DB transfers

candie01

Albermarle said:

This is possibly the most common topic on this forum .

If you spend some time scrolling through a few pages of the forum there are regular threads about DB transfers , problems finding an IFA etc etc.
For example , a link to one of many https://forums.moneysavingexpert.com/discussion/6259993/defined-benefit-transfer-value/p1

£7K guaranteed income going up with inflation every year ( after 30 years inflation it could well be £14K ) is not to be given up lightly , although if it really was 50X ( I suspect it isn't. or there is some fact missing )) it would be tempting I guess .

I have the document that states pension £7000 and transfer value £356k. That was in September. 
My colleague got hers a year ago and had been in it longer than me. Her pension was £9000 and she got a transfer value of £425k. She transferred out in February 20 then Covid happened so her funds dropped by 90k but have now recovered and are now 11k more than she transferred. 

german_keeper

Have you formulated any kind of retirement plan? Have any of your colleagues? My gut feeling from what I have read is no.

A few things that might be useful to consider, at least as a starting point.

Have you obtained a state pension forecast?

What is the normal retirement age of your DB pension. Can you take it from an earlier age and if so how much will it be reduced by? 

How much is your DB pension increased by in deferment? And how much after payment?

How much will have been paid into your DC scheme by NRA of your DB scheme and by earlier than that if early retirement appeals to you? You could also do some playing around with different assumed growth % figures.

Do you understand the options you have when taking your DC pension?

Lots of other things to consider. But you may find that potentially your DB pension forms the bedrock of a very comfortable retirement indeed. You may eventually decide to take a CETV but you should really consider all your options.

Prism

candie01 said:

Marcon said:

candie01 said:

I recently got a transfer value for the DB pension and it was 350k. The annual pension would be £7000. 
Several colleagues have transferred their pensions over the last five years and were discussing it in the office. There's lots of talk that the company may go bust over the next few years. 
 

Your pension will be far more than that by the time you get to retirement.

If the company does go bust, the Pension Protection Fund will be there to step in and protect a good slug of your benefits.

candie01 said:

I felt I was 100% sure I wanted to transfer as I feel I could have that money in a SIPP and whilst I know it can go to and down to over ten years it's likely to go up. And even if it did go down a bit I would still have a lot more than what I would get from £7000 per year even if I lived to 97, that's 30 years of £7000 per year, so £210k. 

Your SIPP could go up or down. Your DB pension will definitely go up.

It isn't 30 years at £7,000; your pension will increase both in deferment (i.e. from the time the scheme closed until the time you access your benefits) and once in payment.

You have huge gaps in your understanding, so perhaps digging out that old scheme booklet, or looking at the latest statement from your DB scheme, would be useful.

Thanks for your comment. I do understand that the £7000 will rise with inflation but if I put that lump sum in investments it could grow more than the rate of inflation. Am I missing something here?

Its likely it will grow more than inflation but then it could also be the case that in 15 years time you find that it hasn't matched inflation at all, much like a US investor in the late 1960's. Inflation can really damage an investment pot.

[Deleted User]

candie01 said:

Can I have experiences please from people who have moved their DB transfer and how they feel now and I'd it worked out well and who they used etc? 

Best wait for a few years, I think, candie01.

Your concern that the transfer value may be about to decline is understandable but it wouldn't happen in isolation; your colleague in the office who has already transferred should likely find the value of her SIPP impacted too. The pension transfer value always represents current fair value in exchange for the scheme's obligations to you.

And DB pension transfers are not about to be banned any time soon.

There's a lot to consider before you transfer. Fortunately you have many years to resolve this. For example, when -God willing - you reach your father's age, you should have an LTA test looming. You should know far better in a dozen years' time whether that could affect you. In such circumstances, a DB pension could be valuable in keeping you the right side of the tax-collector.

It's a mess, and something of a paradox, but I would say Don't hire a Financial Adviser until you are absolutely sure that you want to transfer. Your adviser will almost certainly make a negative recommendation. Which doesn't mean it would be the right decision for you. You can find better ways of burning through £11,500 this year.

I'm really happy to have transferred a DB pension as an insistent client but the process is a sham, really, and I would not have dreamed of transferring out at 47.

Marcon

candie01 said:

Marcon said:

candie01 said:

I recently got a transfer value for the DB pension and it was 350k. The annual pension would be £7000. 
Several colleagues have transferred their pensions over the last five years and were discussing it in the office. There's lots of talk that the company may go bust over the next few years. 
 

Your pension will be far more than that by the time you get to retirement.

If the company does go bust, the Pension Protection Fund will be there to step in and protect a good slug of your benefits.

candie01 said:

I felt I was 100% sure I wanted to transfer as I feel I could have that money in a SIPP and whilst I know it can go to and down to over ten years it's likely to go up. And even if it did go down a bit I would still have a lot more than what I would get from £7000 per year even if I lived to 97, that's 30 years of £7000 per year, so £210k. 

Your SIPP could go up or down. Your DB pension will definitely go up.

It isn't 30 years at £7,000; your pension will increase both in deferment (i.e. from the time the scheme closed until the time you access your benefits) and once in payment.

You have huge gaps in your understanding, so perhaps digging out that old scheme booklet, or looking at the latest statement from your DB scheme, would be useful.

