Should I move a DB work pension to a sipp

hjf139

Approaching 60 and have a preserved DB workplace pension from previous employer. Looking at options so could take smaller pension and maximum tax free lump sum or move whole pot  of £285 000 to a sipp. . Pension would be enhanced until 65 and then reduced by about 30% as per scheme rules, as it assumed that state pension would be paid at 65, but that is now 67 in my case. Hubby would get a 50% pension if I pop my clogs first. We will both be entitled to full state pension and hubby has his own separate pension arrangements.

My quandry is if I transfer the whole fund value instead to say a SIPP, can I still take 25% tax free and is there a tax implication on the rest or not? Just trying to explore all options before making a decision that maximises the pot which is around £285 000, so 25% tax free bit would be £71250 as opposed to £54 000 if I take pension, which at the moment I don't need, and still planning on continuing to work for a few years, but would like lump sum. as wanting to help daughter out with uni from Oct 2023.
If I take the pension based on what pension payments would be over 30 years as a rough estimation of life expectancy, the pot would end paying out about £245000 including lump sum taken at time of taking pension. If I transfer, whole pot of £285 000 stays within family. 
I know I need to consult an independent IFA which I have tried to do and spent 1.5 hrs talking to one yesterday but still no clearer as all they went through was some future planning which indicated that I would clearly have a comfortable retirement.   Any help much appreciated, thanks

JoeCrystal

Is preserved DB workplace pension index-linked and if so, what is the cap if any exist? How would you feel if your pension fund dropped by 50% in a short amount of time? It is not that straightforward

Lastly, what is your expected pension from it anyway? That could give us some reasonable idea of its CETV multiple. 

dunstonh

Just trying to explore all options before making a decision that maximises the pot which is around £285 000, so 25% tax free bit would be £71250 as opposed to £54 000 if I take pension, which at the moment I don't need, and still planning on continuing to work for a few years, but would like lump sum. as wanting to help daughter out with uni from Oct 2023.

Robbing your retirement years to pay for something during your working years is not generally considered a good thing to do unless your retirement planning overall is ahead of the game and it is affordable.

I know I need to consult an independent IFA which I have tried to do and spent 1.5 hrs talking to one yesterday but still no clearer as all they went through was some future planning which indicated that I would clearly have a comfortable retirement. 

That future planning is key to deciding whether it is suitable to do it or not.  An early check to give you a quick and dirty get out at little or no cost before you become committed to an expensive process.

hjf139

 Yes pension is index linked, not aware of a cap on it. Expected pension at 60 is £8500 pa, dropping at 65 to  £5750. Transfer value confirmed from them is £285 000.

Albermarle

There is a search box at the top of the page. If you type 'DB transfer' you should get plenty of previous threads on the same topic, particularly on the difficulties of transferring out, even when you want to .

JoeCrystal

hjf139 said:

 Yes pension is index linked, not aware of a cap on it. Expected pension at 60 is £8500 pa, dropping at 65 to  £5750. Transfer value confirmed from them is £285 000.

Is that today's term or what you were given when you left the company however many years ago it was? Might be worth double check if there is an actual cap? If it is uncapped. then it is a lot more valuable. 

hjf139

just checked and it's linked to CPI with maximum of 3%

xylophone

My quandry is if I transfer the whole fund value instead to say a SIPP, can I still take 25% tax free and is there a tax implication on the rest or not? 

If the pension is transferred to a SIPP, it would be possible to take a 25% tax free PCLS - any future withdrawal would be taxable as income in the tax year of receipt.

Withdrawals in excess of PCLS would trigger the Money Purchase Annual Allowance in respect of any contributions you may make to a DC pension.

https://www.pruadviser.co.uk/knowledge-literature/knowledge-library/money-purchase-annual-allowance-mpaa/

Regarding the transfer out, you need the advice of a Pension Transfer Specialist.

You need to be aware that a transfer out without a positive recommendation from the PTS is not easy.

https://www.pruadviser.co.uk/knowledge-literature/knowledge-library/pension-transfers-conversions/

https://adviserbook.co.uk/

You would tick "pension transfer" when the menu comes up as well as any other specialisms required.

hjf139

JoeCrystal All figures are current ones as received details last month. I will get full state pension at 67 and also have a teachers pension in payment as took that at 55 as wanted lump sum for some house renovations. So currently get teachers pension, still working and planning on doing to so until 65, so don't need this pension at the moment but lump sum would be good for some bits we want to do.

Jonty6262

hjf139 said:

 Yes pension is index linked, not aware of a cap on it. Expected pension at 60 is £8500 pa, dropping at 65 to  £5750. Transfer value confirmed from them is £285 000.

Do all DB pensions do that if you take it early? 

RogerPensionGuy

hjf139 said:

 Yes pension is index linked, not aware of a cap on it. Expected pension at 60 is £8500 pa, dropping at 65 to  £5750. Transfer value confirmed from them is £285 000.

Why does pension go down from age 60 to 65?