Transferring out of a defined benefit pension to an annuity. Getting charged £13000!

bostonerimus

dunstonh said:

I've done a spreadsheet of all the options and the annuity is overall the better option, particularly if I die before the 25 years is up.

An annuity rate of 5.4% is possible if you are old enough.  However, the expectation is that inflation will be higher in the next few decades.  So, going level would be very high risk for someone that calls themselves risk-averse.   

I haven't seen L&G come out near top for many years on annuities.  Although if you are looking at fixed term 25 year annuities then it is possible they could do.  Although a risk-averse person would be unlikely to buy a 25-year annuity.   There is the possible argument for buying a short term annuity in expectation of rising rates and possible health issues but not sure a 25 yaer one would be a good idea.

I can imagine that getting a "good to transfer" advice outcome on a level fixed-term annuity of 25 years for a risk-averse person is not going to be likely.   This then turns it into an insistent client case and most annuities have to be bought via an intermediary.   No intermediary is going to transact an annuity purchase on a DB transfer on a non-advised basis.

Yes, assuming the OP is around normal retirement age ie 60ish, a 25 year annuity seems risky to me and they are giving up the major reason to have an annuity (or a DB plan) which is longevity insurance. Combine that with the lack of inflation adjustment and it's a gamble on not living a long time and low inflation. I think the OP might be discounting the benefits of the DB plan a bit too much.

Jerry_Mander

bostonerimus said:

Yes, assuming the OP is around normal retirement age ie 60ish, a 25 year annuity seems risky to me and they are giving up the major reason to have an annuity (or a DB plan) which is longevity insurance. Combine that with the lack of inflation adjustment and it's a gamble on not living a long time and low inflation. I think the OP might be discounting the benefits of the DB plan a bit too much.

As I said, what I want to do isn't for everyone, but for me who is a very thrifty person the level payment seems better. So i get £16.2K level and I can live quite happily on £6k a year (yes, really, I can!). So all the rest can be saved, or invested, to inflation protect it at minimal risk. Then I'll have the currently £9.5K state pension at 67. And of course the £100k tax free sum which buys me the only thing I really want which, along with savings and sale of my outright owned house, is a detached house.

No way i can get that detached house straight away by taking the company pension.

Albermarle

Jerry_Mander said:

Albermarle said:

In other words , the OP could pay X thousand Pounds for advice and they would be back at Square One a few Grand lighter, but no further forward.

Well I'm in the early stages yet but the two IFAs I've had responses from are providing advice at no cost up to the point where they tell me if they can get me a better deal, after their fees, than I can get just by going through L&G.

I am not sure I understand what you are saying . The process ( simplified) is normally 
1) If you want to transfer out of a DB pension ( regardless of what you do with the transfer ) you have to get advice from an IFA with the right pension transfer credentials , which can cost a few Grand.
2) The IFA gives a positive or negative recommendation, on whether to transfer or not .
3) It it is positive you will be able to transfer to another pension, or buy an annuity in your case 
4) If it is negative , in theory you can still transfer as an 'insistent client ' but in practice you will find it difficult to find anybody willing to accept the transfer . So as I said back to square one, but a few grand lighter .

bostonerimus

Jerry_Mander said:

bostonerimus said:

Yes, assuming the OP is around normal retirement age ie 60ish, a 25 year annuity seems risky to me and they are giving up the major reason to have an annuity (or a DB plan) which is longevity insurance. Combine that with the lack of inflation adjustment and it's a gamble on not living a long time and low inflation. I think the OP might be discounting the benefits of the DB plan a bit too much.

As I said, what I want to do isn't for everyone, but for me who is a very thrifty person the level payment seems better. So i get £16.2K level and I can live quite happily on £6k a year (yes, really, I can!). So all the rest can be saved, or invested, to inflation protect it at minimal risk. Then I'll have the currently £9.5K state pension at 67. And of course the £100k tax free sum which buys me the only thing I really want which, along with savings and sale of my outright owned house, is a detached house.

