Modelling the future / Pension decisions (eg Transfer my deferred DB ?)

optoutDB

Hi everyone,

I have a CETV offer with 3 months to decide. I'm in the category of people for who it might be a good idea to transfer. I've previously not done any numeric analysis of my future wealth, the plan was to build a business so that my deferred DB was of relative low importance, But that hasn't happened

I am 54, single, no dependants. I've got 100k SIPP, 100k ISA/Gold/Crypto, deferred DB with £250k CETV.  The next 10 years are very uncertain. I will get 1 or 2 inheritance sums. My earnings could vary zero to £30k pa. I am currently very (too) frugal but want to spend nearly all of it before I die. I have a potentially life shortening condition (this is probably the most important variable but with the least information).

Rather than expect anyone here to be able analyse this, I'm going to gather advice and build a future wealth model. To start the inputs will be fixed estimates of various scenarios. Then I might add MonteCarlo variation of the scenarios and evaluate the best choice between transfer out or not. It will be macro programmed in excel to give good view of the inputs and outputs, and my spending and earning behaviour will be adaptive to the prevailing situation.  I've written simulations before (engineering, games). And I'll be happy to share once it's done. (Does this already exist?). 

If my completed comprehensive model shows a transfer is best, will this help me get a IFA to recommend that?


Here are my initial questions about future financial modelling:

My deferred pension is CPI linked (Govt supplies the revaluation factors to be used) but portions are limited to 5% increase or 2.5%. 
Do we model prices inflating also per the CPI based revaluation factors, or do we use a 'Real' inflation value (I'm thinking higher)?
What would you put in the inflation model for the next 30 years?   currently I've got 10% for 2 years, then 5%, then 2% forever (BOE finally does it's job!)

How do we model various investment returns?  And are they related to inflation.  eg does medium risk equity beat inflation by X% on average ?

My state pension is predicted to be full £185pw. That looks like the the value now? so I need to increase it by the CPI? up to 2035 when I get it. 



Thanks,

optoutDB

Note: I've ask about few specific inflation/revaluation models, but I can incorporate as many models as I like/you suggest. eg: I already need models for:  food, beer, energy, rent, gold, equities(diversified index trackers), cash, crypto, state pension, Tax allowance.

Pat38493

Based on quite a few of the other threads I've seen here, you will generally find it hard or next to impossible  to get an IFA to recommend doing this, but the potentially life shortening condition that you mentioned might be a factor, depending on the condition and the known statistical risk of early death.

Jacklob

the plan was to build a business so that my deferred DB was of relative low importance, But that hasn't happened 

This would be a major concern to any IFA, as this suggests it is of "high" importance now.  I already hear the usual experts on here taking a huge intake of breath...

optoutDB

Pat38493 said:

Based on quite a few of the other threads I've seen here, you will generally find it hard or next to impossible  to get an IFA to recommend doing this, but the potentially life shortening condition that you mentioned might be a factor, depending on the condition and the known statistical risk of early death.

I had (probably) 25 years of unspotted massively high cholesterol due to familial hypercholesterolemia. Borderline hyper-tension for many years (not advised to me by my GPs). The consultant 10 years ago had no answer to how much damage/build up is likely to have accrued in my arteries and hence whether it would improve after my cholesterol was under control. This is what I need to look into, maybe I can find someone to assess my arteries.

optoutDB

optoutDB said:

the plan was to build a business so that my deferred DB was of relative low importance, But that hasn't happened 

Jacklob said:
This would be a major concern to any IFA, as this suggests it is of "high" importance now.  I already hear the usual experts on here taking a huge intake of breath...

My concern is that my pension will be too plentiful from age 67, and that my spending profile should be higher from now. It may well turn out that not transferring and just starting drawing early with a lump sum is close enough to optimum and also safe.

Marcon

optoutDB said:

Hi everyone,

I have a CETV offer with 3 months to decide. 

