My pension: What to do?

marycanary

d0nnyoz said:

but if I die after 10 years and I have no wife, I essentially lose those benefits whereas if I took the transfer out value, I would at least have access to that 'pot' even after I die (through my wife or my children). But I do understand it is a highly complex decision.

What if the money runs out before you die? That could be because of poor investment decisions or just plain bad luck. Google "sequence of returns risk".  Are you and/or your wife comfortable managing a portfolio as you age? You seem to be only looking at the upside - a pot to leave your children. You are not looking at the downside - a poor retirement for you or your wife.

shinytop

Have I missed it or has nobody asked the most important question; how much are you giving up in return for the £700k?

Albermarle

shinytop said:

Have I missed it or has nobody asked the most important question; how much are you giving up in return for the £700k?

Good point . A lot of these DB/transfer posters just say what the CETV is .
Really they should say 'I have a guaranteed pension of £X pa and I have been offered £X to buy me out ' 

d0nnyoz

Thanks again for the advice(?) - sorry I've not responded (how do I set up notifications on this thread??)

I'm still non-the-wiser about what to do. I definitely want to take my pension so the question is: Do I take it from where it is (which is a DB scheme I believe)? Or do I transfer it out and manage it myself?
I am very capable of managing the money myself - if anything, I'm quite risk-averse although I do understand a certain level of risk is required in order to 'grow the pot'! Maybe I should just stick it all in Bitcoin! I jest!

Regarding my wife's situation, she is older than me (I'm nearly 56 and she will be 64 next week!) and she has no pension provision except state pension when she reaches 67. She is as 'fit as a fiddle', has been instructing aerobics for 35 years and still takes about 4 high-impact classes a week (now on Zoom) and does yoga everyday!

One good point to hear on here is the level of fees I might be landed with if I transfer out - it sounds a lot!
I have two friends who were quite senior in BT (one of them was actually the Group HR Director of BT!) and have both retired. I KNOW that if I ask for their advice they will both say leave it where it is, and that is my inclination right now. The ONLY factor making me think of a transfer is my health and how long I will last (I actually feel 100% at the moment and have done all the way through my recent cancer treatment). I suppose the 64 million dollar question: How long will I last? If I knew that, it would make the all decision easier!!

Albermarle

 I suppose the 64 million dollar question: How long will I last? If I knew that, it would make the all decision easier!!

This is the uncertainty that hangs over many pensions related decisions.

I definitely want to take my pension so the question is: Do I take it from where it is (which is a DB scheme I believe)? Or do I transfer it out and manage it myself?

As already posted a couple of times , you have only mentioned the CETV and not what you would be giving up , so impossible to make any sensible comment .

d0nnyoz

Albermarle said:

As already posted a couple of times , you have only mentioned the CETV and not what you would be giving up , so impossible to make any sensible comment .

When you say giving up, do you mean the benefits I would receive as part of the DB scheme with BT?

There are so many variables it's hard to be precise about what I'm giving up. I would like to take a lump sum but I'm not sure exactly how much I want to take. There is an amount I would 'need' to take and that might equate to somewhere like £20k-£30k but I was thinking of taking a lump sum of £50k. Dropping this to £40k lump sum increases the annual pension by around £300 for the full increasing pension and about £800 for the half-and-half option set out below.
And there is also the added 'complication' of how I take my annual pension as half of my pension is under different conditions - I can take the whole annual pension with all of it being subject to the CPI (yes, this scheme uses the CPI as opposed to the RPI) rate increases or take half of it (roughly) as a higher annual sum which is not subject to increases whilst the other half is subject to the increases. Obviously with the second option, the initial total annual pension is higher and using an average of the CPI increases over the last 25 years (which works out to be 3% PA), it would take about 17 years before the lower pension would catch up to the initial higher pension. I hope all that makes sense.

So, taking £50k as a lump sum, the higher pension would be £20k PA. The lower annual pension (which would increase in total) would be £15.5k PA.

Albermarle

So, taking £50k as a lump sum, the higher pension would be £20k PA. 

So assuming the £20K pa would be increased with inflation every year ( very important point) 

The offer of £700K to buy you out is in the right ball park , but nothing spectacular.

You can turn it on its head and say if you were to buy an annuity for life - £20kpa inflation linked etc it would probably cost over £800K 

ewaste

Albermarle said:

So, taking £50k as a lump sum, the higher pension would be £20k PA. 

So assuming the £20K pa would be increased with inflation every year ( very important point) 

The offer of £700K to buy you out is in the right ball park , but nothing spectacular.

You can turn it on its head and say if you were to buy an annuity for life - £20kpa inflation linked etc it would probably cost over £800K 

🤔

So, taking £50k as a lump sum, the higher pension would be £20k PA. The lower annual pension (which would increase in total) would be £15.5k PA.

I read that as £15.5k index linked to CPI or £20k non-index linked 'level pension'. Both of which are taking into account taking a £50k lump sump.

The only question I'd have for the OP, is what is the maximum index linked amount you can get. In other words taking zero or the lowest lump sum possible. I perfectly understand that due to your health you don't see this as a prudent option, I'm just curious more than anything.

Albermarle

I read that as £15.5k index linked to CPI or £20k non-index linked 'level pension'. Both of which are taking into account taking a £50k lump sump.

If that is a correct interpretation ( and it might well be ) then the £700K starts to look like a bit more generous.

d0nnyoz

What I was trying to explain above was that I can take my annual pension benefits in two ways.
I can either take an annual pension benefit which will increase  at the rate of inflation (so the full amount), or I can take a portion of that annual pension benefit that will not increase with the rate of inflation for a higher amount and the other portion will increase. Does that make sense?
On my notes is states "However, when you retire, if you’ve built up benefits before 6 April 1997, you have the option to take a Pension Increase Conversion.  This means that you can give up some of your future pension increases for a higher annual amount straight away."

I did another illustration on the online portal with a Zero lump sum and for the full increase benefit it comes out at £17,100 pa.
If I used the PIC above, I can get £21,500 pa with £9.9k of this increasing with inflation and the rest being static.