Draw down on pension investment

Tax_Slave

I have a final salary pension that will pay me £10,009 a year from the age of 59 (this December).
This is one of a couple of final salary pensions I have.
An alternate is to transfer the pension with a transfer value of £258,913.
The windows part of this pension is £6,000 per year approx (60%).
Only 25% of the pension increase with inflation.

I have a life limiting form of blood cancer and can expect at best 20 years more life or maybe longer if new treatments become available. At the same time the stats say living another 10 years has odds of 33%. Odds of 5 years is 45%.

Anyway my question is;
£258,913 , I could take £10,000 a year out and without investment increases this lump sum would last me 26 years approx. This would be 85 years old.
if I did opt for the transfer option , do products exist where you can invest the money and take say £10,000 a year out?
I presume that this would be tax free for the first £258,913 / 4 = £64,728 amount of money I took out?
(if with other income I went over my tax allowance).

PS My wife has her own pension plans.
I understand that if I die prior to 75 my wife would get what’s left in the investment via my will or default inheritance.

zagfles

Sorry to hear about your situation.

Yes you can transfer out although you'll need financial advice - reduced life expectancy is one of a small number of good reasons to to transfer out and the likelyhood is you'd get a positive recommendation from an adviser.

Once in a SIPP or personal pension, you can take 25% tax free and drawdown the rest (taxable) as you choose. Whatever age you die, your wife would get what's left, the only difference between under/over 75 is that if under 75 it would be tax free. Note you don't (or very rarely) leave pensions via a will, you'd need to fill in an "expession of wish" with the provider, although the default would almost certainly be your wife.

The other option to consider would be buying an impaired life annuity. The adviser should discuss this option.

Worth a chat with Pensionwise too https://www.moneyhelper.org.uk/en/pensions-and-retirement/pension-wise?source=pw

To find an adviser: https://www.unbiased.co.uk

Good luck!

Albermarle

You should spend some time reading this forum, as questions/issues about transferring out of DB/final salary schemes is one of the most debated topics.
Putting aside your health issues ( you  wish you could !) another couple of important points are as follows 
1) You might not believe it but a transfer value of £258K to give up a pension of £10K pa at 59 is in fact a rather poor offer.
Probably because only 25% will increase with inflation I guess.
2) If you did transfer and wanted to take out £10K pa , then to keep pace with inflation , the actual amount you take out would have to increase in line with inflation ( otherwise after 26 years £10K might only buy £2K worth of goods and services )
So for it to last 26 years ( or longer ) it would need to be successfully invested to at the least keep pace with inflation . This should not be an issue if dome correctly, but you will probably need some help if you are new to investing ( or do some learning )

Tax_Slave

Some great advice.
Thanks for the prompt replies.

I will follow the links in replies and research this further.

The literature and forms I have been sent with reg to final salary pension and Xfer out , will not act on Xfer out unless you can prove you have received advice.
For values above £30k.

Albermarle

Tax_Slave said:

Some great advice.
Thanks for the prompt replies.

I will follow the links in replies and research this further.

The literature and forms I have been sent with reg to final salary pension and Xfer out , will not act on Xfer out unless you can prove you have received advice.
For values above £30k.

Yes and the problem is if you received the ( expensive advice ) and the answer is a negative recommendation , in theory you can transfer out but in practice it is difficult.
You can get what is called 'Triage advice ' (which is basically a simpler, cheaper option to weed out obvious cases that will get a negative recommendation ) before going on to the full process ( or not )

Tax_Slave

Albermarle said:

Tax_Slave said:

Some great advice.
Thanks for the prompt replies.

I will follow the links in replies and research this further.

The literature and forms I have been sent with reg to final salary pension and Xfer out , will not act on Xfer out unless you can prove you have received advice.
For values above £30k.

Yes and the problem is if you received the ( expensive advice ) and the answer is a negative recommendation , in theory you can transfer out but in practice it is difficult.
You can get what is called 'Triage advice ' (which is basically a simpler, cheaper option to weed out obvious cases that will get a negative recommendation ) before going on to the full process ( or not )

You would think having an idea of your longevity would make decisions easier. But it’s still a gamble involving outliving the predictions via new treatments increasing life span. So a huge positive via living longer could become a financial negative if I make the wrong pension decision.

Thanks for the great advice and next step is to document fully all my pensions (2 final salary currently deferred until I’m 60 and a defined contribution scheme that’s currently invested (not crystallised - a term I learnt the meaning of last year via this forum).