Should I really take the DB income?

jrh22542254

Option 1 for me as its guaranteed inflation proofed from age 65. You can sort out leaving the money to your beneficiaries later in a number of different ways. I tried 3 different so called IFAs and it took forever and the costs were well hidden and horrendous. 
Also dont forget the lump sum commutation rates are not in your favour and neither is the CETV value - its all stacked against you.
Hence I went for option 1 - simple and no worries, particularly as you are nowhere near the lifetime allowance.

Decision_Time

"Option 1 for me as its guaranteed inflation proofed from age 65. You can sort out leaving the money to your beneficiaries later in a number of different ways. I tried 3 different so called IFAs and it took forever and the costs were well hidden and horrendous. 
Also dont forget the lump sum commutation rates are not in your favour and neither is the CETV value - its all stacked against you.

Hence I went for option 1 - simple and no worries, particularly as you are nowhere near the lifetime allowance."

Unfortunately only approx 50% of it has any inflation proofing, and that's only to 3%.

As to the LTA, I'm currently trying to make sure that I won't have issues with the LTA at 75 tests. i.e. I'm drawing down more than I need and putting the excess into S&S ISAs and GIA accounts.

But I do agree that option 1 is the simpler approach for me - at least until inflation starts to eat into the DB income.

Terron

I went with option 1 for my DEC pension which I took when I turned 60. Mine was about half yours.

AlanP_2

How long did the IFA take to go through the process? I'd hope that given their knowledge of the scheme they'd be able to do it long before the 3 month deadline ran out - but saying that, I guess I'd contact the IFA first before getting the official CETV figure to line everything up.

You would think so wouldn't you, in reality their admin team was processing the forms to go back to the scheme at about 7pm the evening before the deadline.

The IFA certainly knew the scheme details and there was some kind of back office portal link between them and the scheme administrators for requesting scheme info and uploading documents by the sound of it.

It seemed a very thorough process to me, certainly not a tick-box exercise.

Started with completion of a basic info form with details on mortgage / debts / household income / assets / dependents / other pensions / SP forecast / current spending on broad categories / desired income etc.

Followed up by a 2 hour Zoom call with the IFA for my wife and I where we went over the info provided and expanded on the details and discussed how we would use the money if transferred out (we had a prepared plan in mind) 

My wife was optional but as we plan together, and the eventual decision would affect her, we both wanted her involved from the start. It gave her an opportunity to ask the IFA questions from her point of view, maybe with a bit less "attachment" if that makes sense.

The IFA then went off and did his stuff with a few email exchanges as queries arose along the way, and a discussion about where it would go if transferred (to the SIPP they set up with Royal London) and whether ongoing IFA service would be required (No).

Output was a report of about 60 pages that covered our situation, what we wanted to achieve, comparisons of different investment returns /annuities v the DB income and how different inflation rates would play out in those different scenarios and the risks / benefits of both options.

Conclusion was "Yes" for transfer.

As an appendix to the report there was the blurb from RL on their SIPP and the investment choices he was proposing.

Before they would accept the signed transfer forms from me I had to have a final call with the IFA where he checked my understanding of the report and that i appreciated there was "no going back" and understood the risks.

"The lack of inflation proofing was my real concern"

Did the IFA go into this in any detail? My understanding is that my wife will get 50% of my GMP, it would be good if the IFA mentioned that too.

He knew about the lack of inflation protection ahead of time, we discussed it during the call and it was referenced in the report.

Spouse would get 60% of overall pension from memory so not sure GMP specifically is relevant.


Overall I would say the IFA service was good, and how they can do it for the price I have no idea, but the admin / hand holding was a bit weak. Trying to get hold of him on the phone was difficult and there could have been more in the way of progress reports

AlanP_2

I find this interesting, and in a way it reinforces the point that the decision to take the CETV or not is specific to the individual.

Decision_Time, Terron and I are all deferred members of the same scheme and near enough the same age

For DT, the LTA is a consideration weighing against transferring, has "plenty" of DC / investments to live off so this DB isn't essential but would be a goodish complement to the other income sources despite the limited inflation proofing.

STILL DECIDING

Terron, if I recall correctly, has a number of BTL properties and limited (no?) other DB income streams.

TAKE DB INCOME

I have a good DB income to come from other sources, as does my wife, but less in DC / investments. LTA is not an issue for me and we don't "need" more guaranteed income.

TAKE CETV


If a new poster came on here and just posted up the CETV and annual pension numbers the consensus would be "don't transfer" as the multiple is low.

Add a bit more detail around inflation protection and views might change as the low multiple makes a bit more sense.

Add a bit more detail around other assets, want / need income levels etc. and a sensible / practical discussion of the pros and cons FOR THEM can take place.

Terron

AlanP_2 said:

I find this interesting, and in a way it reinforces the point that the decision to take the CETV or not is specific to the individual.

Decision_Time, Terron and I are all deferred members of the same scheme and near enough the same age

For DT, the LTA is a consideration weighing against transferring, has "plenty" of DC / investments to live off so this DB isn't essential but would be a goodish complement to the other income sources despite the limited inflation proofing.

