DB Pension transfer..a no brainer?

grocerjack

C_Mababejive said:

Aged almost 60, still contributing to a DB pension. Also have a SIPP with about 60k in it.

Transfer value circa £1m, no dependents.

Transfer seems a no brainer. Am i missing anything?

I find the negativity to transferring out a bit wearing to be honest. DB schemes are great, but for most you can't touch it until 65, even if they are closed down (as ours was in 2010). If you die a day after retiring then your partner would get something...if you both die then the whole fund will go back into pension fund. In that case it usually dies with you in those circumstances. Any children over 18 might get a cursory sum from it.  I transferred mine out just as COVID hit, my value was circa 800k. I did loads of research beforehand, and found a diamond of an IFA who used Briggs Murray to risk assess me, and determine if it was recommended to transfer out. They said yes, and I took the 25% to pay off the mortgage and the rest was held in cash until the initial pandemic 'panic' had subsided (IFA and Transact advice). Investment at medium risk started in July 2020 and has returned around 9% so far. That is exeptional and I know it won't return this every year, but risk is part of life and my transfer is managed via Transact who seem happy to take me as a client, and according to every review I've read have a very good record in fund management.

My IFA has provided a very extensive 'life plan' as part of a service that I think is very reasonably costed. DB pensions are the gold standard, but they are often very inflexible and whilst a guaraneteed annuity from them is great, I much prefer a flexible drawdown option, and the chance to spend the money whilst I'm physically and mentally able. I have just accepted redundancy at 60 so the 'package' with the transfer pension (about to be bolstered with my company DC fund) means I can probably look to a 'comfortable' retirement according to the PLSA retirement standards. Don't forget at 66/67 you will be getting £10k SP as well.  It is a personal choice though, and will depend on your attitude to risk and your desire to retire early. I wouldn't denigrate those who remain in their DB schemes, but don't assume that transferring out is always a bad option.

eskbanker

grocerjack said:
Investment at medium risk started in July 2020 and has returned around 9% so far. That is exeptional and I know it won't return this every year

An incidental point to the thrust of the overall post, but I wouldn't describe that as exceptional - that's about 6.7% annualised growth, which isn't abnormal at all for a medium risk investment....


In terms of your initial comment about negativity to transferring, OP made an almost completely unsupported remark that it would be a no-brainer, and asked for what they might be missing, so posters have contributed factors that need to be included in the evaluation, as this board is littered with examples of posters who've been seduced by apparently huge CETVs, without being aware of how to make a realistic like-for-like comparison.

There are also many threads discussing the difficulty of obtaining an IFA recommendation or transferring against advice, which is a situation that has changed significantly since you went through the process....

grocerjack

eskbanker said:

grocerjack said:
Investment at medium risk started in July 2020 and has returned around 9% so far. That is exeptional and I know it won't return this every year

An incidental point to the thrust of the overall post, but I wouldn't describe that as exceptional - that's about 6.7% annualised growth, which isn't abnormal at all for a medium risk investment....


In terms of your initial comment about negativity to transferring, OP made an almost completely unsupported remark that it would be a no-brainer, and asked for what they might be missing, so posters have contributed factors that need to be included in the evaluation, as this board is littered with examples of posters who've been seduced by apparently huge CETVs, without being aware of how to make a realistic like-for-like comparison.

There are also many threads discussing the difficulty of obtaining an IFA recommendation or transferring against advice, which is a situation that has changed significantly since you went through the process....

Is that what they are now calling an 'insistent client' - someone who wants to transfer even if advised not to. I understand what the posters are doing, and it's fair to outline the potential pitfalls, but I do think the whole subject tends to be heavily aganst transferring out and the positives are often overlooked.

Malthusian

grocerjack said:

Is that what they are now calling an 'insistent client' - someone who wants to transfer even if advised not to. I understand what the posters are doing, and it's fair to outline the potential pitfalls, but I do think the whole subject tends to be heavily aganst transferring out and the positives are often overlooked.

As the history of these threads illustrate, people consistently undervalue a long-term inflation-linked income stream vs a lump sum (lottery winner syndrome). And cashing in a DB pension is unsuitable for most people. (Most people don't do extensive research into financial decisions or take a sanguine attitude to investment returns.) So in a "MoneySaving" forum the emphasis will always be on the advantages of the DB pension.

Ever since Osborne's "pension freedoms" the advantages of cashing one in have largely sold themselves.

As it happens, most DB schemes do allow you to retire before 65 - you just have to pay an actuarial penalty in most circumstances if it's not an ill-health pension.

If someone considers the negative aspects of a DB pension and decides they'd rather stay put, they've just saved several thousand pounds compared to paying for professional advice to tell them the same thing. A DB transfer is the single most high risk transaction that most people can undertake in their lifetime, and if someone is put off by random people down the pub, then it's extremely unlikely that an adviser would have tried to persuade them it was a good idea.

