Totally confused

paul1672

Hi there,
I'm a 48 year old singleton that has worked all my life and paid into workplace pensions since 1989.
Im looking for some advice as im really struggling to understand my options.
I have a few pensions that I've accrued over the years with a combined current transfer value of about £230k and I've been trying to convert all of them into one pot except my current one that I still contribute to.
I have had an initial chat with a couple of advisors and I've been advised my main pension pot which has the most transfer value in it is a defined benefits pension with a transfer value of £162k and that they would not touch it as they work differently to other pensions.
My concern is i wont be able to touch it at 55 when I was hoping to take a 25% cash lump sum from it.
My limited understanding is that because its a defined benefits pension I cannot touch it until I retire when it will be paying out just £4,000 a year. Whilst I appreciate that's guaranteed income I would need to receive that for like 40 years after retirement to even get close to receiving the full amount.
What I really want to do is transfer it so I can open a drawdown scenario when I reach 55.
Is this even possible or am I completely stuck with this defined benefits pension  pot?
What i dont understand is if im stuck with it then why do I have a transfer figure, and why won't anyone touch it?
Sorry for the long post and I hope this makes sense.

Paul

Dazed_and_C0nfused

There is no "full amount" with a DB pension.

The company are guaranteeing to pay that £4,000 for the rest of your life, probably with some inflation proofing, at no risk to you.

Some DB schemes have a standard PCLS/TFLS, what does yours allow?

It is possible to give up your right to the £4k (and any associated PCLS/TFLS) but you have to pay for advice and that is a costly exercise.

There are countless threads on here on this subject so best have a read of some of those before doing anything else.

paul1672

Sorry but im very naive on pensions, may i ask what a  PCLS/TFLS is?

Paul

Dazed_and_C0nfused

Pension commencement lump sum (phrase often used for DB schemes)

Tax free lump sum

xylophone

I assume that your deferred DB pension is not with an unfunded public sector scheme?
If it is, you are not permitted to transfer to a Defined Contribution Scheme.

Otherwise, as your benefits have a value greater than £30,000, if you wish to transfer out, you must first pay for the advice of a Pension Transfer Specialist (see link below).

Once you have received this advice (whether the advice is to transfer or not to transfer) and can confirm to the ceding scheme (in the form they prescribe) that you have done so, you can approach another provider to request acceptance of the transfer.

However, see  https://www.pruadviser.co.uk/knowledge-literature/knowledge-library/transfer-pension-scheme/

.... although most schemes provide the right to transfer, not every scheme has to accept an incoming transfer.

A stakeholder pension scheme is currently the only type of scheme which must accept any transfer from another registered pension scheme.

You mention that you have had difficulty in finding  a suitable adviser 

https://rtsfinancialplanning.co.uk/why-its-nearly-impossible-to-transfer-a-defined-benefit-pension/

https://adviserbook.co.uk/

Have you consulted the Scheme Guide to your DB pension in the section on taking benefits early?

It may be possible to do this but you would almost certainly find find that a substantial actuarial reduction would be applied.

Linton

paul1672 said:

Sorry but im very naive on pensions, may i ask what a  PCLS/TFLS is?

Paul

Tax Free Lump Sum.  Pension Commencement Lump Sum was a term I think was introduced by the government presumably to cover the possibility that it may not be tax free at some point in the future.

Albermarle

Pension Commencement lump sum/Tax free lump sum.
Regarding transferring your defined benefits pension - as suggested spend some time looking through the forum as it is a popular topic ( try using the search box for CETV - Transfer- final salary etc )
Briefly there have been many cases in the past where people have been persuaded to transfer out of their DB scheme and they have ended up in a worst position due to bad investments etc. The FCA ( financial conduct authority) now insist on detailed financial advice being given and certified before allowing any transfer. Many IFA's are not qualified to do the work and /or have to pay a large insurance indemnity premium in case the client comes back later complaining it all went wrong and sues them .
So most are not interested and many pension providers will not accept DB transfers for the same reason.
The transfer values ( CETV ) often look very tempting and if invested well in a DC pension and if markets are kind, then you can generate a better income than from the DB pension . BUT none of that is guaranteed and the £4k pa is .........
Five good reasons to transfer out of your company pension....and five good reasons not to - Royal London

hugheskevi

paul1672 said:

I'm a 48 year old...What I really want to do is transfer it so I can open a drawdown scenario when I reach 55.

So you will reach age 55 in 2028? This is the year in which minimum pension age for pension commencement is due to be increased to age 57. There is no specific date for the change yet, but 6th April 2028 would be likely - will you have reached age 55 by that date?

Linton

paul1672 said:

Hi there,
I'm a 48 year old singleton that has worked all my life and paid into workplace pensions since 1989.
Im looking for some advice as im really struggling to understand my options.
I have a few pensions that I've accrued over the years with a combined current transfer value of about £230k and I've been trying to convert all of them into one pot except my current one that I still contribute to.
I have had an initial chat with a couple of advisors and I've been advised my main pension pot which has the most transfer value in it is a defined benefits pension with a transfer value of £162k and that they would not touch it as they work differently to other pensions.
My concern is i wont be able to touch it at 55 when I was hoping to take a 25% cash lump sum from it.
My limited understanding is that because its a defined benefits pension I cannot touch it until I retire when it will be paying out just £4,000 a year. Whilst I appreciate that's guaranteed income I would need to receive that for like 40 years after retirement to even get close to receiving the full amount.
What I really want to do is transfer it so I can open a drawdown scenario when I reach 55.
Is this even possible or am I completely stuck with this defined benefits pension  pot?
What i dont understand is if im stuck with it then why do I have a transfer figure, and why won't anyone touch it?
Sorry for the long post and I hope this makes sense.

Paul

If you are no longer a current member of the DB scheme it will increase with inflation from the point you left til the date it is due to start paying out.  Depending on the dates you were in the scheme it will also increase with inflation whilst in payment.  So on both counts your calculation of 40 years to receive the transfer value is probably wrong.

In general you can only take your  DB TFLS when you start taking the main pension.

The reason you cannot easily "cash in" your DB pension would require a longer reply and a lot of history.  But in summary when you signed up for the DB pension your employer agreed that you should have a guaranteed pension for your retirement.  However as an unintended effect other pension law changes and the fall in interest rates after the 2008 crash the cashing-in of the CETV became a practical possibility.

The government did not want large numbers of people who did not appreciate the value of their DB pension cashing it in for the ££££s and then living in poverty, possibly on benefits, in retirement.  They therefore made it a legal requirement that anyone wishing to transfer out of a DB scheme must receive advice from a suitably qualified IFA.  This will be expensive. If the advice is that transfering is not in your best interests you can still do so as there are a small number of pension providers who will accept what is called an "insistent client".

The reason for a CETV is because there are situations where transferring out would be very much in one's best interest - eg if one was likely to die very early because of illness.

LHW99

And the £4k pa is probably going to increase by inflation up to some limit (before? and) during payment, so less than 40yrs to recover the CETV ("cash equivalent transfer value")

barnstar2077

As mentioned above, can you take your DB scheme a bit earlier?