What's the best way of taking my DB & DC pension @ 55 please?

itsmeagain

Dox said:

How about investing in proper financial advice, given the sums involved? Expecting people to 'advise' on the basis of a couple of paragraphs isn't realistic. Plenty will venture an opinion, but in the absence of full knowledge of all relevant factors, it is unlikely to be the best one for you.

You may be right but I'm very sceptical. My company put on a retirement course with Close Brothers 3 years ago. From those discussions it appears that some companies are pro transfer and some are against (unless you fit some special circumstances). They told us that they would advise 90% of those that do transfer, not to transfer. Therefore 2 different professional advisors would give opposing advice. I don't fit any of those special circumstances for a transfer so I'm left only with considering the pro's & cons of taking the DB or DC 1st.
I'm not convinced that i'm a minority / extraordinary / unique / complex position that requires special attention to come up with a solution that no one would think of unless you paid them £750!

itsmeagain

Albermarle said:

Then it is not an AVC at all , but a standalone DC workplace pension .
The Money4Life pension you are in ( I am as well) has a clunky website ; only offers SW funds ( although quite a lot ) but has low charges . Also no charges for drawdown and the low charges stay the same when you leave the employer ( as far as I know ) 

I'm only referring to it as an AVC/DC because that's what our 'people portal' says...

"If you are a member of the XXXXXX Defined Benefit pension scheme you can choose to make additional voluntary contributions (AVCs) through the Scottish Widows Defined Contribution Scheme. To do this use the Scottish Widows AVC joining form"

hyperhypo

OP...in your original post you commented you wouldn't be considering using PCLS lump sum  because of poor value. Was that because the cash sum was nowhere near 25% of CETV...these are usually expressed as multipliers of each 1£ of DB given up? I'm interested as needing to consider same...but in context of needing some cash to bridge from dB to do ...multipler x22.  Might justify a separate post but would like you to elaborate if you care to...

Albermarle

When calculating the multiplier of 22, did you take account of the fact the lump sum is tax free. I think this could increase the multiplier up to around 24. 

hyperhypo

It's x22.2 as advertised in the scheme admins tables, point taken. I realise this question of taking pcls or not is ultimately personal  but trying to get an idea of others ideas of what is good value. My context is i need to find c. £40k to bridge db to dc and how to fund it , take some pcls (around 50% of full pcls)  or take some out of DC sipp and pay BR tax on it.

Reason to hang on to as much db as possible is due to relatively high inflation protection (RPI 10% and above at discretion), and demise of RPI in 2030.

Albermarle

or take some out of DC sipp and pay BR tax on it.

If you do that , you will trigger the MPAA , which means you will be limited to adding max £4K pa  to a pension in future ( including any employer contributions )

Regarding what others do with DB pensions . Many just take the cash as they see it as some kind of retirement bonus , especially the lower paid . Even when the factor is only 12 like with the LGPS .

Otherwise it tends to be a bit of a 50:50 decision, when you have a factor of 22+, so down to personal circumstance/preference.

itsmeagain

hyperhypo said:

OP...in your original post you commented you wouldn't be considering using PCLS lump sum  because of poor value. Was that because the cash sum was nowhere near 25% of CETV...these are usually expressed as multipliers of each 1£ of DB given up? I'm interested as needing to consider same...but in context of needing some cash to bridge from dB to do ...multipler x22.  Might justify a separate post but would like you to elaborate if you care to...

