Has anyone regretted transferring out of a defined benefit (gold plated) pension or vice versa ?

CarMad

Has anyone regretted transferring out of a defined benefit (gold plated) pension or vice versa ?

When values were 30 - 40 x annual DB pension, and now seeing huge drops in value due to current fear in the unstable markets.
 

waveydavey48

I dithered over taking the TFLS from my DB pension with rate of, from memory, 32. I decided to take all pension which has increases capped at rpi up to 10% and I'm glad I did.

Silvertabby

CarMad said:

Has anyone regretted transferring out of a defined benefit (gold plated) pension or vice versa ?

When values were 30 - 40 x annual DB pension, and now seeing huge drops in value due to current fear in the unstable markets.
 

After 2015 there was a huge rush to transfer out of the LGPS into 'access now' personal pensions, despite the conversions being more like 20X the annual pensions given up.

My colleagues and I gave it 10 years before the complaints would start rattling in. (.....but I didn't realise that I wouldn't have a pension left!)

The clock is ticking......

Dazed_and_C0nfused

Silvertabby said:

CarMad said:

Has anyone regretted transferring out of a defined benefit (gold plated) pension or vice versa ?

When values were 30 - 40 x annual DB pension, and now seeing huge drops in value due to current fear in the unstable markets.
 

After 2015 there was a huge rush to transfer out of the LGPS into 'access now' personal pensions, despite the conversion being more like 20X the annual pensions given up.

My colleagues and I gave it 10 years before the complaints would start rattling in. (I didn't realise that I wouldn't have a pension left!)

The clock is ticking......

You just can't help some people's greed/ignorance/stupidity/short-termism

eskbanker

CarMad said:

now seeing huge drops in value due to current fear in the unstable markets

What 'huge drops in value'?  Dips of 10-15% or more are far from infrequent and wouldn't typically be considered 'huge', so anyone who invested without accepting such relatively routine fluctuations only has themselves to blame, although worse market conditions already prevailed in 2020, 2018, etc, etc.  However, the sustained bull market of recent years means that this dip would generally be expected only to be eroding some profits rather than actually causing losses....

dunstonh

Has anyone regretted transferring out of a defined benefit (gold plated) pension or vice versa ?

Goodness yes.  hundreds of thousands of people did it and it turned out to be a bad move.

When values were 30 - 40 x annual DB pension, and now seeing huge drops in value due to current fear in the unstable markets.

What huge drop?

Albermarle

What huge drop?

The current drops in investments (10 to 15% for most) are clearly on their own, not that big in historical terms.

However if you bring high inflation into the picture, it starts to look more worrying. The transferred DC pot will also be losing 10% in value in addition to investment losses. Now most private DB pensions have capped inflation increases, so would be losing out as well, but the transferred DC pot is losing another 5% on top - so up to 20% in total.

Then even ignoring any worst case/doomsday scenarios, share markets still seem under pressure, bond market is flat, and forward outlook for next two or three years not very optimistic. Inflation will probably recede next year, but maybe will still be significant. In which case the DB transfer last year could easily be one third down in value by the end of say 2024. Of course it is only a guess, but seems a realistic one ? ( or 30% if you add some dividends on ) 

In which case the OPs question is quite pertinent. These multiples of 30 to 40 will effectively become only 20 to 25.

dunstonh

The current drops in investments (10 to 15% for most) are clearly on their own, not that big in historical terms.

Especially when you consider that there were bigger loss periods in 2020, 2018, 2015/16, 2011,2008/9, 2001-2003

However if you bring high inflation into the picture, it starts to look more worrying. The transferred DC pot will also be losing 10% in value in addition to investment losses. Now most private DB pensions have capped inflation increases, so would be losing out as well, but the transferred DC pot is losing another 5% on top - so up to 20% in total.

We are returning to a period that is more consistent with the long term average.   The low-interest rate/low inflation period has spoilt a lot of people.   We are going through a period that is unwinding so many things that have become "normal" in the last 20 years and many people have not experienced what it was like before or cannot remember.

In which case the OPs question is quite pertinent. These multiples of 30 to 40 will effectively become only 20 to 25.

And you can forget about getting a recommendation to transfer out when that happens in all but extremely rare cases.  Although that may be irrelevant as the last two providers in our area (possibly county) have just stopped doing DB transfers.  Fidelity has pulled out too (which was one of the cheaper options).  I spoke to the director of one of the firms and he said that their PI renewal was up over 40% this year if they continued with DB transfers and with transfer values falling they didn't see much point in paying that extra when the advice was increasingly going to be not to transfer.

Threads like this could just end up being theoretical discussions if there is no-one left to actually do transfers.

When values were 30 - 40 x annual DB pension, and now seeing huge drops in value due to current fear in the unstable markets.

It isn't fear in unstable markets that have caused the drop.  It is gilt yields and that is due to rising interest rates.  This time was always going to come along at some point.

Albermarle

When I mentioned multiples of 20 to 25 , what I meant is that someone who transferred last year with a multiple of 30 to 35, then following the market drops and inflation, is sitting on a reduced value pot, that is maybe only effectively a 20 to 25 multiple of the DB pension they gave up. 

 Fidelity has pulled out too (which was one of the cheaper options).
Not quite , they have restricted its availability though.

Against this backdrop, from 1 January 2022, our safeguarded pension benefit transfer advice will only be available to existing Fidelity Personal Investing or Wealth Management customers, or active members of a workplace pension scheme administered by Fidelity. Except for a limited number of exceptional circumstances, this advice is only available for clients aged 53 and over. Our advice includes investment recommendations, so we are unable to provide advice where you wish to select investment funds yourself.

LHW99

Albermarle said:

When I mentioned multiples of 20 to 25 , what I meant is that someone who transferred last year with a multiple of 30 to 35, then following the market drops and inflation, is sitting on a reduced value pot, that is maybe only effectively a 20 to 25 multiple of the DB pension they gave up. 

 Fidelity has pulled out too (which was one of the cheaper options).
Not quite , they have restricted its availability though.

Against this backdrop, from 1 January 2022, our safeguarded pension benefit transfer advice will only be available to existing Fidelity Personal Investing or Wealth Management customers, or active members of a workplace pension scheme administered by Fidelity. Except for a limited number of exceptional circumstances, this advice is only available for clients aged 53 and over. Our advice includes investment recommendations, so we are unable to provide advice where you wish to select investment funds yourself.

Although presumably once one has been transferred there are no specific ways that Fidelity could prevent a further transfer to a firm that does allow self-management?

Malthusian

CarMad said:

Has anyone regretted transferring out of a defined benefit (gold plated) pension or vice versa ?

As DunstonH alludes to, so many people have regretted it that it became the biggest personal pension scandal in UK history. Google "personal pension misselling review 1990s".

The recent British Steel scandal was to the 1990s scandal what a case of vote rigging at a parish council election is to Watergate.

The five most dangerous words in finance: "But this time it's different..."