DB pension

pioneer

Sarahspangles said:

I’ve got pensions that start at 60, 65 and 67. The DB ones are the ones I’m not worrying about because there’s an element of guarantee with them - in my case they will keep up with inflation. Other DB schemes are capped but in normal years (which this isn’t) they will also keep pace with inflation.

Some people like to take a lump sum of part or all of their pension, but if you just put it in savings and admire it, it’s losing spending power fast, because savings tend not to keep pace with inflation. If you think of a pension as more like a guaranteed replacement salary - with cost of living pay rises - that you don’t actually have to work for, you might feel differently about it.

I prefer to hedge remember this is  "Tax free" wouldn't you rather ringfence some for your dependents/emergencies/projects/holidays  rather than leaving it all to the pension provider? Just a thought.

Albermarle

Missjayne said:

HappyHarry said:

Missjayne said:

My pension was a non contributory pension with my job. I left there in 1993 so what ever I get is a bonus but just wondered why it has gone down so much. If I were to take it yearly I would only get £1,007.76 a year. If I take a lump sum I could do something with it. I have to transfer it first I know. Just wondered why it has gone down. I was told it wasn’t linked to inflation. 

Are you sure you would only get £1,007 a year? Could it be that it was worth £1,007 a year in 1993 and you have had 30 years of inflation to be applied to that? 

hi you are correct that is the total scheme pension £1007.76 the pension amount I will get when I retire at 60 will be £2,113.32 pa. It would take me 44 years to get my current guaranteed value of 88k in 2021-22 it was a value of 130k I so wished I had transferred it and cashed it in then.  So you don’t think it will go up anytime soon. 

Something still does not sound right.
Even when CETV's were at a peak, the typical multiplier was in the low 30's. Here £130K divided by £2.1K = 62  !!
I do not think I have ever seen a figure that high, which would indicate something is wrong in the figures somewhere.

Why is it so difficult to transfer a DB pension now. 

In simple terms lots of people did it in the past and regretted it. In some cases due to the activities of unscrupulous financial advisors, but also people not investing it properly/spending it too quickly and then running out.
So the financial authorities put some hurdles to jump in the way of the transfer. Probably they made these hurdles a bit too high, and generally many advisors and providers have been put off getting involved.

Sarahspangles

pioneer said:

Sarahspangles said:

I’ve got pensions that start at 60, 65 and 67. The DB ones are the ones I’m not worrying about because there’s an element of guarantee with them - in my case they will keep up with inflation. Other DB schemes are capped but in normal years (which this isn’t) they will also keep pace with inflation.

Some people like to take a lump sum of part or all of their pension, but if you just put it in savings and admire it, it’s losing spending power fast, because savings tend not to keep pace with inflation. If you think of a pension as more like a guaranteed replacement salary - with cost of living pay rises - that you don’t actually have to work for, you might feel differently about it.

I prefer to hedge remember this is  "Tax free" wouldn't you rather ringfence some for your dependents/emergencies/projects/holidays  rather than leaving it all to the pension provider? Just a thought.

True - but as my DB pensions are public sector they have a poor commutation rate and are more likely to keep pace with inflation in the pension than if I have to manage them. I’ll just have to look after myself so I’m drawing pension for longer!

Pipthecat

In the distant past I worked for a high street bank and I'm set to receive a small DB pension.  Like you I thought about cashing it in but was talked out of it.  Reasons for not pursuing the transfer were:

• I'd already missed the boat on really high CETVs
• The costs of obtaining advice to complete the transfer of a relatively small amount would be disproportionally high
• The DB pension is rising with inflation and right now looks to be really good value 

But what really clinched it for me was that the rest of my pensions (now consolidated) are DC and invested quite aggressively.  This small DB pension offsets that slightly and so I'm just treating it as an early boost to the state pension.

Missjayne

Pipthecat said:

In the distant past I worked for a high street bank and I'm set to receive a small DB pension.  Like you I thought about cashing it in but was talked out of it.  Reasons for not pursuing the transfer were:

• I'd already missed the boat on really high CETVs
• The costs of obtaining advice to complete the transfer of a relatively small amount would be disproportionally high
• The DB pension is rising with inflation and right now looks to be really good value 

But what really clinched it for me was that the rest of my pensions (now consolidated) are DC and invested quite aggressively.  This small DB pension offsets that slightly and so I'm just treating it as an early boost to the state pension.

I haven’t got any DC pensions I thought I might as well cash it in if I can and  actually do something with it and enjoy it. Like buy a little place in the sun. The amount I am going to get a month is not enough to do anything with it. 

Pipthecat

I understand the frustration that you cant do what you want.   However even if you could transfer the pension at the push of a button you would still have to plan the drawdown to reduce the tax implications.  Take an £80k lump sum in one go and you will be gifting the tax man £20k of it.  Is there a tax free lump sum offered alongside DB pension?

Prism

The whole point of why the government uses tax breaks as a method of getting us and the companies we work for to contribute to our retirement is so that we are less dependent on the state when it happens. However small the monthly top up to the state pension is, it still makes you better off. To go along side that longer term benefit, most pension schemes offer a lump sum tax free option to help with those early years but you get penalized heavily on tax if you want to cash it all in. They  basically don't want people spending their entire pension on something, like a property, and then running out of money and going back onto support and benefits later. One way they do this is through tax and the other is to block the easy transfer of DB pensions, unless that transfer is suitable.