Tiny, almost forgotten pension offers CETV of £175k - need IFA

em987623232

Hi, I have a DB pension from my first job (I actually lost touch with it at one stage) and I idly asked for the CETV. They came back with £175k - I only paid in £100 a month for 4 years. My current IFA, who I am not thrilled with, would refer me to some expert who costs a fortune to look at this. I have other pensions pots and would quite like to put the £175k in my own sipp. My pension forecast from this at 65 is 7k, so it seems sensible to at least investigate. Advice?

eskbanker

The issue of transferring out from DB pensions is discussed regularly on here (search for 'db transfer' threads) - you are legally required to engage a financial adviser with specialist skills (even if the recommendation is ultimately not to transfer, which in itself tends to prevent this from happening) so there's no avoiding that....

em987623232

I know that, I guess I am looking for some comparative figures for the advice from the IFA, and perhaps a suggestion of someone reasonably priced. 

Cheese1990

Given the costs and likely negative outcome from an ifa review I would look at the actual details of your dB plan. Given the CETV value I reckon an ifa may charge up to about 10k for the advice and your plan is probably worth about 3k per year. Also 7k per year from the residual amount seems optimistic 

em987623232

The 7K is the estimate from the administrators. I've looked into the details and I cant see anything blindingly good that I am missing. 10 k is exaclty the sort of sum I want to avoid. I dont quite understand why this is is so hard - if I just drawdown the 175k its going to last 25 years - taking me to 90 - and ive got 17 years until in 65 to invest the 175 and hopefully have it grown at least to match inflation. I have full state contribution, another sipp, and this - seems to be a bit of an obvious win, and would boost my sipp to 500k

Dazed_and_C0nfused

Or another way to look at is that this DB pension of £7k + State Pension of £9.3k will give a great guaranteed, inflation proofed, pension.

Leaving you with your SIPP to boost it and add flexibility.

Albermarle

I have deleted my previous comment ( in case you read it ) as I had misread the info .

£175K for £7K is  a pretty poor offer, if the £7K will increase with inflation each year .
Normally you would expect something > £200K .

To buy an inflation linked lifetime annuity at 65 would cost close to £250K .

If the £7K will rise with inflation annually then the chance of a positive recommendation is going to be almost zero due to the low CETV. IN the past you could still transfer with a negative recommendation but that seems very difficult now .

 I dont quite understand why this is is so hard 
If you search for all the old threads and read them you will what is behind it all.

dunstonh

I know that, I guess I am looking for some comparative figures for the advice from the IFA, and perhaps a suggestion of someone reasonably priced. 

Cost will be around £3500 to £5000 as a reasonable price.  Anything above that means the adviser doesn't really want the business but if you do it at that price then fair enough. Or it means they are greedy.

I dont quite understand why this is is so hard 

Probably you are underestimating the cost of a guaranteed income from life that increases annually vs one that zig zags in value and could run out in your lifetime.

- if I just drawdown the 175k its going to last 25 years - taking me to 90 

No.  You have forgotten to factor inflation into it.   £175000 will have the spending power of around £117k in ten years or £78k in 20 years.   You will long had to increase your draw to cover inflation and would run out earlier than that.

kinger101

You're unlikely to find someone who'll recommend the transfer, so you're likely stuck with the DB.

I wouldn't call £7k pa tiny.  Particularly when you consider it is index-linked and likely includes dependents benefits too.  On the balance of probabilities, you'd probably do better if you could access the £175K but that won't change an IFA's mind.  I'd be counting my blessings if I'd paid about £100 a month for four years for that much pension.

I have a similar DB pension, and as already mentioned, the SP + DB would give you a very comfortable baseline income.  If anything, you can take a little more risk with DC schemes knowing you've got about £16.5 pa in the bag already.

hyubh

em987623232 said:

Hi, I have a DB pension from my first job (I actually lost touch with it at one stage) and I idly asked for the CETV. They came back with £175k - I only paid in £100 a month for 4 years. My current IFA, who I am not thrilled with, would refer me to some expert who costs a fortune to look at this. I have other pensions pots and would quite like to put the £175k in my own sipp. My pension forecast from this at 65 is 7k, so it seems sensible to at least investigate. Advice?

As others have alluded to, it's important to understand what the increases are (if any). Given your figures, I'm wondering if there is a not inconsiderable amount of GMP revaluing at 'fixed rate' - otherwise, a pension of 7K after only four years reckonable service would imply either a very large salary (senior exec) or an incredibly generous accrual rate.

Typically a private sector scheme would only give statutory increases on GMP once due, so nil for pre-88 GMP and inflation capped to 3% for post-88 GMP. Treatment of 'excess' (i.e. non-GMP) varies - statutory increases on excess only apply for post-97 service, but that doesn't mean schemes didn't give excess increases before.

xylophone

otherwise, a pension of 7K after only four years reckonable service would imply either a very large salary (senior exec) or an incredibly generous accrual rate.

The OP says

Hi, I have a DB pension from my first job 

It seems unlikely that he was at senior exec level.