What would make you consider DB to DC transfer

Cypruseast

Pablo7474 said:

NB for the benefit of this I am querying this on the basis of someone approx 13-20 years away from pension of good health.

What does this mean?

I think it’s reasonably clear what it means but for the benefit of doubt then I am querying this based on someone say of 45 years of age who has reasonable health prospects. Naturally an individual in poor health will have more challenging decisions to make and this may skew the reasons for maintaining a DB pension over a transfer.  

RoadToRiches

You will find it hard to onboard a IFA to even work with if you are under 50.  

Pablo7474

It’s not clear, that’s why I asked. 

If you are under 50 I would say you have almost zero chance of getting advice. Why would you want it now? What possible reason can there be beyond excellent value? 

arnoldy

Virtually all DBs (apart from the public sector) are NOT inflation linked. They are capped at 05, 2.5%, or 5% - and that's always dependent on a scheme funding level [for what now will be a closed fund that the employer has no real incentive to keep feeding with anything more than the bare minimum £s].

So in effect you are hoping/thinking that inflation will be low for the next 30 years of retirement - something you have no ability to control - and something the long term inflation data says is quite an optimistic view.

And significant inflation will see a genteel slide into poverty with private DBs, which becomes more apparent the longer you live (which is bizarrely one of the reasons people are told to keep DBs!)

Pablo7474

Arnoldy, what is your point with this? What someone thinks about inflation is not a good enough reason to transfer out of a DB and take all the risks involved with investing and managing your own pension. Good luck on finding an adviser to sign off on this! 

RoadToRiches

Pablo7474 said:

Arnoldy, what is your point with this? What someone thinks about inflation is not a good enough reason to transfer out of a DB and take all the risks involved with investing and managing your own pension. Good luck on finding an adviser to sign off on this! 

On its own maybe not, but this was a point I made in my case :-)

Pablo7474

Was it a point they took into account though? You maybe raised good points and they disregarded this one? 

RoadToRiches

We discussed it along with a number of other points, but yes you are right on its own I doubt it made much difference.  It was more a point being made that the DB scheme had caps and in the event of hyper-inflation the payouts would not keep pace with inflation.

Similarly I made the point that in the event that interest rates do sky rocket, inflation and gilt rates would go up too, CETV values would ultimately fall and future annuity rates would improve beyond what they are today.

You are right though, this was not my main case but I bought it up when the Pension Transfer Specialist started discussing  inflation proofing promised income for life from the DB scheme being given up for the CETV..

Albermarle

shinytop said:

A multiplyer of more than 50 would have made me seriously consider it.  With the 28x on offer I didnt even work it out.     

Probably anything near 40 would be tempting , but I would conservatively use the pension due at NRA to calculate it .
Rather than using a reduced pension that would be paid earlier . 

arnoldy

Pablo7474 said:

Arnoldy, what is your point with this? What someone thinks about inflation is not a good enough reason to transfer out of a DB and take all the risks involved with investing and managing your own pension. Good luck on finding an adviser to sign off on this! 

Apologies I was trying to answer the question "what would make you consider DB to DC transfer"

If you are worried about inflation (something you have no control over) it might be one of the reasons to transfer out of a DB pension, which is usually not inflation linked - whereas history tells us that that stock market investments, property and land etc generally do.