Thanks for your comment. I do understand that the £7000 will rise with inflation but if I put that lump sum in investments it could grow more than the rate of inflation. Am I missing something here?

Yes. The difference between a guarantee (DB) and a gamble (SIPP).

Dale72

candie01 said:

Hi. I'm 47, no children and no spouse. I'm have a DB pension that ended in 2015 when the common then started us with a DC pension. 
I recently got a transfer value for the DB pension and it was 350k. The annual pension would be £7000. 
Several colleagues have transferred their pensions over the last five years and were discussing it in the office. There's lots of talk that the company may go bust over the next few years. 
I've read about transfer values and it would seem that X 50 is a very good offer. I have also been told this is due to historically low gilt rates and as they go up my transfer value is likely to go down. 
Over the last three weeks I've spoken to 15  financial advisers. Most said come back when you are 50. Two have said they will advise me. One charges £11500 and will not assist with th transfer is they recommend not to transfer. The other will charge me £8500 and will assist whether the report is transfer or not and told me AJ bell would accept me either way. 
I felt I was 100% sure I wanted to transfer as I feel I could have that money in a SIPP and whilst I know it can go to and down to over ten years it's likely to go up. And even if it did go down a bit I would still have a lot more than what I would get from £7000 per year even if I lived to 97, that's 30 years of £7000 per year, so £210k. 
My dad has a SIPP and I have looked at his figures and his money overall is doing well. 50% increase in 5 years. 
With so many financial advisers telling me. It to move it it's putting a black cloud over me. Bit I also know they clearly are only insured for over 50 so that's why they are turning me away. Cc an I have experiences please from people who have moved their DB transfer and how they feel now and I'd it worked out well and who they used etc? 

I'm taking my advice from Hargreaves Lansdowne, who I have an existing Sipp with. I wouldn't be in a massive hurry to transfer unless you have a clear investment strategy for the money. I spoke to many IFAs, and I don't recall any of them telling me they thought transfer values would plummet over the next few years, but 1 or 2 did think the stock markets would!

TVAS

I noticed he didn't answer the other questions I posed and this is a classic missing out because the transfer value is high and others are transferring so I should transfer as well. This is not sufficient justification to transfer. 

In reality nobody will touch your case because it is too high a risk, yes you are single no dependants but in good health. 

If you get diagnosed with a disease where death is imminent or much shorter life expectancy you can make an argument to transfer so that relatives, charities benefit from the pension fund. If this were to be the case medical evidence would need to be produced by your GP to justify the transfer.

Dale72

TVAS said:

I noticed he didn't answer the other questions I posed and this is a classic missing out because the transfer value is high and others are transferring so I should transfer as well. This is not sufficient justification to transfer. 

In reality nobody will touch your case because it is too high a risk, yes you are single no dependants but in good health. 

If you get diagnosed with a disease where death is imminent or much shorter life expectancy you can make an argument to transfer so that relatives, charities benefit from the pension fund. If this were to be the case medical evidence would need to be produced by your GP to justify the transfer.

You already stated you would reject a transfer request, even the shonkiest of IFAs would need a little more info before finally deciding that.

[Deleted User]

Dale72 said:

candie01 said:

Hi. I'm 47, no children and no spouse. I'm have a DB pension that ended in 2015 when the common then started us with a DC pension. 
I recently got a transfer value for the DB pension and it was 350k. The annual pension would be £7000. 
Several colleagues have transferred their pensions over the last five years and were discussing it in the office. There's lots of talk that the company may go bust over the next few years. 
I've read about transfer values and it would seem that X 50 is a very good offer. I have also been told this is due to historically low gilt rates and as they go up my transfer value is likely to go down. 
Over the last three weeks I've spoken to 15  financial advisers. Most said come back when you are 50. Two have said they will advise me. One charges £11500 and will not assist with th transfer is they recommend not to transfer. The other will charge me £8500 and will assist whether the report is transfer or not and told me AJ bell would accept me either way. 
I felt I was 100% sure I wanted to transfer as I feel I could have that money in a SIPP and whilst I know it can go to and down to over ten years it's likely to go up. And even if it did go down a bit I would still have a lot more than what I would get from £7000 per year even if I lived to 97, that's 30 years of £7000 per year, so £210k. 
My dad has a SIPP and I have looked at his figures and his money overall is doing well. 50% increase in 5 years. 
With so many financial advisers telling me. It to move it it's putting a black cloud over me. Bit I also know they clearly are only insured for over 50 so that's why they are turning me away. Cc an I have experiences please from people who have moved their DB transfer and how they feel now and I'd it worked out well and who they used etc? 

I'm taking my advice from Hargreaves Lansdowne, who I have an existing Sipp with. 

Good luck with that, Dale.

Hargreaves Lansdown are expensive and will advise you not to transfer anyway: you know how to proceed from there I hope.

Dale72

ZingPowZing said:

Good luck with that, Dale.

Hargreaves Lansdown are expensive and will advise you not to transfer anyway: you know how to proceed from there I hope.

It's not too bad actually £3000, I didn't speak to many that quoted lower than that, and the existing relationship was the clincher. Yes I'm expecting a no, but then I would have with any IFA I had chosen, unless I found a 'back alley' one, so to speak, and I didn't want to go down that route. So I have AJ Bell lined up, and will then consolidate at some stage, unless there's a good reason to keep them separate (probably a question for another thread).