Transfer final salary pension to new DC scheme

jamesd

GMNN said:

...

From my research, it seems that "cash-equivalent transfer values" have traditionally been calculated at 20x the annual pension income, but recently 30+ is not uncommon apparently. In my case, this would correspond to £177k (20x) to £266k (30x).

... it seems I would struggle to find an IFA to recommend doing this, and I just don't understand why.

The regulator is passionately opposed to switching from guaranteed to unguaranteed income, even if the expected income is far higher, and makes the rules that advisers have to follow in such a way that it's become increasingly hard to make recommendations that are in the best interests of the clients.

It doesn't help that the regulator also sticks their head in the sand and pretends that transfer rates don't vary with time, so claiming on the basis of past rates that most transfers are against the interests of those transferring when at current rates that is much less likely to be so.

Parliament provided a way to transfer against advice. The regulator has made it too risky for most pension firms to be willing accept those transfers.

Essentially we have a regulator opposed to the will of Parliament and not yet having been corrected by a change in the law to outlaw its behavior.

Pablo7474

DaveT55 said:

I was in my thirties when I transferred my DB pension last year. I weighed up all the options and it was the best decision for me. 18+ months on I have absolutely zero regrets. I had no need for the security of a DB pension in my 80's/ 90's - early retirement without penalties and leaving the full value to family was a key driver for me, given my family medical history.

At your age there is a 99.9% certainty you will be an insistent client i.e no adviser would recommend the transfer. In the current climate this leaves it almost impossible for this transfer to happen because there is also no platform that will accept the transfer in on this basis (possible options exist with SSAS which has been mentioned on previous strings). 

ICB transfers are not completely dead, but pretty much.   

Just out of interest, how did you know in your thirties what you will need in 50 or 60 years time? 

Dazza1902

Think 30 times is still conservative, my dB was 5k and cetv 200k. At 30 , you have time to build a decent DC pot, most of the people on this forum reckon having dB and DC the best

Scenario. At what age can you take the dB ?

OldBeanz

With £20k guaranteed income (assuming full state pension) it allows you to take bigger risks and accumulate more.
With your contributions maximum lifetime allowance would be in danger and DB's are "less valuable" from that point of view. Appears far easier just to stick with what you have as well rather than pay someone £13k to tell you that you shouldn't take the risk.

GMNN

Thank you all for the thoughtful responses - it's given me more to think about, including some aspects I had not considered (more flexibility by having DB+DC+SP combined income, uncertainty around how annuity rates will evolve, LTA constraints considerations...).

I think given the hurdles and costs involved to deal with an IFA, and the benefits of having more flexibility with some guaranteed income until I die, I will leave my DB pension where it is for now, and start accumulating into my new DC pension.

Albermarle said:

To change the subject slightly, I hope your new job has a suitably higher salary to compensate for moving from DB to DC.
Typically an employer will add over 20%/25% to a DB scheme as they are expensive to run , whilst DC contributions tend to be more in the 3% to 8% region, although they can be higher.

Yes, I was well aware of the step down moving from a DB to DC pension. New job is close to 40% higher salary, and provides up to 15% employer contribution to DC pension (i.e. I can choose how to allocate this additional 15% between higher salary or pension, but I think I will throw it all into my new pension pot to get it started).

Dazza1902 said:

At what age can you take the dB ?

Can start at 55 with some penalties, 60 for full pension I've accrued.

cloud_dog

GMNN said:

I quit my job last month after 9 years working there, and had a generous final salary pension scheme.

Just got a letter from my pension provider this week with a summary of my accrued benefits, stating I had built-up a total pension of £8,876 per year as of my final date of employment.

I will be starting a new job soon, which provides a defined contribution pension.

I initially assumed the best course of action was to do nothing and leave my pension in the DB plan until I retire, but the more I think about it, the more it feels like it would be better to transfer it to my new DC pension..

From my research, it seems that "cash-equivalent transfer values" have traditionally been calculated at 20x the annual pension income, but recently 30+ is not uncommon apparently. In my case, this would correspond to £177k (20x) to £266k (30x).

If I leave my DB pension as is, it will increase with inflation up to a max of 2.5% per year. However, I should be able to do better than that if I invest it into my new DC scheme (say a global tracker fund, assuming 5+% CAGR). I'm 31yo, so not planning on touching that money for 30+ years - I'm completely fine with market volatility and fully expect to see significant drawdowns during that period.. 

Reading a few threads around this subject on this forum, it seems I would struggle to find an IFA to recommend doing this, and I just don't understand why. The difference for my pension pot at the end of my career over such a long period of time could be massive. And wouldn't I still be able to purchase an annuity from my DC pension pot at the end of my career if I did want to switch back to a guaranteed income until I die?

So, what am I missing? What is so great about a DB pension that IFAs would all advise against what I'm proposing (yes - I know guaranteed income when I retire, but anything else?)

I see you've been double checking comparable feedback on Reddit  

Dazed_and_C0nfused

Can start at 55 with some penalties, 60 for full pension I've accrued.

There isn't usually any penalty, just a actuarial reduction to reflect the fact that the pension would be paid for longer.

DaveT55

Pablo7474 said:

Just out of interest, how did you know in your thirties what you will need in 50 or 60 years time? 

We (wife and me) investigated the specifics of the DB scheme I was enrolled in and carried out a risk benefit analysis of our personal situation over the next 30+ years. Transferring was the best option.... So confident that it's the correct things to do that we are at the final stage of transferring my wife's DB pension at the minute on an ICB. Incredible how expensive and difficult it has now become, but there are still avenues to get it over the line.    

Marcon

GMNN said:

Thank you all for the thoughtful responses - it's given me more to think about, including some aspects I had not considered (more flexibility by having DB+DC+SP combined income, uncertainty around how annuity rates will evolve, LTA constraints considerations...).

I think given the hurdles and costs involved to deal with an IFA, and the benefits of having more flexibility with some guaranteed income until I die, I will leave my DB pension where it is for now, and start accumulating into my new DC pension.

Albermarle said:

To change the subject slightly, I hope your new job has a suitably higher salary to compensate for moving from DB to DC.
Typically an employer will add over 20%/25% to a DB scheme as they are expensive to run , whilst DC contributions tend to be more in the 3% to 8% region, although they can be higher.

Yes, I was well aware of the step down moving from a DB to DC pension. New job is close to 40% higher salary, and provides up to 15% employer contribution to DC pension (i.e. I can choose how to allocate this additional 15% between higher salary or pension, but I think I will throw it all into my new pension pot to get it started).

Dazza1902 said:

At what age can you take the dB ?

Can start at 55 with some penalties, 60 for full pension I've accrued.

Doubt it. Given that the law will have changed by then, the minimum age for drawing any DB or DC  pension (other than on grounds of ill health) will be at least 57, probably older, unless you have a 'protected pension age' - and it doesn't sound as if you have. 

Dazza1902

Looks like you need an isa aswell