Approximate value of pot?

GaryBC

Hi guys 
I've got a final salary pension quote which includes a transfer out option. I'm trying to get a very rough idea of what sort of income this pot could provide.
If it's in the ballpark I'll go forward and get formal quotes, but if it'll only likely get me 50p a week then I'll not waste any more time on the exercise. 
I'm 65 and the CETV is £614k. Can anyone give me a clue as to [very] roughly what sort of [lifetime] income this could provide?
Thanks 
Gary 

Dazed_and_C0nfused

What guaranteed annual pension are you thinking of giving up to get the £614k and when would it be payable from?

Are you planning on keeping the £614k in cash or investing it in equities?

Thrugelmir

What's your scheme retirement age? 

garmeg

GaryBC said:

Hi guys 
I've got a final salary pension quote which includes a transfer out option. I'm trying to get a very rough idea of what sort of income this pot could provide.
If it's in the ballpark I'll go forward and get formal quotes, but if it'll only likely get me 50p a week then I'll not waste any more time on the exercise. 
I'm 65 and the CETV is £614k. Can anyone give me a clue as to [very] roughly what sort of [lifetime] income this could provide?
Thanks 
Gary 

At a safeish 3% drawdown it would generate about £18,000 per year gross (or £1,500 per month).

How much is the actual pension you are giving up per year?

[Deleted User]

Id be surprised if you still have an option to commute. 

ZeroSum

Mickey666 said:

garmeg said:

GaryBC said:

Hi guys 
I've got a final salary pension quote which includes a transfer out option. I'm trying to get a very rough idea of what sort of income this pot could provide.
If it's in the ballpark I'll go forward and get formal quotes, but if it'll only likely get me 50p a week then I'll not waste any more time on the exercise. 
I'm 65 and the CETV is £614k. Can anyone give me a clue as to [very] roughly what sort of [lifetime] income this could provide?
Thanks 
Gary 

At a safeish 3% drawdown it would generate about £18,000 per year gross (or £1,500 per month).

How much is the actual pension you are giving up per year?

I assume that 3% drawdown is just the annual fund growth, ie without dipping into the overall pot total itself.

How long does the OP expect to live?  Let's say another 30 years (to age 95) so another £20k per year could be withdrawn for 30 years.  OK, extreme example and probably not prudent either, but what about taking an additional £10k per year, which would leave around £300k in the pot at age 95. (remember that £150k-ish could be drawn down tax-free as well).

Yes, inflation will have an impact on that, plus the £18k interest/month would gradually reduce as well, but it's an option.

Also, does the OP get a state pension?  That could also be a useful additional income stream. 

I guess we need to know more about the OP's outgoings, but assuming they have no rent or mortgage to pay then theor state pension could probably pay the bills, leaving around £18k pa as disposable income.  Not bad.  Plus the ability to drawdown lump sums as required for fancy holidays perhaps - after all, retirement is a time to enjoy yourself and it's better to doing at the front end than the back end, so to speak.

It would be interesting to know what the pension income would be if it is not transferred.

Also, if there is no transfer and the OP dies at 70 (hopefuly not!!) that £600k-ish just disappears into the pension scheme's coffers never to be seen again.  If it has been transferred out, then it remains in the OP's estate but not subject to IHT.  Effectively, it becomes a tax-free lump sum for the OP's beneficiaries.

Lots to think about, but my feeling is that transferring out is the way to go.

Unless OP is married, then widow will get widows pension from it

Marcon

Deleted_User said:

Id be surprised if you still have an option to commute. 

Commutation normally remains an option until you actually start to draw a DB pension, so no reason why OP wouldn't have that option. If they have a recent CETV, they clearly haven't started to draw their pension.

Silvertabby

Marcon said:

Deleted_User said:

Id be surprised if you still have an option to commute. 

Commutation normally remains an option until you actually start to draw a DB pension, so no reason why OP wouldn't have that option. If they have a recent CETV, they clearly haven't started to draw their pension.

'Commutation' and 'CETV/transfer out' aren't the same thing at all.

Commutation = giving up part of the annual DB pension in favour of a tax free lump sum.  Benefits stay in the original DB scheme.