No way i can get that detached house straight away by taking the company pension.

If you are risk averse and you are being offered a generous CETV why not buy a flat lifetime annuity for longevity insurance to give you a good foundation along with SP and invest the rest. With rates so low I see no reason to annuitize more than you need for income just to invest what you don't spend.

Jerry_Mander

Albermarle said:

I am not sure I understand what you are saying . The process ( simplified) is normally

I think I do understand but my experience (so far) does not seem to match what you're saying "normally" happens. I have in writing from two IFAs that I will get a figure for what they will be able to get for me as an annuity before I have to pay any money. In other words up to that point it's free advice and I'll know what they're offering is actually good value or not. They have arrangements with third parties that enables them to do that.

Jerry_Mander

bostonerimus said:

If you are risk averse and you are being offered a generous CETV why not buy a flat lifetime annuity for longevity insurance to give you a good foundation along with SP and invest the rest. With rates so low I see no reason to annuitize more than you need for income just to invest what you don't spend.

What's SP, my mind has blanked? Edit: Oh, state pension! Duh!

And if you can point me to a provider that does lifetime level payment annuities please do because I couldn't find any. 25 years max for the ones I can find. Bear in mind I am not interested in drawdown as I consider that too risky. I just want guaranteed income at a level rate.

Also, bear in mind that the state pension is in itself much more than I need to live on.

dunstonh

Jerry_Mander said:

Albermarle said:

In other words , the OP could pay X thousand Pounds for advice and they would be back at Square One a few Grand lighter, but no further forward.

Well I'm in the early stages yet but the two IFAs I've had responses from are providing advice at no cost up to the point where they tell me if they can get me a better deal, after their fees, than I can get just by going through L&G.

It is almost certain that L&G will not accept the transfer the minute they find out it is a DB pension and not a DC pension.  AFAIA, L&G does not have any staff on their retail side that handle DB transfers.  Not that L&G do much on the individual pension side nowadays.

 I have in writing from two IFAs that I will get a figure for what they will be able to get for me as an annuity before I have to pay any money.

Getting a figure on a transfer value isn't much work and wouldn't fall foul of contingency pricing rules.   

 In other words up to that point it's free advice and I'll know what they're offering is actually good value or not. They have arrangements with third parties that enables them to do that.

You get no advice until advice is given and you pay for it.   At this stage it is just discussion.   The whole point of IFAs is that they have arrangements with third parties.

theoretica

Jerry_Mander said:

 And of course the £100k tax free sum which buys me the only thing I really want which, along with savings and sale of my outright owned house, is a detached house.

No way i can get that detached house straight away by taking the company pension.

Have you talked to a mortgage broker?
https://www.which.co.uk/money/mortgages-and-property/mortgages/types-of-mortgage/retirement-interest-only-mortgages-explained-a9z9k0h9lbfy

Jerry_Mander

dunstonh said:

It is almost certain that L&G will not accept the transfer the minute they find out it is a DB pension and not a DC pension.  AFAIA, L&G does not have any staff on their retail side that handle DB transfers.

Ok I didn't know that so I'll have to make further enquiries. But still, I have the IFAs I'm dealing with who will hopefully find me a better deal that I can go with, even if it does incur large charges. The IFAs told me they should be able to find me a much better deal than anything I can get directly on the internet. So factor their charges in to what they offer as an annuity and maybe it ultimately comes out at the figure I'm currently getting quoted by L&G. I wouldn't be too unhappy with that.

BTW what is it exactly that makes it so hard to transfer from a DB pension to an annuity that makes the providers not want to touch it with a bargepole?

Jerry_Mander

theoretica said:

Have you talked to a mortgage broker?
https://www.which.co.uk/money/mortgages-and-property/mortgages/types-of-mortgage/retirement-interest-only-mortgages-explained-a9z9k0h9lbfy

More debt! That's the last thing I want.