I can explain (badly). My transfer value is just over £1m. I considered that if I was going to take my DB and 'trade in' 1/4 of my DB pension for a 'tax free lump sum', then the lump sum should be worth 1/4 of the transfer value (because they have removed 1/4 of their liability to me). However, the tax free lump sum is only £130k instead of the £250k expected for my DB to drop down by nearly £8k per year.
They explained and justified the reasoning (continued other liabilities) but it still doesn't stop it appearing to be a 'poor value' (to me).
The quote showed that if i take the full DB, it works out as 52% of my LTA.
If I take the lump sum & a reduced DB, it works out at 49% of my LTA.
I realise that the £130k is tax free, so effectively worth £162k (pre tax) but with all considered, if I claim for more than 20 years (age 75), i'd be better off taking the full DB. (162/8 = 20)ish years.
If I am wrong on this and the lump sum is worth more, I would be very happy for someone to explain please.

itsmeagain

Albermarle, I realise that you are not obliged, but I note that you didn't respond to my response to my post (6 December at 5:42PM edited 6 December at 6:06PM). I would like to understand the significance of your claim & my response if possible please? If it's a simple misunderstanding then don't worry! To refresh your memory....

Albermarle said:

Then it is not an AVC at all , but a standalone DC workplace pension .
The Money4Life pension you are in ( I am as well) has a clunky website ; only offers SW funds ( although quite a lot ) but has low charges . Also no charges for drawdown and the low charges stay the same when you leave the employer ( as far as I know ) 

I'm only referring to it as an AVC/DC because that's what our 'people portal' says...
"If you are a member of the XXXXXX Defined Benefit pension scheme you can choose to make additional voluntary contributions (AVCs) through the Scottish Widows Defined Contribution Scheme. To do this use the Scottish Widows AVC joining form"

Albermarle

itsmeagain said:

Albermarle, I realise that you are not obliged, but I note that you didn't respond to my response to my post (6 December at 5:42PM edited 6 December at 6:06PM). I would like to understand the significance of your claim & my response if possible please? If it's a simple misunderstanding then don't worry! To refresh your memory....

Albermarle said:

Then it is not an AVC at all , but a standalone DC workplace pension .
The Money4Life pension you are in ( I am as well) has a clunky website ; only offers SW funds ( although quite a lot ) but has low charges . Also no charges for drawdown and the low charges stay the same when you leave the employer ( as far as I know ) 

I'm only referring to it as an AVC/DC because that's what our 'people portal' says...
"If you are a member of the XXXXXX Defined Benefit pension scheme you can choose to make additional voluntary contributions (AVCs) through the Scottish Widows Defined Contribution Scheme. To do this use the Scottish Widows AVC joining form"

I thought the DB scheme had been closed to new contributions but when I re read the thread I see it was only closed to new members and you are still contributing to the DB scheme and then separately to an AVC . So you can ignore my previous comments .
I can explain (badly). My transfer value is just over £1m. I considered that if I was going to take my DB and 'trade in' 1/4 of my DB pension for a 'tax free lump sum', then the lump sum should be worth 1/4 of the transfer value (because they have removed 1/4 of their liability to me). However, the tax free lump sum is only £130k instead of the £250k expected for my DB to drop down by nearly £8k per year.
They explained and justified the reasoning (continued other liabilities) but it still doesn't stop it appearing to be a 'poor value' (to me).
As you know there are many pros and cons to transferring out of a DB pensions. One of the pros is that you get a bigger tax free lump sum .

hyperhypo

OP ..thanks for update. Concur with disparity of value and CETV ...(mine was c. £300 and £550k respectively).

Commutation multipliers aside , i don't think i'd have considered taking the cash had i not had a funding requirement that equated to 50% of its value. Seems to me at present to err towards making most out of the RPI protection that these schemes offer for as long as that continues, with as much of the db scheme as available, without reductions of c. 5% for taking it years earlier.

I'll likely be funding my gap using income drawdown from my DC savings, (80% crystallised) after crystallising what's remaining to be and accepting i'll be paying some BR tax.  And depleting the db pot by 25% . I don't believe MPAA will feature. I'm 62 next birthday and can't envisage going back to my old world of work.

Being honest i have considered attempting a CETV transfer in past (x37 of current annual value) but have always come back to the having a mixed db/dc approach best, and reading other threads now on the hoops and apparent scarcity of means to do this support this for time being.