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

Albermarle

LHW99 said:

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?

I presume not, but if the client did this then Fidelity could probably defend any later claims better.  'The client ignored our recommendations etc ' 
Also it is not clear if you need to sign up for ongoing advice, or not.
Some studying of the small print would be recommended !

Thrugelmir

Albermarle said:

What huge drop?

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

The game is still in play. Huge uncertainty clouds almost every asset class. The collapse in Japan in the early 90's wasn't an overnight event. Fiscal tightening back then was progressive. An entire generation of investors today doesn't have the benefit of this experience to relate to.
. 

Linton

Thrugelmir said:

Albermarle said:

What huge drop?

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

The game is still in play. Huge uncertainty clouds almost every asset class. The collapse in Japan in the early 90's wasn't an overnight event. Fiscal tightening back then was progressive. An entire generation of investors today doesn't have the benefit of this experience to relate to.
. 

The Japanese collapse was one country before globalisation at a time when private investing in foreign equity (or in equity at all) was unusual.  With due regard to diversification an investor is surely pretty secure from an individual country's economic collapse, bar the US or possibly China.

Of course if the US goes or the whole world collapses we are all doomed anyway.  Our investments arent going to make much difference.

Thrugelmir

Linton said:

Thrugelmir said:

Albermarle said:

What huge drop?

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

The game is still in play. Huge uncertainty clouds almost every asset class. The collapse in Japan in the early 90's wasn't an overnight event. Fiscal tightening back then was progressive. An entire generation of investors today doesn't have the benefit of this experience to relate to.
. 

The Japanese collapse was one country before globalisation at a time when private investing in foreign equity (or in equity at all) was unusual.  With due regard to diversification an investor is surely pretty secure from an individual country's economic collapse, bar the US or possibly China.

Of course if the US goes or the whole world collapses we are all doomed anyway.  Our investments arent going to make much difference.

UK institutions were heavily invested in Japanese equities. I recall working for Friends provident office at the time that UK investors were first allowed to purchase equities on a nominee basis. Was no direct access to US markets at the time. 

DairyQueen

I am one of those rare folk who received a recommendation to transfer and followed the advice. I have no regrets.

Reasons for recommendation:
- Reduced life expectancy
- No dependants/no children
- Spouse has decent pension arrangements - no need for widower's benefit
- Some DIY investment experience
- Sufficient guaranteed income to cover non-discretionary spends
- Reasonably high risk tolerance
- Estate/IHT/tax planning
- x 32 multiple.

The market dip this year bothers me not one jot. The returns have been decent since the transfer and the portfolio has been positioned for drawdown for two years.

I now have the flexibility to front load drawdown until SP kicks-in, and then reduce, for maximum tax efficiency. Heirs will receive a tax-optimum chunk when I fall off the perch.

My case illustrates that transfers are helpful for a minority. Problem being that most who have taken this route are short any valid reason (greed doesn't count).

Sunnylifeover50plan

I can't determine what the above poster has in terms of health issues but for myself I have had two episodes which would normally have proven fatal had they occurred a few decades ago.

Recognition of mortality can change one's perspective and after transferring out in 2017 I have no regrets.

Value wise I think I'm probably above where I was in 2017 even with recent inflation and market drops.

I sometimes wonder why there are so many posts about folks opting out of defined benefit schemes when market prices are on the down but fewer when prices are on the up.

Sandtree

DairyQueen said:
Reasons for recommendation:
- Reduced life expectancy

One of those situations where its hard to decide which is the positive and negative scenarios @dairyqueen

You state your transfer was beneficial because of reduce life expectancy but how do your sums stack up if you vastly outlive your expected lifespan? Say by 20 years in unexpected good health?

Depending on scheme rules, personal circumstances there are a minority where it is recommended but that doesn't mean none dont go on to regret the decision. 

Thrugelmir

DairyQueen said:

- Reasonably high risk tolerance

Heard that said many times over the years. 

DBdoobydoo

Not all DB pension schemes are gold plated. I have been drawing mine since 2013 when I received £10,236 & this year  I will receive £10,808 ie an increase of just 5.5%. To even match the low 1.6% average per annum inflation over the last nine years my pension would need to be £11,590. I didn't appreciate that my pension was not adequately index linked before I started drawing it otherwise I would certainly have considered transferring out.

arnoldy

DBdoobydoo said:

Not all DB pension schemes are gold plated. I have been drawing mine since 2013 when I received £10,236 & this year  I will receive £10,808 ie an increase of just 5.5%. To even match the low 1.6% average per annum inflation over the last nine years my pension would need to be £11,590. I didn't appreciate that my pension was not adequately index linked before I started drawing it otherwise I would certainly have considered transferring out.

For reference FTSE All Share TR = 78% over the period. Apart from the odd outlier private sector DBs are NOT inflation proof, the vast majority will have caps at 0%, 3% and 5%, with a typical pension deferred or in payment having a blended cap of circa 3%. So that means this year (10% inflation) everyone with one of these pensions will be 7% poorer for the rest of their lives. It could well be a similar outcome for at least the next few years.

The only gold plated pensions are the Government ones, no worries about health of fund, inflation lined and a different world.