Making my mind up

player1_2

Hi all, hoping you can offer advice as I prepare to take part of my pension. 

Circumstances are that I turn 63 in November and my private sector DB* pension becomes due. I am assessing the following options;

1. TFLS of  £173k with residual pension of £26k.
2. no lump sum, £29.4k + whatever annuity £91k can purchase 
3. transfer out (pension valued at £664k

*Actually it is a Hybrid scheme, mainly DB with AVCs until deferred, the £91k of DC

i am working in Civil Service with no immediate plans to retire before I am 66 years, 8 months when my Alpha DB pension is due (still contributing, currently £10k and given pay increases should rise to at least £15k

Despite having been contracted out for a large number of years, somehow my statements show I am entitled to full state pension at 66 years 8 months - I must have managed to pay sufficient NI since my private sector DB closed in 2009 (DC thereafter)

I have a separate £195k DC funds (no longer contributing to scme) -  no need to access before state retirement age

I am a higher band taxpayer, 42 % with no immediate life threatening health issues ( although I do have significant osteoporosis and am in remission from prostate cancer (caught early, successful surgery)

I am divorced, no dependants

mortgage paid off, around 190k savings,

I am minded to choose option 1 since I’d like to use part of TFLS plus the proceeds of selling my current property to buy a new house. ( for the same reason I am choosing not to defer, I understand deferral would uplift pension by 4% per year). 

I am risk averse by nature and fear running out of pension

however I realise my DB pension will die with me ( I have a sibling and feel guilty about a largish pension not forming part of my estate if I die early

id appreciate your views on whether this is the right choice

do you know an approx annuity value if I was to choose option 2 ( I am guessing about 4 or 5 k)

Are there other justifications for cashing in DB pension ( all conventional wisdom seems to be not to cash in, plus I’d need to take financial advice then find a provider that would accept the transfer if that was the advice 

Is my DC pension safe from an early death ? ( would it be paid to my estate)

is there any benefit from taking the 45k ish TFLS now ( I don’t need it yet) which I think would chrystalise the pot , or should I leave it be

Does option 1 (plus state and DC pensions in less than 4 years) offer me a comfortable retirement )? ( private sector DB rises capped at 5%)

should I consider deferring my private sector pension since I have savings that would fund buying a house 

sorry for so many questions but I am impressed by all the sound advice offered here, and have read the forum avidly to educate myself.


thanks 

Marcon

player1_2 said:

Hi all, hoping you can offer advice as I prepare to take part of my pension. 

Circumstances are that I turn 63 in November and my public sector DB pension becomes due. I am assessing the following options;

1. TFLS of  £173k with residual pension of £26k.
2. no lump sum, £29.4k + whatever annuity £91k can purchase 
3. transfer out (pension valued at £664k

i am working in Civil Service with no immediate plans to retire before I am 66 years, 8 months when my Alpha db pension is due (still contributing, currently £10k and given pay increases should rise to at least £15k

Despite having been contracted out for a large number of years, somehow my statements show I am entitled to full state pension at 66 years 8 months - I must have managed to pay sufficient NI since my private sector DB closed in 2009 (DC thereafter)

I have £195k DC funds (but no longer contributing) -  no need to access before state retirement age

I am a higher band taxpayer, 42 % with no immediate life threatening health issues ( although I do have significant osteoporosis and am in remission from prostate cancer (caught early, successful surgery)

I am divorced, no dependants

mortgage paid off, around 190k savings,

I am minded to choose option 1 since I’d like to use part of TFLS plus the proceeds of selling my current property to buy a new house. ( for the same reason I am choosing not to defer, I understand deferral would uplift pension by 4% per year). 

I am risk averse by nature and fear running out of pension

however I realise my DB pension will die with me ( I have a sibling and feel guilty about a largish pension not forming part of my estate if I die early

id appreciate your views on whether this is the right choice

do you know an approx annuity value if I was to choose option 2 ( I am guessing about 4 or 5 k)

Are there other justifications for cashing in DB pension ( all conventional wisdom seems to be not to cash in, plus I’d need to take financial advice then find a provider that would accept the transfer if that was the advice 

Is my DC pension safe from an early death ? ( would it be paid to my estate)

is there any benefit from taking the 45k ish TFLS now ( I don’t need it yet) which I think would chrystalise the pot , or should I leave it be

Does option 1 (plus state and DC pensions in less than 4 years) offer me a comfortable retirement )? ( private sector DB rises capped at 5%)

should I consider deferring my private sector pension since I have savings that would fund buying a house 

sorry for so many questions but I am impressed by all the sound advice offered here, and have read the forum avidly to educate myself.


thanks 

Sounds as if you have plenty of other assets to leave if you feel morally bound to provide for your sibling. You need to make a choice which suits your needs (which could include providing maximum cash for them, if that's your priority - which is why nobody can tell you what is the 'right choice' for you).

A free appointment with PensionWise to talk you through the basics of your DC savings would be a good first step: https://www.moneyhelper.org.uk/en/pensions-and-retirement/pension-wise?source=pw

Brie

My DB pension had a guaranteed pay period so should I die before that ends my pension will be paid to the named beneficiary.  See if yours offers the same.

As for transferring it elsewhere...it's not just that it isn't a good idea, it's almost impossible.  You will need to pay an IFA something like £10k to assess the whole thing and very likely they will say don't do it.  And then you owe them the £10k.  

Whether you take your pension sooner rather than later will depend in part on what it does to your income tax.  Maybe not a good idea if it tips you into a higher tax bracket.  