STILL DECIDING

Terron, if I recall correctly, has a number of BTL properties and limited (no?) other DB income streams.

TAKE DB INCOME

I have a good DB income to come from other sources, as does my wife, but less in DC / investments. LTA is not an issue for me and we don't "need" more guaranteed income.

TAKE CETV


If a new poster came on here and just posted up the CETV and annual pension numbers the consensus would be "don't transfer" as the multiple is low.

Add a bit more detail around inflation protection and views might change as the low multiple makes a bit more sense.

Add a bit more detail around other assets, want / need income levels etc. and a sensible / practical discussion of the pros and cons FOR THEM can take place.

I am no longer a deferred member.

I have an annuity - it had a GAR of 10.6% which would have been reduced if I changed the conditions, so it is fixed at just over £4k per year.

I had a hybrid scheme where I took the full DB part of over £9k per year. That is index linked with a 5% cap.

Then I have a bit over £3k from the DEC scheme.

All together £17kpa. My NUMBER was £18k at the time for a moderately comfortable life.

I took a tax free lump sum equal to 25% of the DB hybrid pension from the DC part and put the rest into my SIPP. The hybrid scheme had closed in 2003 and I was in one with reduced charges for employees, so as the charges had gone up my IFA helped me transfer the DC part to a cheaper scheme.

LTA was not an issue. I had about £300k in the DC pension (almost £400k now).

I was made redundant at age 54 and had planned on taking my pensions at 60. I could have lived off my savings until then, but decided to invest them and tey to live of the money earned from them. I still had to use some savings in the first year when I made £11k, but I have made enough to meet my NUMBER just from BTL ever since (helped by the delay before HMRC caught up with the change).

So now instead of my DB pensions providing almost all I need to meet my NUMBER until I get my SP at 66 they should be allowing my some luxuries. I did go to South Africa to watch some tests in January last year, but my plan to go to Australia to watch the Ashes has been cancelled.

But my BTL plans could have failed. My first purchase had mixed results and I sold it this year. But the second and third did well. At least until last year. The tenant who moved into the second the day after the renovation was completed and has been there every since lost her job and had to go onto UC, so I gave her a rent holiday. The third was a commercial property and the tenant occupying 2/3rds of it moved out just before Corvid and it took 6 months to replace them.

Having some guaranteed income is comforting.

Silvertabby

You say that you have checked, and that you will both get the full State pension, but are you absolutely sure about that?

We are a long way from saying that 35+ years of NI contributions automatically gives the full single tier pension.  Those of us who started work before 2016 are under transitional arrangements - and early retirement (with little or no post 2016 NI conts) plus a lot of contracted out service (LGPS for one)  doesn't normally = the full £179 per week.

Decision_Time

"You say that you have checked, and that you will both get the full State pension, but are you absolutely sure about that?"

Yes we definitely are, thanks. We actually had to buy a few voluntary years to get my wife there, but I was lucky and managed it with my record alone.

Decision_Time

"I went with option 1 for my DEC pension which I took when I turned 60. Mine was about half yours."

"Having some guaranteed income is comforting."

Yes the guaranteed bit is what makes me think that taking the income is likely the right thing to do as it is comforting, it's just the poor inflation linking that is making me have second thoughts.

"You would think so wouldn't you, in reality their admin team was processing the forms to go back to the scheme at about 7pm the evening before the deadline."

Thanks AlanP_2 for your info about the process. I bet there were a few heart palpitations as it got closer to the deadline!!

"If a new poster came on here and just posted up the CETV and annual pension numbers the consensus would be "don't transfer" as the multiple is low.

Add a bit more detail around inflation protection and views might change as the low multiple makes a bit more sense.

Add a bit more detail around other assets, want / need income levels etc. and a sensible / practical discussion of the pros and cons FOR THEM can take place."

Yes I can make pros and cons for all of the options.

"For DT, the LTA is a consideration weighing against transferring, has "plenty" of DC / investments to live off so this DB isn't essential but would be a goodish complement to the other income sources despite the limited inflation proofing."

That's a neat summary of how I see our situation. I can see how the other options could help, but I'm always drawn back to how by taking the full DB income it would complement the DC / investments especially in the early days until we get to state pension age, and then again when I'm no longer around (though hopefully that will be a long time coming.)

Terron

Decision_Time said:

"I went with option 1 for my DEC pension which I took when I turned 60. Mine was about half yours."

"Having some guaranteed income is comforting."

Yes the guaranteed bit is what makes me think that taking the income is likely the right thing to do as it is comforting, it's just the poor inflation linking that is making me have second thoughts.

It took me a while to decide. It was one of the main reasons I joined this forum.

I found that the AVCs I had paid were invested in cash, so the first thing I did was to transfer them to a fund (not an option whilst I was at DEC). I took them as a TFLS when the pension started.

Eventually I decided that as even with the DB pension my total guaranteed income would be less than my NUMBER (though close) I would keep it. That allows me to keep my DC funds invested for longer and at a slightly higher risk, hopefully counteracting the lack of inflation protection.