DB pension transfer cost

malc_b

Hi,

I have a deferred DB pension.  I thought it's value was ~20k but this was a very old figure (and AFAIR was told to me over the phone so not sure that was right anyway).  The value last July was ~75k and pension prediction was ~2.4k.  I'm told (over the phone again) that the pension is joint (50%), rpi 3%-5% (i.e. 3% minimum, 5% maximum).  The majority of my other pensions are in a SIPP or in PPPs that I could transfer to my SIPP.  I'm considering transferring this DB to my SIPP but reading around this seems to be very difficult to do now or at least not that cheap.  Best I've seen is 2.5k although since I haven't got the latest figures yet I have not approached any IFA directly for a quote.  Will I find anything significantly cheaper?

My view is that as it is a small pension and I'd rather have the flexibility of a SIPP, also the annuity rates tables seem to suggest that the DB pension is not that different to what I could buy as an annuity (i.e. the DB is not worth any more than its transfer value).  When I have the latest figures I can accurately compare.  The cost of a yr's pension to transfer rather distorts that.

Dazed_and_C0nfused

Best I've seen is 2.5k although since I haven't got the latest figures yet I have not approached any IFA directly for a quote. Will I find anything significantly cheaper?

From recent posts here it's doubtful you will still get 2.5k never mind anything cheaper.

Which you'll probably be pleased about come normal pension age for the DB scheme.

MallyGirl

How old are you?

malc_b

The 2.5k cost was from pensionworks online quote.  HL look to be 3k from their fee structure.

I'm 6mth from 65 and I need to either take the pension, or defer, or transfer, but after 65 I lose the statutory right to transfer.  I wasn't too impressed with the return.  My wife is same age so statistically we should last to a similar age (80yrs male, 83yrs female).  Assuming 3% increase each yr (lower limit) until age 83 (i.e. I do better than average) then that is a total of 62K.  13k short of the transfer value and NO gain in 18yrs.  If you assume 5%, (upper limit) then the total spend by age 83 is 76.7k.  Again near enough zero gain in 18yrs.  Not very impressive, you might as well put the 75k in a notice account and earn 1% which would put you at 69k spent by age 83.

Dazed_and_C0nfused

The 2.5k cost was from pensionworks online quote.  HL look to be 3k from their fee structure.

I don't think HL advise on DB transfers, this is from their website,

If you’re part of a defined-benefit (DB) pension, such as a ‘final salary’ scheme, transferring your pension to a personal plan is probably not in your best interest. These pensions not only give you a guaranteed income, they also normally offer benefits to a spouse or partner once you die. You might be able to transfer, but if the transfer value is more than £30,000, you’ll have to take advice from a regulated financial adviser and provide proof that the advice is in favour of transferring.

hyubh

malc_b said:

My wife is same age so statistically we should last to a similar age (80yrs male, 83yrs female).

Life expectancy at age 65 is 84.7 for men and 87 for women (https://www.ons.gov.uk/peoplepopulationandcommunity/birthsdeathsandmarriages/lifeexpectancies)

I wasn't too impressed with the return. 

It's not really a 'return' because the risk is low (you haven't mentioned the sponsoring employer is in trouble). If you think inflation will shoot up way above 5%, that would be a reason to think poorly of it. But RPI min 3% max 5% is a pretty good guaranteed increase basis.

malc_b

That link is out of date

https://www.ons.gov.uk/peoplepopulationandcommunity/birthsdeathsandmarriages/lifeexpectancies/bulletins/nationallifetablesunitedkingdom/2018to2020

says 83.5 and 86 (at age 65) so my figures were a bit off.  If not return then value for money.  If I could support the maximum pension increase for the average life expectancy with almost so increase in the initial sum deposited then that suggests a poor return on the investment or more likely excessive fees (strictly if it was a DC but comparing DC to DB you have to make this comparison).  I've no idea how the employer is doing.  As well as any big company I guess.

HL have financial advisers who will provide advice on DB transfers accounting to their fee schedule.

eskbanker

malc_b said:

That link is out of date

https://www.ons.gov.uk/peoplepopulationandcommunity/birthsdeathsandmarriages/lifeexpectancies/bulletins/nationallifetablesunitedkingdom/2018to2020

says 83.5 and 86 (at age 65) so my figures were a bit off.

Your data was published last September and relates to the period from 2018 to 2020.

https://www.ons.gov.uk/peoplepopulationandcommunity/birthsdeathsandmarriages/lifeexpectancies/bulletins/pastandprojecteddatafromtheperiodandcohortlifetables/2020baseduk1981to2070 has the 2020 figures quoted by @hyubh (albeit the specified URL had a superfluous bracket) and was published three weeks ago....

Marcon

malc_b said:

The 2.5k cost was from pensionworks online quote.  HL look to be 3k from their fee structure.

I'm 6mth from 65 and I need to either take the pension, or defer, or transfer, but after 65 I lose the statutory right to transfer.  I wasn't too impressed with the return.  My wife is same age so statistically we should last to a similar age (80yrs male, 83yrs female).  Assuming 3% increase each yr (lower limit) until age 83 (i.e. I do better than average) then that is a total of 62K.  13k short of the transfer value and NO gain in 18yrs.  If you assume 5%, (upper limit) then the total spend by age 83 is 76.7k.  Again near enough zero gain in 18yrs.  Not very impressive, you might as well put the 75k in a notice account and earn 1% which would put you at 69k spent by age 83.

If your scheme's NRA is 65, you've already lost your statutory right to a transfer - but your scheme may well offer non-statutory transfers. Worth checking the point.

Albermarle

My view is that as it is a small pension and I'd rather have the flexibility of a SIPP, also the annuity rates tables seem to suggest that the DB pension is not that different to what I could buy as an annuity (i.e. the DB is not worth any more than its transfer value). 

To buy a lifetime annuity at age 65 , with inflation link and 50% to Spouse on death ( which is usual for a DB scheme) then to buy an annuity for £2.4K pa would be over £100K .

If you see cheaper prices it is because the T's & C's are not equivalent . 

malc_b

Why when I'm 6mths from age 65?  I've only just received some paperwork from them.  They are not being very fast on replying either.  No had a reply to email I sent a while back.  I had to phone.  I was promised forms in the post but they haven't turned up yet either.

I can do transfers after 65 with the trustees approval.  I rather get it done before obviously rather than need approval.  However I note from the scheme newletter in 2020 "every June we calculate the value of your deferred pension" and this can be accessed online - not true for me as I just have a single July 2021 statement.  Then the 2021 newsletter says "every 3 months we will calculate the value of your deferred pension" and this can be accessed online - again not true. Hence if I don't get values in time for age 65 the delay is down to them which I think would make it hard for the trustees to refuse transfer.