Linton

grocerjack said:

eskbanker said:

grocerjack said:
Investment at medium risk started in July 2020 and has returned around 9% so far. That is exeptional and I know it won't return this every year

An incidental point to the thrust of the overall post, but I wouldn't describe that as exceptional - that's about 6.7% annualised growth, which isn't abnormal at all for a medium risk investment....


In terms of your initial comment about negativity to transferring, OP made an almost completely unsupported remark that it would be a no-brainer, and asked for what they might be missing, so posters have contributed factors that need to be included in the evaluation, as this board is littered with examples of posters who've been seduced by apparently huge CETVs, without being aware of how to make a realistic like-for-like comparison.

There are also many threads discussing the difficulty of obtaining an IFA recommendation or transferring against advice, which is a situation that has changed significantly since you went through the process....

Is that what they are now calling an 'insistent client' - someone who wants to transfer even if advised not to. I understand what the posters are doing, and it's fair to outline the potential pitfalls, but I do think the whole subject tends to be heavily aganst transferring out and the positives are often overlooked.

The FCA state that the default assumption should be that transfer is not recommended.  Therefore I cant see it is an appropriate role for this forum to give someone who doesnt know why they want to transfer reasons for doing so.  That they dont know is surely prima facie evidence that they should not.

In my view it is right that the whole system is heavily against transferring out.  The irreversible risk to the transferee's future is so great that the reasons for doing so should be convincing and genuine.

GunJack

The cost of the analysis is a bit of a problem in all this... I'm watching how things go as I may want to look at transferring my current db out in around 4 years - it's the smaller of the 2 I have, but a decent cetv could mean retiring a bit earlier. However, as stated, anywhere from 4-7k if the report says no is a massive kick in the gonads and bye-bye earlier retirement to boot

Linton

GunJack said:

The cost of the analysis is a bit of a problem in all this... I'm watching how things go as I may want to look at transferring my current db out in around 4 years - it's the smaller of the 2 I have, but a decent cetv could mean retiring a bit earlier. However, as stated, anywhere from 4-7k if the report says no is a massive kick in the gonads and bye-bye earlier retirement to boot

Is £4K-£7K really the difference between retiring early or not?  Surely that is only say 4 months living expenses. If your finances are that tight can you afford to take the risk?

Diplodicus

Linton said:

GunJack said:

The cost of the analysis is a bit of a problem in all this... I'm watching how things go as I may want to look at transferring my current db out in around 4 years - it's the smaller of the 2 I have, but a decent cetv could mean retiring a bit earlier. However, as stated, anywhere from 4-7k if the report says no is a massive kick in the gonads and bye-bye earlier retirement to boot

Is £4K-£7K really the difference between retiring early or not?  Surely that is only say 4 months living expenses. If your finances are that tight can you afford to take the risk?

It's the equivalent of 4 years Council Tax or energy bill price rises for fifty households, however it is normalised. 

Much of the inflated fee is justified by citing risk insurance but, by recommending no transfer, the adviser is avoiding that risk.  

eskbanker

marlot said:

>> Investment at medium risk started in July 2020 and has returned around 9% so far.
Hmm.  Maybe I'm taking a bit more risk, but I've done rather better than that.

That was what I was thinking when querying the 'exceptional' comment - a couple of representative mid-range multi-asset funds (VLS60 and HSBC Global Strategy Balanced) over that timeframe are somewhat better:

GunJack

Linton said:

GunJack said:

The cost of the analysis is a bit of a problem in all this... I'm watching how things go as I may want to look at transferring my current db out in around 4 years - it's the smaller of the 2 I have, but a decent cetv could mean retiring a bit earlier. However, as stated, anywhere from 4-7k if the report says no is a massive kick in the gonads and bye-bye earlier retirement to boot

Is £4K-£7K really the difference between retiring early or not?  Surely that is only say 4 months living expenses. If your finances are that tight can you afford to take the risk?

No, things aren't that tight, but transferring db2 could be the difference between paying last off the mortgage earlier and therefore retiring a few years earlier (due to the 25% TFLS IF transferred IF the cetv is high enough and IF an advisor thinks it's a good idea) or hanging on for a couple more years to get a higher pension and ls as the extra couple of years earning along with less actuarial reduction plus an extra couple of years service in db2. I'm in a position that if a transfer of the smaller db2 was given the thumbs-up I probably wouldn't have to touch the 75% for some time, as with no mortgage left I'd need £9.6k less p.a. nett income, and therefore db1 would cover my income requirements. 

And herin lies the problem of only having 2 db pensions, the lack of flexibility. All these people who moan about not having db don't seem to appreciate the down sides.... I could do all the sums in the world to show it would be a good idea to transfer, but unless an advisor says yes it's a non-starter..