Anyone have experience of transferring out of final salary pension to an annuity and fees incurred

ntaylo13

I am currently 55 years old and living abroad with my family running a business , we have decided to return to the uk in 2023 , we will sell all ours assets and have enough to live modestly  mortgage and car loan free  but i would ideally want to access my works final salary pension which i cannot access until i am 65 currently , maybe starting at 60 years old instead. I would look to go with the safer option of buying an annuity , has anyone gone through this process and can give me a ball park figure of any fees i would be paying to complete this process? thanks in advance for any relevant information.

JoeCrystal

Are you sure you cannot access it earlier than 65? Generally speaking, you can draw on your DB pension scheme earlier, but it would be actuarially reduced.

Besides, the value of buying the annuity is so poor that fewer and fewer people are buying them at the moment. According to HL, a joint-life 50% 3% escalation annuity of £1,000 at the age of 60 would cost £41,893, so if you want £10,000 per year for the sake of argument, you would need to spend £418,893 to buy it. There is a reason why the DB pension scheme is so valuable in this day and age!

You will need to do a lot more research on the current pension provisions, and there are tons of threads on this forum discussing the same issues, so it would be worth your time and efforts to read them.

Do you know that your final salary pension scheme is a form of an annuity, right? The concept of transferring CETV out to buy an annuity is... bizarre. (unless the CETV is so generous that you can buy a better annuity on the market or other factors which increase the annuity such as serious ill health and so on).

It is also worth checking your state pension forecast as well.

Albermarle

Using a DB pension to buy an annuity seems crazy . What is the logic behind it ?

xylophone

but i would ideally want to access my works final salary pension which i cannot access until i am 65 currently , maybe starting at 60 years old instead. I would look to go with the safer option of buying an annuity

I am utterly mystified.

Do you understand your deferred DB pension scheme?

Do you have a copy of a scheme booklet?

If so, what does it have to say about access to the pension before normal scheme retirement age?

sammyjammy

Why do you think an annuity is safer?

Marcon

ntaylo13 said:

I am currently 55 years old and living abroad with my family running a business , we have decided to return to the uk in 2023 , we will sell all ours assets and have enough to live modestly  mortgage and car loan free  but i would ideally want to access my works final salary pension which i cannot access until i am 65 currently , maybe starting at 60 years old instead. I would look to go with the safer option of buying an annuity , has anyone gone through this process and can give me a ball park figure of any fees i would be paying to complete this process? thanks in advance for any relevant information.

Check if you can access your pension before age 65 - the starting level will be reduced to reflect the fact it is being paid sooner than expected and for longer.

If you definitely can't, then get a Cash Equivalent Transfer Value and do a bit of research into the annuity it would buy you at the age of 60. Remember to factor in benefits you'd receive in the DB scheme - annual increases, spouse's pension etc.

xylophone said:

but i would ideally want to access my works final salary pension which i cannot access until i am 65 currently , maybe starting at 60 years old instead. I would look to go with the safer option of buying an annuity

I am utterly mystified.

Do you understand your deferred DB pension scheme?

I think OP might mean they are looking at buying an annuity as opposed to a more adventurous option such as drawdown, but perhaps they could confirm?

ntaylo13

My company pension if taken early,  i would lose about 7% a year for every year i take it before 65 so maybe you can understand me looking into getting any income earlier , in my old company which i left 6 years ago there are many of my former colleagues  that are wanting to leave early ( there are currently no early retirement options open to them with none on the horizon), these guys are taking their money out of this final salary pension to drawdown their pension. They are all a similar age to me, though of course have an extra 6 years contributions than i have. I myself was surprised to hear they are doing this , with me returning to the uk in the next few years, it may make my families life back in the uk more comfortable accessing my pension fund earlier but choosing the safer option of an annuity. I have in no way made my mind up one way or the other just yet . If the figures dont add up i probably will have enough moderate savings to live on until maybe i am 64 and take a hit on losing 7% of my pension as it is increased every year by RPI and would recover the loss in a few years probably.
I am here to ask if anyone has been in a similar situation and their experiences.
I wouldnt access my company pension early at 60 and lose 35% of its value so looking at my options, as a side note my father died of cancer at 58 and my mother of cancer at 67 so maybe you can understand my interest in taking my pension earlier , if i die my wife would get 50% of my company pension and i would not enter into anything else that wouldnt guarantee her that .
thanks for the replies

Silvertabby

ntaylo13 said:

My company pension if taken early,  i would lose about 7% a year for every year i take it before 65 so maybe you can understand me looking into getting any income earlier , in my old company which i left 6 years ago there are many of my former colleagues  that are wanting to leave early ( there are currently no early retirement options open to them with none on the horizon), these guys are taking their money out of this final salary pension to drawdown their pension. They are all a similar age to me, though of course have an extra 6 years contributions than i have. I myself was surprised to hear they are doing this , with me returning to the uk in the next few years, it may make my families life back in the uk more comfortable accessing my pension fund earlier but choosing the safer option of an annuity. I have in no way made my mind up one way or the other just yet . If the figures dont add up i probably will have enough moderate savings to live on until maybe i am 64 and take a hit on losing 7% of my pension as it is increased every year by RPI and would recover the loss in a few years probably.
I am here to ask if anyone has been in a similar situation and their experiences.
I wouldnt access my company pension early at 60 and lose 35% of its value so looking at my options, as a side note my father died of cancer at 58 and my mother of cancer at 67 so maybe you can understand my interest in taking my pension earlier , if i die my wife would get 50% of my company pension and i would not enter into anything else that wouldnt guarantee her that .
thanks for the replies

First thing to do would be to obtain a CETV (cash equivalent transfer value) from your DB pension provider.

Then see how much of annuity this would buy you iaw your requirements. ie, payable from 60, 5% annual increases and 50% widow's pension.

If you can get a higher annuity than your DB pension minus the 35% early payment reduction I will be......... amazed! 

Dazed_and_C0nfused

If you can get a higher annuity than your DB pension minus the 35% early payment reduction I will be......... amazed! 

+1

Albermarle

Dazed_and_C0nfused said:

If you can get a higher annuity than your DB pension minus the 35% early payment reduction I will be......... amazed! 

+1

+2

there are many of my former colleagues  that are wanting to leave early ( there are currently no early retirement options open to them with none on the horizon), these guys are taking their money out of this final salary pension to drawdown their pension. 

OP - this type of transfer has become increasingly difficult in recent times . You have to go through a detailed  process with a specially qualified and expensive financial advisor, and if you get a negative recommendation ( which is highly likely ), then you have effectively wasted your time and money .
Are you sure that many of  your former colleagues have actually managed to fully complete the transfer process recently ? ( a couple of years ago it was easier) If so that would be quite a surprise.

maybe i am 64 and take a hit on losing 7% of my pension as it is increased every year by RPI and would recover the loss in a few years probably.
All these types of pensions are reduced if you take them early , although 4 to 5 % is more typical . At this level you are not really losing out as of course the pension gets paid for more years . So at 7% what you are really losing is about 2.5% each year.

RoadToRiches

Albermarle said:

Using a DB pension to buy an annuity seems crazy . What is the logic behind it ?

Enhanced annuity rates - lifestyle choices
No Partner pension required
Index linking option to take this or not.
Split pension use some for flexi access drawdown
Higher Tax Free Cash option at the start

Many benefits.