CETV DB transfer to pay off Mortgage? Good sense, too risky or just not allowed?

joeriki

I asked a question about CETV values and I got great replies but no what I expected. I did not know there was such an issue transferring this things. I did not know it cost so much. So I am taking my question back a step and sharing my plan to see what critical but valuable eyes can see in my logic. Thanks.

SITUATION

I am non resident, diabetic and have no working income, single, no dependants. My parents are getting older and I don’t have any cushion in case it is needed. My only assets is a £1mi lliquid  home. I have no remortaging potential. Thus my only income is a house I rent in the UK and a £500 active pension. I live on 20k-30k a year.

CHANGE

In march 22 I tried to sell my house but the war started and inflation came back. The market stalled and I do not want to sell at the 100-150k  discount my agent suggests would secure a sell now. My mortgage is 200k, tracker at +1% base rate and end s 2030, Mortgage tripled this year. Its a low yielding property but still my break even is 10% base rate. I have room.

CONCERN
I became concerned about rates and being a forced seller in 8 years or less if rates go bad. Or I would have to return to the UK and be a delivery driver or something as my skills expired. But also my quality of life shifted as now I am constantly looking at the BOE, Fed, Russia and so on. Im tired of it. I left all that behind but have been dragged back in. So to cut ties I sell or delete my debt.

SOLUTION A:

So I figured cash my pension and become debt free. I have a one account so the money is still available but I pay no debt.

This like a great way to reduce my significant interest rate risk as both my CETV and mortgage go bad in high rate climate.
I have been told I may even be able to cash out tax free. I mean that would be huge. I would take out 280k. Debt free plus cash. My house is old now and needs repairs for 20-30k to spruce it all up. I do not have that currently. This would solve it all



SOLUTION B: I was also offered 50K plus 6k per year. I also have a 33k DC pension sum. Combined i could reduce my debt a lot and still keep a guaranteed pension. and use the 100% rent to pay off mort for next 6 years. I would have an austere but doable time. But it still does not look as good as the lump sum. The lump sum feels like a party with little cost. I still have enough to live. It only does not work out if something bad happens to my house. And its never had an empty day in 10 years never mind a void. 

What Am I missing?

Numbers Recap:
Age: 56. Single, Non-resident, no dependants.
Life Expectancy, 77 (diabetic)
CETV 280K, 
Or 44K + 6.5K for life
Mort 200K, term 8 years. No chance of remort
1% Tracker £780/mo. Up from 150/mo last decade. One account so funds any paid down funds are still available.
Property Valuation (March 2022) 1.3m but 1.05m to sell today. Maybe 1.12 if patient. But its only going one way.
Rent Net Income 1.8k/mo but falling from 2.5k/mo, heading to 1.4k. Needs 20k tidy-up to boost that i dont have.

Existing Pension 500/mo,State pension (8 years away 300/mo) and DC lump sum 35k, can access now.

Grateful for the situation, is not bad.  Just unclear what to do. 

Gary1984

You can only transfer a CETV to an approved pension scheme so I'm afraid it's a non-starter. IF you could transfer it to a SIPP you could then immediately withdraw it all but you'd be paying 40-45% tax on most of it. Also is this a DB scheme that's in payment? If so you can't transfer it at all.

Downsizing seems like your best option?

Gary1984

Also I note you're a fair bit off full state pension. Buy as many additional years NI contributions as you can between now and retirement. Absolutely nothing beats it as an investment. Get a part time job doing anything to either get your stamps paid by an employer or get the cash to pay them yourself.

LHW99

Its pretty near impossible to transfer a DB, as you have heard.

I would take the lump sum from the DB, reduce the mortgage and use the DB income  + rent to overpay on the mortgage (but's that's me).

Why not ask on the Debt Free Wannabe board?

https://forums.moneysavingexpert.com/categories/debt-free-wannabe

MovingForwards

Would £1.1m less outstanding mortgage, CGT, sale fees etc be enough to fund the rest of your life in whatever country you're living in, especially when the DB and state pension start to get paid?

Have you looked into ex-pat buy to let mortgages as they are available, that then frees up equity from the house.

Marcon

Your main problem is going to be getting financial advice at all, given you are non-resident. That alone would scupper the possibility of transferring - the DB scheme cannot progress the transfer without proof you have received such advice.

Albermarle

One way to transfer out of a DB pension, is to be able to show that you will have sufficient income from other sources in retirement, so you really do not need the DB pension income.
If you have not got these sources then you will never get a positive recommendation, so the whole idea is a non starter.
If you said you wanted it to pay off the mortgage, that would be the end of any discussions as well. 

joeriki

Gary1984 said:

Also you could perhaps split your DC into smaller pots and get most of it tax free using the small pots rule?

Its not started. I have never heard of the small pots rule. Will investigate. Cheers

dunstonh

One way to transfer out of a DB pension, is to be able to show that you will have sufficient income from other sources in retirement, so you really do not need the DB pension income.
If you have not got these sources then you will never get a positive recommendation, so the whole idea is a non starter.

The information posted doesn't bode well on that front.  

joeriki

Gary1984 said:

Also I note you're a fair bit off full state pension. Buy as many additional years NI contributions as you can between now and retirement. Absolutely nothing beats it as an investment. Get a part time job doing anything to either get your stamps paid by an employer or get the cash to pay them yourself.

I have been meaning to do this. This is the push I need. Looking at this it seams paying from now til 2034 makes sense but paying the 18 years back pay does not as it only adds 15 quid (if I am reading this right?) I have quite bad adhd so I am, lost on everything. Just trying to tidy it all up!  Thanks

joeriki

LHW99 said:

Its pretty near impossible to transfer a DB, as you have heard.

I would take the lump sum from the DB, reduce the mortgage and use the DB income  + rent to overpay on the mortgage (but's that's me).

Why not ask on the Debt Free Wannabe board?

https://forums.moneysavingexpert.com/categories/debt-free-wannabe

Thanks, this is the way forward I think. I worked out if I can pay all the rent in to the remaining mortgage it will be covered by 2028/9.  Its a good option. Thanks