Transfer out = transfer of all benefits to another scheme.

Different schemes have different rules - but many won't allow a transfer out if the member is within 12 months of their normal retirement date.  .....And it's not unknown for a junior member of staff to produce a requested CETV and not take proper heed of the date of birth. 

coyrls

Mickey666 said:

garmeg said:

GaryBC said:

Hi guys 
I've got a final salary pension quote which includes a transfer out option. I'm trying to get a very rough idea of what sort of income this pot could provide.
If it's in the ballpark I'll go forward and get formal quotes, but if it'll only likely get me 50p a week then I'll not waste any more time on the exercise. 
I'm 65 and the CETV is £614k. Can anyone give me a clue as to [very] roughly what sort of [lifetime] income this could provide?
Thanks 
Gary 

At a safeish 3% drawdown it would generate about £18,000 per year gross (or £1,500 per month).

How much is the actual pension you are giving up per year?

I assume that 3% drawdown is just the annual fund growth, ie without dipping into the overall pot total itself.

This seems a common misconception.  Safe Withdrawal Rates are calculated as a percentage of the initial pot which is then raised by inflation each year.  Success is defined as not running out of money after a fixed period (e.g. 30 years), it has nothing to do with "not dipping into the overall pot total itself". 

xylophone

Commutation normally remains an option until you actually start to draw a DB pension, so no reason why OP wouldn't have that option. If they have a recent CETV, they clearly haven't started to draw their pension.

This?
https://www.pruadviser.co.uk/knowledge-literature/knowledge-library/transfer-pension-scheme/

• There is no statutory right to transfer in relation to non-flexible benefits (for example Defined Benefit types schemes) if the member is within 12 months of normal pension age. Any scheme wishing to offer a member the right to take a transfer of their DB benefits within 12 months of normal retirement age will need to provide a non-statutory right to transfer.

happyandcontented

ZeroSum said:

Mickey666 said:

garmeg said:

GaryBC said:

Hi guys 
I've got a final salary pension quote which includes a transfer out option. I'm trying to get a very rough idea of what sort of income this pot could provide.
If it's in the ballpark I'll go forward and get formal quotes, but if it'll only likely get me 50p a week then I'll not waste any more time on the exercise. 
I'm 65 and the CETV is £614k. Can anyone give me a clue as to [very] roughly what sort of [lifetime] income this could provide?
Thanks 
Gary 

At a safeish 3% drawdown it would generate about £18,000 per year gross (or £1,500 per month).

How much is the actual pension you are giving up per year?

I assume that 3% drawdown is just the annual fund growth, ie without dipping into the overall pot total itself.

How long does the OP expect to live?  Let's say another 30 years (to age 95) so another £20k per year could be withdrawn for 30 years.  OK, extreme example and probably not prudent either, but what about taking an additional £10k per year, which would leave around £300k in the pot at age 95. (remember that £150k-ish could be drawn down tax-free as well).

Yes, inflation will have an impact on that, plus the £18k interest/month would gradually reduce as well, but it's an option.

Also, does the OP get a state pension?  That could also be a useful additional income stream. 

I guess we need to know more about the OP's outgoings, but assuming they have no rent or mortgage to pay then theor state pension could probably pay the bills, leaving around £18k pa as disposable income.  Not bad.  Plus the ability to drawdown lump sums as required for fancy holidays perhaps - after all, retirement is a time to enjoy yourself and it's better to doing at the front end than the back end, so to speak.

It would be interesting to know what the pension income would be if it is not transferred.

Also, if there is no transfer and the OP dies at 70 (hopefuly not!!) that £600k-ish just disappears into the pension scheme's coffers never to be seen again.  If it has been transferred out, then it remains in the OP's estate but not subject to IHT.  Effectively, it becomes a tax-free lump sum for the OP's beneficiaries.

Lots to think about, but my feeling is that transferring out is the way to go.

Unless OP is married, then widow will get widows pension from it

Not necessarily, our DB pot only repaid contributions paid in by the person (not employer conts) until the pension was in payment, and if it was then it was 50% of the monthly amount to the widow.