Pension... transfer to drawdown ?

Wconnah

Hi all,

Help !  Been going round in circles in my mind trying to come up with the best plan.

I am age 55 now and intend to semi retire.

I have a BT pension pot (final salary) containing £185k.

I have a Barclays pension pot (defined contribution/hybrid), containing £75k.

I have a mortgage of £45k, and savings of £12k.

I am not married, live with partner - she has no mortgage. I rent my house out.

I am no expert, but have been doing quite a bit of research. My current thinking is to pay off the mortgage (peace of mind), and put the remainder into a flexi-access drawdown plan. Seems to be quite a popular for many these days. I was thinking to invest half in a safe way, and the other half a bit less cautious, but open to suggestions. I realise I will have to get sign off from an IFA.

 So I guess my questions are:-

1.  Do people generally think this is a decent overall plan ?

2.  I’m assuming it would be better to take out the £45k and pay the mortgage off first, to cut down on the amount to be transferred, and possibly reduce fees slightly?

3.  How likely am I to be able to get an IFA to sign this off ?

4.  Is it best to use the final salary as it is, and just drawdown from the Barclays ?

TIA

Albermarle

I have a BT pension pot (final salary) containing £185k

With a final salary scheme , you do not have a pot of money allocated to you . You have the promise of a guaranteed pension from when you start to take it to when you die , usually linked to inflation . As a secondary point most schemes offer you a sum to buy you out of the scheme and give up the promise of a guaranteed income . For most people this is not a good idea to do and it is expensive in time and money . Is this what you are thinking of doing ?

Wconnah

Albermarle said:

I have a BT pension pot (final salary) containing £185k

With a final salary scheme , you do not have a pot of money allocated to you . You have the promise of a guaranteed pension from when you start to take it to when you die , usually linked to inflation . As a secondary point most schemes offer you a sum to buy you out of the scheme and give up the promise of a guaranteed income . For most people this is not a good idea to do and it is expensive in time and money . Is this what you are thinking of doing ?

When I say pot, I mean CETV with the final salary scheme.  This would be the sum to buy out of the scheme, yes.  I am considering this yes.

xylophone

You would need advice from a pension transfer specialist to transfer your DB to a DC and it would not be cheap - and on the face of it I can see no compelling reason that the PTS would give a positive recommendation.

Why with only modest pension provision and savings would you wish to give up the security of an index linked pension payable for life?

With regard to the Barclays pension ( is it  a DC plan for employees of the bank?) and if so, does it have any safeguarded or guaranteed element?

If  it does have safeguarded  benefits and rather than taking the pension you proposed moving it to an arrangement which would enable you to  "cash in" the whole, this too might require advice.

And apart from that, your tax bill would be high.

Would you intend to continue to contribute to a DC pension? If you  took both the PCLS and additional money from the DC scheme, you would be caught by the Money Purchase Annual Allowance in respect of future contributions.

p00hsticks

Wconnah said:

Albermarle said:

I have a BT pension pot (final salary) containing £185k

With a final salary scheme , you do not have a pot of money allocated to you . You have the promise of a guaranteed pension from when you start to take it to when you die , usually linked to inflation . As a secondary point most schemes offer you a sum to buy you out of the scheme and give up the promise of a guaranteed income . For most people this is not a good idea to do and it is expensive in time and money . Is this what you are thinking of doing ?

When I say pot, I mean CETV with the final salary scheme.  This would be the sum to buy out of the scheme, yes.  I am considering this yes.

So how much pension would you get at the normal retirement age for that CETV ?

Does it increase annually and by what criteria ?

Any associated lump sum ?

xylophone

Does it increase annually and by what criteria ?

Any associated lump sum ?

It is a BT pension -  https://www.btpensions.net/news/section-c-court-case-update-1

And there is a lump sum/the ability to commute to increase the lump sum.

xylophone

OP, have you obtained a state pension forecast?
https://www.gov.uk/check-state-pension
When did you work for BT?

Albermarle

When I say pot, I mean CETV with the final salary scheme.  This would be the sum to buy out of the scheme, yes.  I am considering this yes.

You should have a look through the forum for threads about DB transfers, especially about the IFA cost and difficulty finding one since rules have been tightened up .

Also this is a useful sum up of the pros and cons:

https://www.royallondon.com/siteassets/site-docs/media-centre/good-with-your-money-guides/five-good-reasons-good-with-your-money-guide-2018-edition.pdf

Wconnah

xylophone said:

You would need advice from a pension transfer specialist to transfer your DB to a DC and it would not be cheap - and on the face of it I can see no compelling reason that the PTS would give a positive recommendation.

Why with only modest pension provision and savings would you wish to give up the security of an index linked pension payable for life?

With regard to the Barclays pension ( is it  a DC plan for employees of the bank?) and if so, does it have any safeguarded or guaranteed element?

If  it does have safeguarded  benefits and rather than taking the pension you proposed moving it to an arrangement which would enable you to  "cash in" the whole, this too might require advice.

And apart from that, your tax bill would be high.

Would you intend to continue to contribute to a DC pension? If you  took both the PCLS and additional money from the DC scheme, you would be caught by the Money Purchase Annual Allowance in respect of future contributions.

Thanks for the reply. I thought it was safeguarded, but it doesn't appear so now. They have sent me an options pack, which basically means using the "pot" to shop around for an annuity.  Or moving out the scheme.
The reason for giving up the security of an indexed linked pension for life, is because the annual payments will double, and that's without allowing for investment growth. The Barclays plan for life would pay circa £2,000 p/a.  Drawdown would give me around £4,000, for 20 years, until age 75.  Various options in between eg only take £3,000 p/a would take me to age 81.   As many people say on here, rather have the majority of the money in the "younger" years. 
I am an ex-employee of the bank yes.
The main reason is flexibility. I can continue to work. (semi), and would need to draw less, leaving more in for later years. But I would be in control.   I don't intend to make future contributions.

Wconnah

p00hsticks said:

Wconnah said:

Albermarle said:

I have a BT pension pot (final salary) containing £185k

With a final salary scheme , you do not have a pot of money allocated to you . You have the promise of a guaranteed pension from when you start to take it to when you die , usually linked to inflation . As a secondary point most schemes offer you a sum to buy you out of the scheme and give up the promise of a guaranteed income . For most people this is not a good idea to do and it is expensive in time and money . Is this what you are thinking of doing ?

When I say pot, I mean CETV with the final salary scheme.  This would be the sum to buy out of the scheme, yes.  I am considering this yes.

So how much pension would you get at the normal retirement age for that CETV ?

Does it increase annually and by what criteria ?

Any associated lump sum ?

Normal retirement age 60, would give £5,500 p/a, lump sum of £16k
Various options to index  link yes.

Wconnah

xylophone said:

OP, have you obtained a state pension forecast?

When did you work for BT?

Hi yes I did get my state figures.  Age 67, for get the actual number, was around £160 pm
Worked for BT 1981 - 1996.   Section B member.