DB transfers

arnoldy

Prism said:

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.

Not as much as inflation can damage a final salary pension. Most final salary pensions (outside of Public sector) are CPI linked with caps - often 2.5% or 4.5% on various parts of the pension. In inflationary times final salary pensions are NOT a safe option.

candie01

Dale72 said:

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).

Did you transfer to aj bell?

candie01

arnoldy said:

rism said:

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.

Not as much as inflation can damage a final salary pension. Most final salary pensions (outside of Public sector) are CPI linked with caps - often 2.5% or 4.5% on various parts of the pension. In inflationary times final salary pensions are NOT a safe option.

It's capped at 2.5%

hyubh

candie01 said:

arnoldy said:

Not as much as inflation can damage a final salary pension. Most final salary pensions (outside of Public sector) are CPI linked with caps - often 2.5% or 4.5% on various parts of the pension. In inflationary times final salary pensions are NOT a safe option.

It's capped at 2.5%

I assume you are referring to statutory minimum increases for DB pension accrued from 6/4/05? For pension accrued between 6/4/97 and 5/4/05, it's capped to 5%, not 2.5%. However a scheme could/can implement better increases if it wishes....

candie01

hyubh said:

candie01 said:

arnoldy said:

Not as much as inflation can damage a final salary pension. Most final salary pensions (outside of Public sector) are CPI linked with caps - often 2.5% or 4.5% on various parts of the pension. In inflationary times final salary pensions are NOT a safe option.

It's capped at 2.5%

I assume you are referring to statutory minimum increases for DB pension accrued from 6/4/05? For pension accrued between 6/4/97 and 5/4/05, it's capped to 5%, not 2.5%. However a scheme could/can implement better increases if it wishes....

Yes I do remember part of it was capped at 5% and part was 2.5%, the scheme ended in 2015 and my employer then switched us to a defined contribution. 

ukdw

There are obviously quite a few risks if you do transfer out as stated in the other threads.  

The biggest risks with sticking with the DB are:
1. A future 10% reduction if the company goes under and the DB ends up going into the pension protection scheme.
2. Future high inflation breaching DB limits
3. Transfer values dropping or ability to transfer being curtailed - which would definitely be the case if risk 1 above occurred.

In terms of the initial fees for the transfer, personally I don't think the size of these is all that critical - as a £350k fund could easily move up or down by £3k, £8.5k or £11.5k in a few weeks depending on market conditions.  Much more important in my opinion are managing ongoing fees and making the right long term investment and drawdown choices.

I personally transferred out with a lower multiple than yours about 4 years ago and haven't had any regrets (including during the temporary Covid crash last year) and have quite enjoyed learning more about investment management etc.  Personally I would likely have transferred out at at anything above 25x due to the increased flexibility, larger PCLS and ongoing income (especially in early retirement years) and improved death benefits.

When making your decision though I certainly wouldn't assume 50% growth every 5 years - my personal assumption is less than half this level.

candie01

ukdw said:

There are obviously quite a few risks if you do transfer out as stated in the other threads.  

The biggest risks with sticking with the DB are:
1. A future 10% reduction if the company goes under and the DB ends up going into the pension protection scheme.
2. Future high inflation breaching DB limits
3. Transfer values dropping or ability to transfer being curtailed - which would definitely be the case if risk 1 above occurred.

In terms of the initial fees for the transfer, personally I don't think the size of these is all that critical - as a £350k fund could easily move up or down by £3k, £8.5k or £11.5k in a few weeks depending on market conditions.  Much more important in my opinion are managing ongoing fees and making the right long term investment and drawdown choices.

I personally transferred out with a lower multiple than yours about 4 years ago and haven't had any regrets (including during the temporary Covid crash last year) and have quite enjoyed learning more about investment management etc.  Personally I would likely have transferred out at at anything above 25x due to the increased flexibility, larger PCLS and ongoing income (especially in early retirement years) and improved death benefits.

When making your decision though I certainly wouldn't assume 50% growth every 5 years - my personal assumption is less than half this level.

Did you get a positive report or where you an insistent client?

ukdw

candie01 said:

Did you get a positive report or where you an insistent client?

Positive - although it was before I think they changed the guidance to make positives reports a bit harder to get.

In my case it took several months for my CETV to come through which gave me plenty of time to understand the factors involved in the guidance process and I don't think I would have proceeded with the transfer until I got a positive recommendation.  

Heisenberg01

"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? "

I transferred a very similar amount last year, at age 49, I gave up £9500 a year.
The transfer was relatively easy, when I read the amounts quoted on here I'm amazed, it cost me 1% initial and 0.75 ongoing plus Transact fees.( Maybe it's because I'm oop North?)
It's a bit if a roller coaster to be honest, a bad day in the market can wipe 5k overnight. A bad month IE March wiped £20k. Although currently I am about + 5%
At the end of the day I had no intentions of working untill 65, if I took my final salary at 58-60 it would reduce to 7k ISH which was not doable, however 370k with  hopefully some positive growth at the same age is.(yes I know, it's a bit of a gamble). 
I am currently hammering a salary sacrifice DC to back this up as well.

candie01

Heisenberg01 said:

"Can I have experience 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 transferred a very similar amount last year, at age 49, I gave up £9500 a year.
The transfer was relatively easy, when I read the amounts quoted on here I'm amazed, it cost me 1% initial and 0.75 ongoing plus Transact fees.( Maybe it's because I'm oop North?)
It's a bit if a roller coaster to be honest, a bad day in the market can wipe 5k overnight. A bad month IE March wiped £20k. Although currently I am about + 5%
At the end of the day I had no intentions of working untill 65, if I took my final salary at 58-60 it would reduce to 7k ISH which was not doable, however 370k with  hopefully some positive growth at the same age is.(yes I know, it's a bit of a gamble). 
I am currently hammering a salary sacrifice DC to back this up as well.

Wow lucky you that you got it out! I wish I could!