Am I missing something ? DB pension transer to SIPP

HamsterwheelMind

Hello Folks, 
Long time reader, first time posting. 
I am looking to transfer my wifes small DB pension from Natwest into her SIPP where it can be invested in ETF's and the like.
Please can I ask some financially minded people you read the following and tell me if I am missing anything; 

Wife is 45 - planning to take pensions from 65.
Latest forecast of Natwest pension payable PA is 1167 pounds.
Transfer Value is approx 47000 pounds. 

assuming inflation of 2.5pc per year for 20 years the annual pension payable would have grown from 1167 to nearly 2000 pounds come her 65th birthday.
Assuming the same inflation over 20 years, the transfer pot would be worth 77, 000 pounds.
For 77,000 pounds it seems I could buy her an index linked annuity worth 2000  PA come her 65th birthday. 

Now then,
If I transferred the 47000 pounds into a SIPP, invested over various funds and made 5pc per year over 20 years (don't worry, I'll beware of the fee's and charges) it would be worth approx 125 000 pounds. This could buy an annuity worth approx 4000 to 5000 per year (according to Aviva's quick calculator) 
Obviously the stock market can produce greater returns or less. I've just taken 5pc as what I feel to be conservative.

Lots of variables above, specifically the 20 year average of inflation and 20 year performance of a stock porfolio, But what am I missing? To me it seems worth the chances to transfer DB into SIPP. I have used an annuity as a benchmark to compare the two scenarios and would not necessarily buy one, but switch to high yielding shares or funds. 

People's thoughts are invited. 

Andy

Marcon

There are already endless threads on the dangers of DB transfers - use the search box above to look for other threads on this forum.

You might find out whether your wife wants you to transfer her pension, of course...

Dox

Are you missing something? Just about everything, I'm afraid. Your wife will be required to take advice from an adviser (make sure it's an IFA, not just a FA) with the necessary permissions, which will cost upwards of £3K, in the unlikely event you can find anyone remotely interested in taking the risk for such a small transfer value.

jsinc

"Assuming the same inflation over 20 years, the transfer pot would be worth 77, 000 pounds"

Inflation has a cumulative negative real effect on the pot, not positive. Nominally no effect.

Albermarle

As Dox says the 'missing link' is actually the process of transferring. If you have been a long time reader, you will know this is not a simple or cheap process .
Also outlook for next 10 years is not as rosy as the last 10 as far as most people think . Something like 2% above inflation might be more realistic.

xylophone

When did your wife work for Natwest?
What exactly does your wife's statement of deferred benefits say in respect of GMP and excess?
How is the pension revaluing in deferment?
How is the pension index linked in payment?

HamsterwheelMind

Hmmmm, the consensus is "leave well alone" then. I transferred one of my DC pensions into a SIPP earlier in the year and It was a piece of cake. Perhaps I have imagined the process of a DB transfer to be similarly easy and have been encouraged by visions of my ETF's going up,Up and UP forever! Thanks for pouring cold water over me folks. I shall heed your advice. 

Andy

HamsterwheelMind

jsinc said:

"Assuming the same inflation over 20 years, the transfer pot would be worth 77, 000 pounds"

Inflation has a cumulative negative real effect on the pot, not positive. Nominally no effect.

I shall have to read up about that. Thanks for the heads up. 

Markneath

I have a small final salary pension form a previous employer and although relatively small its going to be a nice top up to my state pension.

I did think about transferring it a few years back but then it leaves with me more of my pension tied to the stock market. 

Im looking at it that my state pension and small db will pay the bills and my dc pension and isa will pay for the holidays and luxuries.

HamsterwheelMind

xylophone said:

When did your wife work for Natwest?
What exactly does your wife's statement of deferred benefits say in respect of GMP and excess?
How is the pension revaluing in deferment?
How is the pension index linked in payment?

I am afraid I do not have it in front of me. Will any of those details significantly change the general advice given in this threat and on this forum ? Considering the small amount. 

Dox

HamsterwheelMind said:

xylophone said:

When did your wife work for Natwest?
What exactly does your wife's statement of deferred benefits say in respect of GMP and excess?
How is the pension revaluing in deferment?
How is the pension index linked in payment?

I am afraid I do not have it in front of me. Will any of those details significantly change the general advice given in this threat and on this forum ? Considering the small amount. 

It won't change the gist of what's been said, but it might open your eyes to the happy chance that her pension could revalue by more than the 2.5% you are suggesting. That could well be the case if a large % of her pension is something known as Guaranteed Minimum Pension, which often revalues at a much higher rate than the rest of a pension. If she worked for NatWest before April 1997, she'll have a GMP.