking IFA-advice isn't simply a means to a single end (transferring). There are circumstances in which transferring is best advice but they are few.

I transferred a few years ago. Here are a few of the circumstances that point toward a positive recommendation:

- reduced life expectancy
- no dependants or dependants who would not be reliant on your DB benefits (you may remarry - you are only in your early 50s) 
- sufficient other (preferably) guaranteed income/assets to cover essentials
- high multiple
- intention to engage a portfolio manager or reasonable experience with self-investing
- high tolerance to risk
- inheritance

Few people meet enough of the above examples to receive a positive recommendation. I am one of the few that met all of them. The first on the list is the most likely to weigh in favour of a transfer.

You will struggle to find an IFA that offers this area of advice as the regulator has clamped-down hard on DB transfers. It's a risky and expensive area of advisor business and the cost to you will reflect that, and with no guarantee of the outcome that you may hope for.

I think there is only one platform that will accept insistent clients and some platforms won't accept DB transfers even with a positive recommendation. 

It's a rocky road for a good reason. For most people most of the time the best advice is to stay put.

xylophone

Why would you not keep your DB pension and use your other assets to provide an inheritance?

Marcon

DairyQueen said:

You will struggle to find an IFA that offers this area of advice as the regulator has clamped-down hard on DB transfers. It's a risky and expensive area of advisor business and the cost to you will reflect that, and with no guarantee of the outcome that you may hope for.

I think there is only one platform that will accept insistent clients and some platforms won't accept DB transfers even with a positive recommendation. 

But there's a simple work round for insistent clients (not that I'm suggesting it's a good idea - simply clarifying the position). Once you can confirm to the ceding scheme that you have received advice, they merely need to check that you have and that you are transferring to a properly registered pension scheme. Stakeholder pension schemes are currently the only arrangement required to accept a transfer in from any UK registered pension scheme. Transfer to a stakeholder, then it is a simple matter to transfer from that (a DC scheme) to any other DC arrangement of your choice.

savingholmes

I too am looking to transfer my pension.

I took your quoted CETV and divided it by what you would expect to get at 65 if you stayed in the scheme. It came out at 30 times ie you may be able to draw that amount of money plus an element of inflation for 30 years without running out allowing for some market fluctuations using a flexible drawdown option. By comparison I was turned down on a 40 multiple by a provider - and have recently received an updated multiple of 45 times that I am in the process of getting advice on. 30 x is not that generous. The reason it matters is that the Trinity Study at Oxford reckoned a safe withdrawal rate would be 4% ie you need 25 times your desired annual income to be able to retire and not run out of money. However some economists reckon with COVID a safer withdrawal rate might be closer to 3 or 3.5% - which would mean you need a multiple of 33 times or more to not run out of money. I am not an IFA so this is just what I've picked up from the F1RE movement.

Macron - I haven't found any provider willing to take insistent clients in practice...

Thrugelmir

L9XSS said:

 I’m pretty savvy with investments and would be happy to manage my pension fund stocks through the Vanguard platform. 

Hasn't been difficult in the bull market of the best decade or so not to have made an above average historical return. Downside is that bull markets ultimately fade away for one reason or another. Something that many have little to no experience of navigating through. 

Albermarle

xylophone said:

Why would you not keep your DB pension and use your other assets to provide an inheritance?

Normally the right course of action but the OP will be made redundant at age 54 . Taking his DB pension early will have punitive penalties , so he will have to survive 10 years presumably using up his DC pensions and other money .
So by the time he is 65 , many of his assets may have been used up, unless he is able to re-enter the employment market , which is going to be difficult due to Covid .

Albermarle

However some economists reckon with COVID a safer withdrawal rate might be closer to 3 or 3.5% - which would mean you need a multiple of 33 times or more to not run out of money.

Long before Covid , 4% was already seen as a bit ambitious for UK  but taking at 4% does not mean you will definitely run out of money , only that your chances of running out of money if you live to a ripe old age are higher than if you take less than 4%.

So taking 4% is not really reckless but just not as safety first as less than 4% , as far as I understand. 

Marcon

savingholmes said:

I too am looking to transfer my pension.

I took your quoted CETV and divided it by what you would expect to get at 65 if you stayed in the scheme. It came out at 30 times ie you may be able to draw that amount of money plus an element of inflation for 30 years without running out allowing for some market fluctuations using a flexible drawdown option. By comparison I was turned down on a 40 multiple by a provider - and have recently received an updated multiple of 45 times that I am in the process of getting advice on. 30 x is not that generous. The reason it matters is that the Trinity Study at Oxford reckoned a safe withdrawal rate would be 4% ie you need 25 times your desired annual income to be able to retire and not run out of money. However some economists reckon with COVID a safer withdrawal rate might be closer to 3 or 3.5% - which would mean you need a multiple of 33 times or more to not run out of money. I am not an IFA so this is just what I've picked up from the F1RE movement.

Macron - I haven't found any provider willing to take insistent clients in practice...

Being an insistent client is of no consequence because the law requires the stakeholder provider to take the transfer - that legal requirement is all the defence they will need. One or two don't seem to know this, but pointing them towards Section 1 of the Welfare Reform and Pensions Act 1999 should resolve the issue. 

If you're still struggling, try the Prudential, who certainly understand this: https://www.pruadviser.co.uk/knowledge-literature/knowledge-library/transfer-pension-scheme/ (scroll down to the penultimate paragraph under the section headed 'Types of Transfer').

Transferring out of a stakeholder to another arrangement of your choice (SIPP or whatever) will not need advice, because it is DC to DC. The original source of funds contributed to the stakeholder isn't relevant.