Cashing in pension

Linton

What do you mean by "fairly secure"?  For example, would a drop in pension pot value of say 25% in a crash be acceptable?

If the answer is yes a very rough estmate would be that you can sustain a payment of 3.5% of the initial value of the pot, increasing with inflation.  But of course that cannot be guaranteed and it would require experience of investing and financial management.

Matching Inflation is arguably the most difficult factor in planning retirement.  Your DB pension may well provide it.  However if it has a very low cap then it wont.  On the other hand cash savings almost certainly wont either.

This is probably academic anyway.  In order to transfer out of a DB scheme to a DC one you need a positive recommendation from an IFA.  This is unlikely to be forthcoming unless special factors apply such as having a seriously reduced life expectancy or having sufficient other income that the DB pension is irrelevent to your well being.

magd36

I'll try and explain.

It is linked to the consumer price index.

I have approached an IFA (paid for by my company) and have the option to transfer. Quite a few in my company have already done so (when CTV was peaking).

This is the decision I have to make, hence my question.

I am keen on security but have other sources of income (other DC pensions and savings) so this is a mathematical decision based on the likely age of death. I don't want to get into sharing my health information; at the end of the day, nobody knows when their times up. As I say I'm just trying to weigh things up.

If the reasons for the question are ignored is it possible to answer the original question?

Thanks

magd36

Linton said:

What do you mean by "fairly secure"?  For example, would a drop in pension pot value of say 25% in a crash be acceptable?

I think this partly answers my question i.e. you can't put it into a secure pension similar to cash, even if you are willing to accept 0.5% return after fees.

Thanks
 

magd36

eskbanker said:

What do you see as the benefit of moving from DB to DC and have you tried convincing a financial adviser yet?

The benefit would be to pass on the money if I die early. If I live until I'm very old I'm unlikely to need the DB as my outgoings are likely to be low and I should have enough other income that I won't need the DB. I've discussed this with an advisor and I think transferring will be a possibility for me. Thanks.

Dazed_and_C0nfused

magd36 said:

Linton said:

What do you mean by "fairly secure"?  For example, would a drop in pension pot value of say 25% in a crash be acceptable?

I think this partly answers my question i.e. you can't put it into a secure pension similar to cash, even if you are willing to accept 0.5% return after fees.

Thanks
 

You can, you could just leave it as can within the pension wrapper if you wanted to.

But inflation will be a problem.

magd36

Kim1965 said:

If security is essential a db scheme is pretty safe. Besides unless you have very good reasons its expensive and very difficult to transfer.
If the cetv is above 30k you have to pay for advice, havevyou done this? What is the value of the db pension, what is the scheme retirement date and what is the cetv? 

Age 56 is the retirement date. CTV is 35 times DB. Yes, I've taken advice, and transferring may be possible.

magd36

Dazed_and_C0nfused said:

Really?

What is the inflation factor used by your final salary pension scheme?

You seem keen on security so why would you want to give up a final salary pension 🤔

I'll try and explain.

It is linked to the consumer price index.

I have approached an IFA (paid for by my company) and have the option to transfer. Quite a few in my company have already done so (when CTV was peaking).

This is the decision I have to make, hence my question.

I am keen on security but have other sources of income (other DC pensions and savings) so this is a mathematical decision based on the likely age of death. I don't want to get into sharing my health information; at the end of the day, nobody knows when their times up. As I say I'm just trying to weigh things up.

If the reasons for the question are ignored is it possible to answer the original question?

Thanks

xylophone

The original question

To work out whether it's best to cash in a pension I would like to know the following:

How secure can I make the pension and what would be the expected interest rate after all fees are taken into account?

Presumably you don't actually mean "cash in" but rather transfer the CETV into a personal pension.

It would be possible to hold the entire amount as cash within the new scheme.

Hargreaves Lansdown for one would not charge any fees to hold cash - but note the interest rate.......

https://www.hl.co.uk/help/sipp,-drawdown-and-annuity/sipp/investments/can-i-hold-cash-in-the-vantage-sipp-and-earn-interest#:~:text=Base rate since 17/03,are variable unless stated otherwise.

Inflation is currently running in excess of 9%.

If you chose to invest, your capital would rise and fall with the market value of your investments.

The return on your investments (interest/dividends) would be variable.

dunstonh

 CTV is 35 times DB. Yes, I've taken advice, and transferring may be possible.

Is that CETV recent?   CETVs have fallen by around 25% over the last 3 months.   if the CETV is getting closer to its expiry, you may find you have to get another and it could be lower.

If you re willing to accept a 25% loss on the CETV to what it was 6 months ago, why are you not willing to utilise investments?

NedS

magd36 said:

I'll try and explain.

It is linked to the consumer price index.

I have approached an IFA (paid for by my company) and have the option to transfer. Quite a few in my company have already done so (when CTV was peaking).

This is the decision I have to make, hence my question.

I am keen on security but have other sources of income (other DC pensions and savings) so this is a mathematical decision based on the likely age of death. I don't want to get into sharing my health information; at the end of the day, nobody knows when their times up. As I say I'm just trying to weigh things up.

If the reasons for the question are ignored is it possible to answer the original question?

Thanks

It is also fundamentally linked to your attitude toward and tolerance for risk. Regardless what the maths may tell you, if you cannot sleep at night worrying about the fact your pot has just dropped 40% due to a market crash then your quality of life will suffer.