If my completed comprehensive model shows a transfer is best, will this help me get a IFA to recommend that?

If you've already got a CETV and the clock is ticking, it's probably already too late to find an IFA who is willing to plough through all the necessary legwork which would at least put you in a position where a transfer could (at least technically/legally) proceed. They will need the whole 3 months to do what has to be done, if you want the full advice process which would give the ceding scheme the necessary confirmation that you have taken full advice. You could get abbreviated advice (cheaper and quicker), but would still need to proceed to full advice before the DB scheme could pay over any transfer.

Will your scheme give you another CETV within 12 months, and how much would you have to pay? £500 or so is typical if you request a further CETV within a 12 month period.

The IFA will have to follow the guidelines laid down by the relevant regulatory authorities (including stringent guidance from the FCA) so no, your model won't count for much.

squirrelpie

optoutDB said:

I had (probably) 25 years of unspotted massively high cholesterol due to familial hypercholesterolemia. Borderline hyper-tension for many years (not advised to me by my GPs). The consultant 10 years ago had no answer to how much damage/build up is likely to have accrued in my arteries and hence whether it would improve after my cholesterol was under control. This is what I need to look into, maybe I can find someone to assess my arteries.

I'd say you should first concentrate on establishing your medical outlook. Use some of your gold or crypto to pay for an MRI/CT/whatever (HeartFlow?) if you can't get good answers from the NHS for whatever reason. Find good consultants in your area and get a referral. Presumably you haven't had a heart attack or stroke etc? Try to understand as much for yourself as possible as there is some dispute about the basic science.

bostonerimus

I'd put income diversity high on your priority list which argues for keeping the DB pension. You have DC and general account money that you can use in emergencies or to pass on as an inheritance and you can generate a guaranteed income floor with the DB pension and state pension. You can save and invest any excess. Do a budget and have a medical check up, but the variety of your current finances is enviable. I'm sure all the retirees without DB pensions are jealous right now as they see their pots fall by 10% or 20% 

optoutDB

Marcon said:

If you've already got a CETV and the clock is ticking, it's probably already too late to find an IFA who is willing to plough through all the necessary legwork which would at least put you in a position where a transfer could (at least technically/legally) proceed. They will need the whole 3 months to do what has to be done, if you want the full advice process which would give the ceding scheme the necessary confirmation that you have taken full advice. You could get abbreviated advice (cheaper and quicker), but would still need to proceed to full advice before the DB scheme could pay over any transfer.

Will your scheme give you another CETV within 12 months, and how much would you have to pay? £500 or so is typical if you request a further CETV within a 12 month period.

The IFA will have to follow the guidelines laid down by the relevant regulatory authorities (including stringent guidance from the FCA) so no, your model won't count for much.

Thanks. I can get another CETV for £175, but presumably that will come back lower. 

hmmm I don't see why it should take an IFA 3months, what do they do?  They must have their models set up, and I can give them all the specific to me info in 1 day.

Are the FCA guidelines available?

But I probably will never get a reduced life forecast from a doctor, if that is a crucial factor. 

I'm starting to see that getting a transfer would be difficult. In which case taking it early and front loading with a lump sum might be the answer.  I hadn't twigged before that the state pension uses up most of the tax free allowance, so most of my private pension withdrawal will be subject to basic rate tax after age67.

My pension provider has an instant quote tool that gives you pension valuations for any start date. Standard, Lump sum, Stepped, and Stepped with lump sum. 

optoutDB

squirrelpie said:

I'd say you should first concentrate on establishing your medical outlook. Use some of your gold or crypto to pay for an MRI/CT/whatever (HeartFlow?) if you can't get good answers from the NHS for whatever reason. Find good consultants in your area and get a referral. Presumably you haven't had a heart attack or stroke etc? Try to understand as much for yourself as possible as there is some dispute about the basic science.

I agree. I'm not used to paying for medical, but it could be the best investment going for me.