Is it enough?

Albermarle

draiggoch said:

You need to look very carefully on how much of a reduction there will be in your and your wife's pensions due to early payment as these can be quite hefty. Could be in the region of 5% per year so 25% less pension for taking it 5 years early, even 50% for taking it 55 instead of 65. This can make living on savings or DC pensions for a period much more efficient than taking the DB pension so early.

Although of course you would get the reduced pension for ten more years , so swings and roundabouts to some extent, although a 4% annual  reduction is better than 5% of course.

It is also a gamble on how long you will live . If you have any health/lifestyle issues/family history of not getting old then maybe better to take the pension early.

Mowzel

Thanks for the replies, yes there's family evidence to support taking my pensions as early as possible and my own health isn't brilliant, IFA told me a few weeks ago if I take abridged advice they will tell me A/stay in scheme or B/unclear, if unclear they would help me proceed to take my CETV and help invest it (as I've asked) however I'm not sure that's possible now as I read AJ Bell have stopped taking transfers, and Im not sure who else, if anybody does.

11k per year isn't brilliant but it's not the end of the world, also the 81k in DC pension leaves me some options I'm sure, be interesting what FA comes up with 

Albermarle

 IFA told me a few weeks ago if I take abridged advice they will tell me A/stay in scheme or B/unclear, if unclear they would help me proceed to take my CETV and help invest it (as I've asked) however I'm not sure that's possible now as I read AJ Bell have stopped taking transfers, and Im not sure who else, if anybody does.

I think what the IFA means by' B/unclear ' is that they think there is a reasonable possibility of a positive outcome and to now progress to the full ( not abridged )transfer assessment which will cost a few Grand probably .

All providers will accept a transfer with a positive recommendation , the problem is if you get a negative recommendation . You are legally OK to transfer but nobody will accept it ( or almost nobody ) 

jamesd

Let's start at state pension age and pretend that you each get 9.5k of state pension. Add in your wife's pension of 5k a year and that's 24k gross, similar net after you transfer personal allowance to your wife. So, no need for your own DB pension to achieve your long term income target and it's all available for bridging money until you both reach state pension age.

Now we can move on to look at bridging capital needs.

For 4 years she has about 17.7k net income but you can improve that by transferring personal allowance to her. Ignoring that transfer you have 4 years of 24k - 17.7k = 6.3k shortfall, total bill 25.2k.

Now you're 59 and she 55. Assuming 9.5k state pension each you have a shortfall of 8 years at 9.5k = 76k for you until your state pension age. With 5k NHS pension her own state pension  shortfall until YOUR SPA is 8 years at 4.5k = 36k. Combined total 112k. You also need 8 years of 5k = 40k to cover the shortfall between 19k state pensions and 24k target. So grand total for this period is 152k.

At this point you're 57 and she 53.  For her SP you need 4 years of 4.5k = 18k. You also need 4 years of 5k to get you 24k, another 20k. Grand total for this period is 38k.

With both of you now receiving state pensions and her DB you're roughly at target for the rest of your lives if we ignore the effect of one of you dying and what the other needs after that.

Adding up the capital needs we have 25.2k plus 153k plus 38k = 216.2k

With 528k you have an excess of 311.8k that at a withdrawal rate of 3.2% increasing with inflation each year could produce an additional 9.9k a year of income over your target.

I've assumed that investments except the 311.8k increase at inflation so that everything is in today's money.

It's clear that meeting your objective is impossible without the DB transfer and unchallenging with it, so proceeding looks like the way to go.

Abridged advice is only permitted to offer two responses: it's not in your best interest to transfer (but you aren't considered to have received advice and can't yet transfer) or you need full advice. Since it's in your interests to transfer you might as well start out with full advice which does allow you to transfer even if the advice based on FCA rules is no.

Mowzel

Thanks Jamesd, full advice is the route I'm leaning towards tbh, what worries me is if I get an "unclear" but IFA is willing to help me transfer as they have already stated, and nobody will accept my transfer, which could make it a costly process for nothing. 

Mowzel

Is anybody aware what sort of reasons make the transfer of a CETV more likely to happen, is it based only on health issues or is CETV transfer a thing of the past completely? 

Notepad_Phil

Mowzel said:

Is anybody aware what sort of reasons make the transfer of a CETV more likely to happen, is it based only on health issues or is CETV transfer a thing of the past completely? 

Have a look at https://www.ftadviser.com/pensions/2021/02/17/what-makes-a-good-or-bad-pension-transfer/ for some of the issues that may be involved.

Other reasons I've heard of in the past are where the person has other substantial DB pensions that they can access or where the DB pension provided poor/no indexation.

jamesd

Mowzel said:

Is anybody aware what sort of reasons make the transfer of a CETV more likely to happen, is it based only on health issues or is CETV transfer a thing of the past completely? 

Not only health, also your objectives. In your case both your health and your income objective support the transfer being in your best interests. You've particularly good reason to want to take more income at younger ages than later, a flexibility not allowed by DB.

A key potential negative is how much experience you have with investing and how comfortable you are with the ups and downs of investments. Since you have 81k of DC you have at least some experience of and comfort with this, so be sure to mention this and not stick solely to a risk level set of questions and answers. For example, say that you won't be unduly worried by a 10, 20, 30 or 40% drop in the total value of an investment mixture because you know that those and recovery are routine. Around 20-30% is the sort of drop that allows an equity:bond mixture that maximises potential income.

Mowzel

Quick question if thats OK guys, been advised by my IFA that I need to ask for an extension on my CETV figures as  the 3 months is almost up and he won't have time to give full advice without an extension, alternatively wait until next May for a new CETV, does this happen regularly? 

Malthusian

Mowzel said:

Quick question if thats OK guys, been advised by my IFA that I need to ask for an extension on my CETV figures as  the 3 months is almost up and he won't have time to give full advice without an extension, alternatively wait until next May for a new CETV, does this happen regularly? 

Whether it happens regularly or not I can't say, but I can say that you shouldn't care as it is entirely up to your particular scheme and what other schemes do doesn't matter.

They can either say no, say yes but charge you, or (if you're lucky) give you an extension or a refreshed CETV gratis. The latter may be more likely if they want to get rid of you, but the only way to find out is to ask.

It certainly is common for CETV deadlines to expire because people have a tendency to request CETVs before they have an adviser in place (which can take a while). This is entirely natural (because people often don't think they need an adviser until they've had a CETV) but unfortunately still the wrong way round if your objective is to successfully transfer out of a DB scheme or at least give it full consideration.