Retirement planning - have you revised your figures?

Kim1965

GunJack said:

Gin_and_Milk said:

 but realistically I can't afford to go sooner than 60.

This is something that people without DB pensions don't seem to get, that it is often not possible to go early as the combination of x years less of service coupled with actuarial reduction can very easily mean that the pension payable won't be enough to live on. I know it certainly affects me..... if I had the equivalent of my 2 DBs (as often quoted by people on the main pensions board) in a DC I'd be able to go now at 55, as it is I'm pretty much stuck 'till 62   


...and before anyone mentions that actuarial reduction is to compensate for taking the pension for longer so you get the same amount overall, that's a fat lot of good if the reduction  means you don't have enough to live on!!

Depends on the scheme normal pension age. Increasing ly its being linked to the state pension age. 
 I have a modest deferred db with pension age of 60, great. With a db at 67 I think a sipp is needed to Bridge the gap to state pension if you want to go early.
 Having some of each is considered the most flexible. 

Albermarle

 if I had the equivalent of my 2 DBs (as often quoted by people on the main pensions board) in a DC I'd be able to go now at 55, as it is I'm pretty much stuck 'till 62   

Most 'advice' on the Pensions Board is NOT to swop guaranteed DB income for risk based investments in a DC pension, unless you have sufficient guaranteed income from other sources. If you had transferred this time last year, you would be staring at a loss of 15% + 10% inflation = 25% down.

In any case the 'equivalent' sum varies a lot dependent on financial market conditions, particularly with government gilts.

The CETV ( cash equivalent transfer values) for a DB pension, peaked in the last three or so years, since then they have dropped 30 or 40 %, so almost impossible to make a sensible case for transferring.

blue.peter

It does look as if there's some good news coming on the energy costs front - at least, for some of us. I buy my energy from Good Energy, and am therefore not subject to the OFGEM price cap. I received an e-mail a couple of days ago that told me:

The headlines:

• The rates you will pay for your energy will reduce from 1st January.
• Your rates include the Government Energy Price Guarantee, and you'll keep receiving the monthly Energy Bills Support Scheme discount on top of this.

For reasons that I don't fully understand, my house is horribly expensive to heat, so I pay a very large amount for my gas. I did some sums on the basis of the detailed numbers that I was also given, and have worked out that the price reduction that I'll be getting is going to be roughly equivalent to the Support Scheme payments that I'm getting (£67/month until March(?)).

My plan is to keep it simple, and just continue to run my DD at its present level. When the support scheme ends, I'll hold the DD at the same level instead of letting it increase back to what it would have been without the support. With luck, I should then have a little surplus that can be refunded.

I hope that those of you subject to the OFGEM cap will benefit similarly when the new cap is announced.

blue.peter

Albermarle said:

Most 'advice' on the Pensions Board is NOT to swop guaranteed DB income for risk based investments in a DC pension, unless you have sufficient guaranteed income from other sources. If you had transferred this time last year, you would be staring at a loss of 15% + 10% inflation = 25% down.

Absolutely right. I did toy with switching my DB to DC in the run up to retirement. The reduction in income that I'd have suffered would have been about 25%. Needless to say, I'm glad I didn't do it.

I'd say that the loss for someone who did such a switch last year could well be a lot worse than your 25% figure because of investment conditions. Obviously the actual figure would depend on the investments held by the DC fund, but I've seen losses in value of around 20% over the last year (largely, AIUI, because of Putin's invasion of Ukraine). And that ignores the effect of inflation.

GunJack

Albermarle said:

 if I had the equivalent of my 2 DBs (as often quoted by people on the main pensions board) in a DC I'd be able to go now at 55, as it is I'm pretty much stuck 'till 62   

Most 'advice' on the Pensions Board is NOT to swop guaranteed DB income for risk based investments in a DC pension, unless you have sufficient guaranteed income from other sources. If you had transferred this time last year, you would be staring at a loss of 15% + 10% inflation = 25% down.

In any case the 'equivalent' sum varies a lot dependent on financial market conditions, particularly with government gilts.

The CETV ( cash equivalent transfer values) for a DB pension, peaked in the last three or so years, since then they have dropped 30 or 40 %, so almost impossible to make a sensible case for transferring.

I know, and there's not a snowball's chance in hell that I would trade either of them in for DC....the point I was making is that a lot of people without DBs don't really get the bit about more than likely being locked in for longer with DBs than with DCs before they can be taken for exactly the reasons I stated in my post.

I'm in a relatively good position, with a 20-yr deferred PCSPS revaluing at full CPI (NPA 60), 16 yrs (up to Apr 2024) company DB CARE revaluing at CPI+1% annually to max 6% (NPA 65), and the company are moving in 2024 to a DC with 9% employee/14% employer setup for my last 6 years takes me to 62 and no need to take the company DB early....and yes I've modelled it all out, and there is a chance I may be able to go at 61 but 62 is far more likely..

Albermarle

blue.peter said:

Albermarle said:

Most 'advice' on the Pensions Board is NOT to swop guaranteed DB income for risk based investments in a DC pension, unless you have sufficient guaranteed income from other sources. If you had transferred this time last year, you would be staring at a loss of 15% + 10% inflation = 25% down.

Absolutely right. I did toy with switching my DB to DC in the run up to retirement. The reduction in income that I'd have suffered would have been about 25%. Needless to say, I'm glad I didn't do it.

I'd say that the loss for someone who did such a switch last year could well be a lot worse than your 25% figure because of investment conditions. Obviously the actual figure would depend on the investments held by the DC fund, but I've seen losses in value of around 20% over the last year (largely, AIUI, because of Putin's invasion of Ukraine). And that ignores the effect of inflation.

For most mainstream investments, they have lost between 10 and 20% this year. In fact many 'low risk' funds have lost more than more typically ' higher risk' funds, which is a rather topsy turvy result, due to a big decline in the price of mainly government bonds.  Of course a loss of more than 20% is possible, if someone was unlucky with their investments choice.
Then all minus inflation as well  of course.

To be fair most private sector DB pensions have lost some value, as normally the inflationary increases are capped at 3 to 5%. Normally only public sector pensions get full inflationary increases.

blue.peter

Albermarle said:

To be fair most private sector DB pensions have lost some value, as normally the inflationary increases are capped at 3 to 5%. Normally only public sector pensions get full inflationary increases.

Indeed. Mine's in payment, and increases are capped at 5%, so my income has suffered a real-terms reduction over the last year or so.On the other hand, I'm luckier than some: a large part (but not all) of my DB pension has a minimum annual increase of 3%, so I did gain a little when inflation was below that.

One minor point, though: LPI is maxed at 2.5%, not 3%, for many DB pensions.

RobM99

I maaged OK on £1300 a month (no rent/mortgage). Now I get the state pension plus gig money, £2,000 is a breeze.

Gin_and_Milk

RobM99 said:

I maaged OK on £1300 a month (no rent/mortgage). Now I get the state pension plus gig money, £2,000 is a breeze.

Currently my figure is around £1400, so not too dissimilar to yours.  Bet a pay rise of about £700 was very nice though!

RobM99

 I can afford a litre of petrol and 2 units sof electricity extra now!