Defined benefit pension

Mousey66

Kim1965 said:

Could even stick it on the nose of a 3 legged horse. 

Might give it a go! 🤔😂 no I’d never gamble it, just use it for what we need😊

jimi_man

There must be something missing here? £7500 plus £1200 a year is a reasonably valuable sum. Is it index linked? And what age can you take it?

If it’s index linked then to me, being willing to throw that away for £20k possibly after taxes, is bordering on insane. A reasonable lifespan of collecting the pension plus the lump sum, could easily be £50k. 

How much left is on your mortgage and how much do you pay per month? When is it due to finish?

Mousey66

jimi_man said:

There must be something missing here? £7500 plus £1200 a year is a reasonably valuable sum. Is it index linked? And what age can you take it?

If it’s index linked then to me, being willing to throw that away for £20k possibly after taxes, is bordering on insane. A reasonable lifespan of collecting the pension plus the lump sum, could easily be £50k. 

How much left is on your mortgage and how much do you pay per month? When is it due to finish?

I can take it now as I’m over 55. 1,200 per year isn’t much a month though. It’s actually a bit less than that I think 1,131.
so less than £100 a month, £25 a week. Hardly worth having when I could potentially take less than 30k, ok it could end up being 20k, no one knows yet, I owe 18k on our mortgage with 7 years left. So if I pay half it helps a lot now when it’s going to be needed.

Kim1965

I think you may have guessed that the collective view is not to cash in the pension. But your mind was already made up, it will be interesting to see its current value. 

Mousey66

Absolutely, maybe the amount financial advice isn’t required needs to be increased? Sadly that decision is out of Jo publics hands, as I’m obviously not the only one with this dilemma. In this day and age 41k doesn’t go far and wouldn’t see me into old age, if I get there, comfortably.
I’ll let you know the TV in December when this one expires.

Albermarle

There must be something missing here? £7500 plus £1200 a year is a reasonably valuable sum. Is it index linked? And what age can you take it?If it’s index linked then to me, being willing to throw that away for £20k possibly after taxes, is bordering on insane. A reasonable lifespan of collecting the pension plus the lump sum, could easily be £50k. 

Although annuity rates have improved, to buy a guaranteed lifetime £1200 per month pension, with some inflation linking, at age 55, would probably cost about £50K to £60K + the £7,500 lump sum. So in total about £60K minimum.

dunstonh

There must be something missing here? £7500 plus £1200 a year is a reasonably valuable sum. Is it index linked? And what age can you take it?

Yes, the Tesco DB scheme increases both prior to scheme age and after as well.

If it’s index linked then to me, being willing to throw that away for £20k possibly after taxes, is bordering on insane. A reasonable lifespan of collecting the pension plus the lump sum, could easily be £50k. 

you are spot on.

so less than £100 a month, £25 a week. Hardly worth having when I could potentially take less than 30k, ok it could end up being 20k, no one knows yet, I owe 18k on our mortgage with 7 years left. So if I pay half it helps a lot now when it’s going to be needed.

I don't have the scheme booklet available but most DB schemes penalise people who take their pension early  due to the longer length in time it will be paid.    So, what are the reductions for you taking it at 55 compared to say 60 or 65?

Absolutely, maybe the amount financial advice isn’t required needs to be increased? 

Not a chance in the short term.  And many providers wont take a DB pension transfer in even if the CETV is less than 30k unless an adviser does it (and they wont).

OldScientist

Is it possible for you to to remortgage? I note that a 7 year fix is currently available at about 5% that would cost £254 per month (if rates go up to 8% by April, that would set you back £281 per month instead) on your remaining 18k. If you used part of the lump sum (say £3k) to pay it down the mortgage to £15k, the repayments would instead be £212 and £234 per month at interest rates of 5% and 8%, respectively and you'd have £4.5k for other purposes.

As for the annual pension of £1200 - I think the Tesco scheme has an inflation cap of 5% and would be worth (in nominal £) after 7, 30, and 37 years at inflation rates of 2%, 4%, and 5% a total of

                  inflation rate (%)

Years	2	4	5
7	8921	9478	9770
30	48682	67302	79727
37	64841	98043	121954

Where 7 years is the extent of your mortgage (you have more than a 95% chance of living longer than this), 30 years is the median life expectancy at 55 (i.e. you have 50% chance of living longer than this), and 37 years is the life expectancy of 25% of current 55 year olds (using ONS figures for males - the figures for females will be a little higher).

I hope this is useful information...

Dazed_and_C0nfused

OldScientist said:

Is it possible for you to to remortgage? I note that a 7 year fix is currently available at about 5% that would cost £254 per month (if rates go up to 8% by April, that would set you back £281 per month instead) on your remaining 18k. If you used part of the lump sum (say £3k) to pay it down the mortgage to £15k, the repayments would instead be £212 and £234 per month at interest rates of 5% and 8%, respectively and you'd have £4.5k for other purposes.

As for the annual pension of £1200 - I think the Tesco scheme has an inflation cap of 5% and would be worth (in nominal £) after 7, 30, and 37 years at inflation rates of 2%, 4%, and 5% a total of

                  inflation rate (%)

Years	2	4	5
7	8921	9478	9770
30	48682	67302	79727
37	64841	98043	121954

Where 7 years is the extent of your mortgage (you have more than a 95% chance of living longer than this), 30 years is the median life expectancy at 55 (i.e. you have 50% chance of living longer than this), and 37 years is the life expectancy of 25% of current 55 year olds (using ONS figures for males - the figures for females will be a little higher).

I hope this is useful information...

Very.  But sadly I suspect it will fall on deaf ears 😟

Mousey66

This is very helpful thank you. I imagine this is what I will end up doing. As if others have said, I’m going to have difficulty transferring even if the amount goes below 30k. Looks like I’ve no other option.