Final Salary Pension Transfer

dunstonh

I'm not against advise , I do find the charge excessive though and the fact that is has been deliberately designed to be excessive does make me cross.

The charge is not excessive for the level of risk/liability that is being taken.  As well as the ongoing annual cost to the advisory firm and one that many advisers have to retain for the rest of their lives.    

It is highly specialised and it is a hot potato and it is priced as such.

arty688

Well I'm none the wiser

• Date Left Plan
  18/06/1994
• Total pension at Date of leaving (per year)
  £861.84
• Total GMP at GMP payment age (per year)
  £2,380.56
• Post April 1988 GMP at GMP payment age (per year)
  £2,380.56
• Total GMP at Date of leaving (per year)
  £182.00
• Post April 1988 GMP at Date of leaving (per year)
  £182.00

arty688

dunstonh said:

I'm not against advise , I do find the charge excessive though and the fact that is has been deliberately designed to be excessive does make me cross.

The charge is not excessive for the level of risk/liability that is being taken.  As well as the ongoing annual cost to the advisory firm and one that many advisers have to retain for the rest of their lives.    

It is highly specialised and it is a hot potato and it is priced as such.

I'm not saying the IFA are excessively charging , I just said the system is designed to produce excessive costs to discourage people from doing it.

Prism

jamesd said:

Prism said:

If only it were so simple.

How about another scenario then using real figures for the US stock market with £120,000, a 4% withdrawal and only 1.9% average inflation.

By year three the pot has dropped to less than half - £57k
By year fourteen its around a quarter - £34k
By year twenty its down to two years left in the pot - £15k and withdrawals are £7.1k per year by this point.

Now that is pretty poor timing I agree (1st April 2000) but still the point is that what could have been a stress free modest retirement has become a rather stressful worry about money.

The point may actually be different: it looks as though you picked 100% equities instead of the normal 35-50% in bonds that's used in safe withdrawal rate studies, notably the 4% rule one that used 50:50 and in that 1994 paper Determining Withdrawal Rates Using Historical Data Bill Bengen observed that "Stock allocations below 50 percent and above 75 percent are counterproductive."

Using a more usual asset allocation, Wade Pfau looked at the question of How Are People Who Retired In The Year 2000 Doing Today? in 2016 and found:

"Ranked in terms of real remaining wealth after sixteen years of retirement for retirees since 1926, the 2000 retiree comes in fifteenth place with 67.5% of wealth remaining in inflation-adjusted terms. This is for a 4% withdrawal rate, 50/50 asset allocation, and all of the other assumptions described in William Bengen’s SAFEMAX.

On the surface, the situation does not look dire for 2000 retirees. The fourteen hypothetical retirees with less remaining real wealth after sixteen years all subsequently experienced success over thirty years with the 4% rule."

The outcome since 2016 has overall been favourable in spite of the brief Covid crash in 2020 and at the 20-21 year point now the situation will have improved over 2016 with the retirees still on target.

Yeah, I only gave that example as a reply to RoadToRiches comment suggesting sticking it in the S&P 500 and taking 4%. That is nothing like the suggestions you mention from Bengen and Pfau which are far more realistic. Although neither of these have been fully tested for a retirement in 2000 I think its fair to say that anyone starting with a good slug of bonds at that time should have no worries by this point.

We know that drawdown strategies are very helpful. Those of us with DC pensions have had years to get our heads around the risks, especially of sequence of returns. I worry that some of the DB transfer people haven't done their research about the risks of drawdown and think that sticking it in equities with a 4% withdrawal and a small cash buffer is enough. The last 10 years has made everything seem a bit too easy I reckon.

Thrugelmir

arty688 said:

dunstonh said:

I'm not against advise , I do find the charge excessive though and the fact that is has been deliberately designed to be excessive does make me cross.

The charge is not excessive for the level of risk/liability that is being taken.  As well as the ongoing annual cost to the advisory firm and one that many advisers have to retain for the rest of their lives.    

It is highly specialised and it is a hot potato and it is priced as such.

I'm not saying the IFA are excessively charging , I just said the system is designed to produce excessive costs to discourage people from doing it.

There's no such thing as a free lunch. 

Pablo7474

So if total GMP at date of leaving is £182, this looks like it would revalue to £2,380 on its own by GMP age. It also looks like you have excess benefits of £861-£182 = £679, so this will have revalued to up until scheme normal retirement age, which may be the same as GMP age. Therefore it looks like from what to have said your pension is the £2380 plus the £679 (revalued from 1994 until normal retirement age). This is based on the info you have provided so would need to check with scheme. If £679 has revalued by rpi for 30 years this could be £1600, therefore pension could be more like £4000. As I say, you’d need to check. Do you know the scheme normal retirement age, is it 65? 

Pablo7474

Also it would be good to know the year not just age so can see how many years are between date of leaving and normal retirement age. 

arty688

The Schemes normal retirement age is 60 and I'm 53 so 7 years left.

QrizB

arty688 said:

The Schemes normal retirement age is 60 and I'm 53 so 7 years left.

So a couple of days ago you said:

So working on retiring at 60 and being dead by 80 I started getting the info together . and had a what I thought was a pleasant surprise as I had a DB pension which I thought would be worth about £1k per year turn out to be worth about £2.5k even better than that the estimated transfer value was £120k.

But now it looks like you have a GMP of £2380, plus perhaps another £1600 on top, so a pension of £4k pa? Where did the £2.5k number come from?

Edit: is the £2.5k pa the value today, not in 7 years time?

xylophone

Are you male?

If so, while your Scheme Normal Retirement Age is 60, GMP age is 65.

Does this mean that your scheme will pay only the excess over GMP (revalued to SNRA) at 60 plus the GMP at date of leaving, with a step up at GMP age?