Also there's rules about taking a DC pension if you are still contributing to a work scheme.  I'm a bit hazy on this but there's something to do with drawdown that lowers the amount you can pay into your current scheme tax free. 

I'm sure someone will come along and explain this and the rest better than I have.

Marcon

Brie said:

My DB pension had a guaranteed pay period so should I die before that ends my pension will be paid to the named beneficiary.  See if yours offers the same.

Only for a certain period - usually five years.

Brie said:

As for transferring it elsewhere...it's not just that it isn't a good idea, it's almost impossible.  You will need to pay an IFA something like £10k to assess the whole thing and very likely they will say don't do it.  And then you owe them the £10k.  

Brie said:

Also there's rules about taking a DC pension if you are still contributing to a work scheme.  I'm a bit hazy on this but there's something to do with drawdown that lowers the amount you can pay into your current scheme tax free. 

I'm sure someone will come along and explain this and the rest better than I have.

If you 'flexibly access' a DC pension scheme and take anything more than the 25% tax free element, you are then permanently limited to contributing no more than £10,000 (gross) to any future DC pension arrangements.

eastcorkram

With such a huge DB pension due at 63, and you're going to carry on working after that, I'm confused as to how you can possibly be concerned about running out of pension. 

michaels

You talk about public sector DB pension in para 1 and then later you say the private DB pension has a max 5% inflation uplift.  Is this a public or private sector DB pension?

I guess the other key question is how much you need to live off - your DB and state pension provision seem to put you about more than 50% higher than median income and getting towards the 'luxury lifestyle' area according to Which.

xylophone

63 in November and my public sector DB pension

An earlier post indicated that this was a private sector scheme - the DB element presumably became deferred in 2009 when the company introduced the DC arrangement? There is also an AVC element?

Given that you have no dependents, one would have thought  that the combination of two DB pensions, a state pension and a DC pension would give you a perfectly comfortable and secure retirement.

With regard to the DC pension, you could always name your sibling as  beneficiary..

https://techzone.abrdn.com/public/pensions/Tech-guide-DC-death#:~:text=Inherited drawdown-,On the death of the original member, or a beneficiary,can use an inherited fund.

player1_2

michaels said:

You talk about public sector DB pension in para 1 and then later you say the private DB pension has a max 5% inflation uplift.  Is this a public or private sector DB pension?

I guess the other key question is how much you need to live off - your DB and state pension provision seem to put you about more than 50% higher than median income and getting towards the 'luxury lifestyle' area according to Which.

My apologies michaels, the scheme I was in was a private sector DB scheme. It closed in 2009 at which point I became a deferred member and contributed to a DC pension until I left the private sector in 2016 and joined the Civil Service Alpha DB scheme which I remain in, and contributing to. (I have corrected the typo in the original post).

Marcon said:

If you 'flexibly access' a DC pension scheme and take anything more than the 25% tax free element, you are then permanently limited to contributing no more than £10,000 (gross) to any future DC pension arrangements.

Thanks Marcon, I am not contributing to my DC scheme, but have no need to immediately draw from it. I am contributing to the Alpha DB scheme.

Marcon said:

Sounds as if you have plenty of other assets to leave if you feel morally bound to provide for your sibling. You need to make a choice which suits your needs (which could include providing maximum cash for them, if that's your priority - which is why nobody can tell you what is the 'right choice' for you).

A free appointment with PensionWise to talk you through the basics of your DC savings would be a good first step: https://www.moneyhelper.org.uk/en/pensions-and-retirement/pension-wise?source=pw

I have an appointment booked with PensionWise for next week but I think they can only talk about DC pensions and I have DB + DC.

xylophone said:

63 in November and my public sector DB pension

An earlier post indicated that this was a private sector scheme - the DB element presumably became deferred in 2009 when the company introduced the DC arrangement? There is also an AVC element?

Yes xylophone, the private sector scheme became deferred in 2009, up until then I was contributing and paying AVC's, then I paid into a DC scheme until I was TUPE'd to another employer in 2015 (so in effect it is a Hybrid scheme). The AVC's and DC elements are included in the options 1 - 3 I listed, forming part of the monthly pension or cash value to transfer out.
I have a separate DC pension valued currently at £195k, no longer contributing and I have no immediate need to access that. 

The piece of the jigsaw that I am missing regarding my Hybrid scheme is that I have no idea what the £90k (which is the DC element) would buy me in terms of annuity. (option 2)

I hope that is a wee bit clearer.   

Thanks all for advice so far.

QrizB

The piece of the jigsaw that I am missing regarding my Hybrid scheme is that I have no idea what the £90k (which is the DC element) would buy me in terms of annuity. (option 2)

Take a look here for a guide:

https://www.hl.co.uk/retirement/annuities/best-buy-rates

MX5huggy

I can’t see why you haven’t retired already. You must love work. 

You’re going to leave significant assets anyway if you die early. 

Expotter

The important question here, I think, is how much income per year do you anticipate you'll need when eventually retired?
If you take the £173k TFLS, you'll have £26K plus £15k from your other DB pension plus £10k state pension, that's £51k pretty much guaranteed until the day you die and pretty much protected against inflation. Are you hoping for a higher income per year? Because, if you aren't I don't see why would you want an annuity or why do you think you could run out of pension.
As for the DC £195k pension, I'd leave where it is because if you want to leave a potential inheritance for your brother it'll be outside of your state and therefore free of inheritance tax (potentially income tax free as well if you die before 75, but that might be about to change). 
If it was me, I'd take the TFLS, but depending on how much you need to buy your property, perhaps defer it and use the £190k savings first, assuming you don't need the extra income right away.