DB, short service, what to do with it?

MovingForwards

DB info:

I'm at the stage of leaving PS and the DB after just over 2 years service, as at my leaving date. I wouldn't ever return.

It will pay me maybe £420 a year, on reaching SPA, plus maybe £1300 lump sum. CPI stops after I leave.

Scheme papers say it can be kept with them or transferred out, subject to requiring advice if applicable; highly doubt it would have a £30k + transfer value.

My partner is named in the expression of wishes, only married / civil partnership get a pension percentage on death. Don't know if we will marry, it's not happened yet.

I assume after I've left a letter will arrive confirming figures, or I contact them a few weeks after my final pay.

DC info:

New role is DC, total 8% in between employer / me. I get full details when I start.

I have 2 old DC's, I transferred the others to vanguard and add to it monthly.

Misc info:

Still have my sub-prime mortgage and making overpayments. On schedule to clear it by the end of 2029. Might move in 2025 when fixed term is up as it still leaves me with a sufficient term to play with; it would be a similar sized property, CT banding etc.

Still saving each month as it's EF, repairs, possible mortgage deposit, bridge the gap if I retire early eg before lowest age to access pensions.

22ish years to SPA, basic tax payer, based on today's money my full SP covers our lifestyle with money left over; have more than enough working years to reach full SP.

Thoughts:

It doesn't seem worth keeping it in the DB after I leave, I'm prepared to take the risk the DC's / SIPP drop and I sit it out. 

Viability of splitting it with a view to being "small pots", unless that option goes in the future?

It could possibly work better getting dropped in to an existing DC.

If it's low enough for me to transfer out without FA, is there something obvious I'm missing?

El_Torro

It probably won’t perform better invested in a DC pension, but for £420 a year does it really matter? Personally I’d be tempted to transfer it, for simplicity if nothing else. A lot depends on what transfer value they offer you too.

Are you saying that the value of the payout won’t increase with inflation between now and your retirement date? Are you sure that’s right? If so it makes the case for transferring out a lot stronger.

Any thoughts on whether you might rejoin the public sector one day, and start paying into this scheme again?

One last thing: 8% of your salary going into your pension in your new job probably won’t give you a particularly good retirement fund (regardless of what you do with your DB pension). You should consider making higher contributions or opening a SIPP.

Albermarle

It could possibly work better getting dropped in to an existing DC.
If it's low enough for me to transfer out without FA, is there something obvious I'm missing?

Apparently many DC pension providers will not accept DB transfers even when they are under £30K , without advice , although there is no legal requirement .

So you had best check with your existing providers .

Thrugelmir

Treat it as a bond investment within your portfolio. Not least because it will be a secure guaranteed source of income. 

NedS

MovingForwards said:

DB info:

It will pay me maybe £420 a year, on reaching SPA, plus maybe £1300 lump sum. CPI stops after I leave.

You need to clarify that, as it sounds unlikely. Normally, when you leave a PS pension scheme you become a deferred member and the pension payable upon reaching the scheme retirement age will be uprated each year by CPI. Sometimes it's capped at either 2.5% or 5%, others are uncapped depending on scheme rules.

Your decision will be based on your age, the transfer value and the conditions around the index linking. If you are particularly young, receive a generous transfer value, and have a 2.5% cap on CPI and believe we are entering a period (10+ years) of sustained high inflation, then a transfer may appear attractive, otherwise I'd leave it be and treat it as a fixed income investment within your overall portfolio as @Thrugelmir suggests. You are unlikely to find a better fixed income investment so it would make little sense to transfer it into your DC pot only to invest in something like Vanguard LS80 or LS60 with a bond/fixed income element. You'd be switching from a guaranteed (index-linked?) fixed income investment to a potentially not so good fixed income investment.

MovingForwards

@El_Torro I could be totally misunderstanding but it says will increase upto 5% PY CPI, while in service until retiring, leaving or death.
(Forgive me for removing a few words from the actual wording)

I would never rejoin this company, or another of the same type, and I don't believe this particular DB is run in other PS areas. I'm not really a PS person, tried it, only planned on staying 5y anyway and prefer the private sector.

Assessing the DC when I receive the details and a lot depends on which company it's in. I can come back and update / ask more questions if I'm unsure of anything.

If it's Nest, would it automatically find my old one and keep adding to it, or would another one get opened up with them?

I am happy with my current SIPP, mindful of charges and in time would look at other providers.

Thanks @Albermarle I didn't know the DC's were a bit funny with small DB's going in!

Thanks @Thrugelmir I may not have much choice. Depending on inflation, and if I've read the no inflation increase right, maybe a monthly bar of chocolate would be a treat.

NedS

MovingForwards said:

@El_Torro I could be totally misunderstanding but it says will increase upto 5% PY CPI, while in service until retiring, leaving or death.
(Forgive me for removing a few words from the actual wording)

I believe the 'leaving' refers to leaving the scheme, not leaving the employment. You don't leave the scheme when your employment ends, you become a deferred member of the scheme, meaning your benefits remain but you will no longer be able to actively add to them, but they will increase by CPI inflation each year subject to the 5% cap.

MovingForwards

That makes more sense as the options are keep it deferred or transfer to another @NedS

Potentially I may be just above the transfer threshold, if CPI is consistently 5% or about half the threshold if 2.5%.

I had a play with a few DB calculators overnight to try and work out whether it might be possible to move it or not. 

Marcon

MovingForwards said:

That makes more sense as the options are keep it deferred or transfer to another @NedS

Potentially I may be just above the transfer threshold, if CPI is consistently 5% or about half the threshold if 2.5%.

I had a play with a few DB calculators overnight to try and work out whether it might be possible to move it or not. 

Ask the scheme for a transfer value - it's the only way to know.

To answer you question above about NEST - if you already have an account with them and join a new employer, then yes, NEST will pick it up (from your NI number) and you'll just have the one account.

hyubh

MovingForwards said:

DB info:

I'm at the stage of leaving PS and the DB after just over 2 years service, as at my leaving date. I wouldn't ever return.

What is 'PS'? If 'public sector', the the reference to capped inflation proofing doesn't make much sense...

jimi_man

What does PS mean? It's been used a lot but I have no idea what a PS DB pension is?