Pension quote

garrob

Hello, I am retiring in 3 weeks time at age 63 and a half. I got a figure from my pension company and it was reduced for taking early.
They quoted me for my DB pension a lump sum of £65,000 and a pension of £9800pa which I asked for as I am taking a lump sum.
They called me last week as I had enquired about my paperwork not arriving, anyway they said there is another way I could take my pension and they offered a lump sum of £98,000 and a pension of £13,747 per annum but they would take £100,000 from my DC pension and leave me £25,000 still invested. At first I thought that was good but thinking about it a bit more I don’t think it is.
If I transferred my DC and I died say 5 or 10 years later I would lose all that money as the DB would die with me, my wife would still get a pension.
Am I correct in thinking that way? Any pointers would be great.

El_Torro

Some DB pensions will pay out a percentage of the pension (some will give 100%, some less) to a surviving spouse. To be sure you will need to check with your DB pension provider.

The deal you have been offered doesn't sound too bad to me. Will the annual pension increase with inflation, or at all? If not then the deal doesn't sound that great after all. 

Marcon

garrob said:

Hello, I am retiring in 3 weeks time at age 63 and a half. I got a figure from my pension company and it was reduced for taking early.
They quoted me for my DB pension a lump sum of £65,000 and a pension of £9800pa which I asked for as I am taking a lump sum.
They called me last week as I had enquired about my paperwork not arriving, anyway they said there is another way I could take my pension and they offered a lump sum of £98,000 and a pension of £13,747 per annum but they would take £100,000 from my DC pension and leave me £25,000 still invested. At first I thought that was good but thinking about it a bit more I don’t think it is.
If I transferred my DC and I died say 5 or 10 years later I would lose all that money as the DB would die with me, my wife would still get a pension.
Am I correct in thinking that way? Any pointers would be great.

What's the relationship between your DB and DC pensions? Are you in a 'hybrid' scheme, or is your DC pension based on Additional Voluntary Contributions? Looking at your other posts, it isn't at all clear, since you refer to your DC pension as a 'workplace pension' without giving any clues!

You've posted a string of queries about your pension, so I wonder if you've thought of having a (free) chat with PensionWise? They can't give investment advice, but they give general guidance - and from what you've said in your questions, that might be very useful to you. There are some scathing comments on here (needlessly so) about what they offer, but basic information is often no bad starting point if you're a novice, which you've said you are. See https://www.moneyhelper.org.uk/en/pensions-and-retirement/pension-wise?source=pw

garrob

Many thanks for your replies.
My DC pension was started in 2016 when my employer stopped the DB pension. The DB rises every year. The DC pension was recently transferred from BW to L & G on a salary sacrifice scheme. It is a target date fund which has lost £4000 since opening it 4 months ago. So BW have offered to transfer the DC element back to them and offered me the higher figure in my original post. Is it worth doing or just keeping my DC where it is.

Albermarle

A lot depends on the terms of your DB pension, in other words how good is it.
What inflation linked increases will it pay each year? Full RPI/CPI link? Or with a cap? Or no increases at all?
Spousal benefit if you die ?

RogerPensionGuy

garrob said:

Many thanks for your replies.
My DC pension was started in 2016 when my employer stopped the DB pension. The DB rises every year. The DC pension was recently transferred from BW to L & G on a salary sacrifice scheme. It is a target date fund which has lost £4000 since opening it 4 months ago. So BW have offered to transfer the DC element back to them and offered me the higher figure in my original post. Is it worth doing or just keeping my DC where it is.

Knowing your current DC scheme pot value now would be helpful to understand?

garrob

My DC pot at the moment is £125,000

xylophone

If you take the BW offer,  will your pension increase in payment as it would if you took the lower figure?

With regard to your pension, what is the breakdown as to pre 88 GMP/post 88 GMP excess?

Have you checked your scheme guide as to pension increase after reaching GMP age (65 for a man)?

Will your wife be entitled to half the higher scheme pension should you pre decease her?

Have you checked your state pension forecast?

https://www.gov.uk/check-state-pension

garrob

Many them any thanks for the replies. I will check the Gmp excess. It says it increases up to 5% per annum.
My wife is entitled to half and my state pension forecast says I can’t improve it anymore and up to now I will get £920 per month.

garrob

I just can’t decide wether it’s worth giving up a £100,000 of my DC.

Expotter

You're not really giving up £100k, because you're also getting an extra £33k tax free lump, so you're giving up £67K for an extra £3947 per year.
It might be helpful if you compare it with what you might get in terms of extra income if you were to purchase an annuity with the money you'd give up. You could try this annuity calculator and play around a bit with what you would require

https://www.moneyhelper.org.uk/en/pensions-and-retirement/taking-your-pension/compare-annuities#