Making my mind up

player1_2

MX5huggy said:

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. 

I do enjoy my job MX5huggy, I don’t think I have enough to fill my retirement days yet so plan to work on until I no longer enjoy it, or feel unable to (but not beyond state pension age)

player1_2

Expotter said:

 
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.

Thanks Expotter. I am minded to take the TFLS and monthly pension now rather than deferring since although deferral may provide more income in the long term, taking the pension now 'rescues' a significant sum for my sibllng if I die before retiral and the pension dies with me.

Phossy

If I read it right, then your DB pension is deferred from previous work. If that's the case then the value is already set and deferring taking it further will not grow it anymore, other than through yearly increases which you'll get whether you defer it or take it now (it will go up by a linked amount whether it is in your hands or not). If it were me, I'd take the lump sum now.

player1_2

Phossy said:

If I read it right, then your DB pension is deferred from previous work. If that's the case then the value is already set and deferring taking it further will not grow it anymore, other than through yearly increases which you'll get whether you defer it or take it now (it will go up by a linked amount whether it is in your hands or not). If it were me, I'd take the lump sum now.

Thanks Phossy, that is my thinking. I was told if I deferred the pension it would go up by around 4% for each year deferred. If I take the pension now I can bank it (even if it is subject to 42% tax) and the pension will grow each year according to inflation (capped at 5%).

Pat38493

Phossy said:

If I read it right, then your DB pension is deferred from previous work. If that's the case then the value is already set and deferring taking it further will not grow it anymore, other than through yearly increases which you'll get whether you defer it or take it now (it will go up by a linked amount whether it is in your hands or not). If it were me, I'd take the lump sum now.

This is not entirely accurate - it's true that the DB pension will increase while it's deferred and when it's in payment.

However, most private DB pensions that are deferred are better protected against inflation whilst in deferment than in payment.  The reason for this is that as I understand it, usually a big part of a DB pension amount that is deferred, is increased annually based on the cumulative capped inflation since the time it was deferred, according to tables published by the government each year.  The increase may be capped at 5% or 2.5% per year depending on the scheme and dates.  

What this means is that if there is one or two years of high inflation, you may still get the full increase in deferment because the overall inflation since it was originally deferred is still under the cap.

Conversely, if the pension is already in payment, the cap applies to the individual year. 

A lot of deferred DB pensions effectively got the full 10% increase last year, whilst if the same pension was in payment it would have been capped to a lower amount.

You need to check the rules around increases for your specific scheme to understand this properly as some schemes might have rules that are more generous than what is legally required.

player1_2

hi all, I hope you don't mind another question ( this one is mainly out of curiousity ). All the conventional wisdom seems to be not to transfer out / cash in a DB pension, and if doing so you must take IFA advice, then find a provider that will accept the pension). Is there anything prevents you simply cashing in and banking the funds ?
Possibly a dumb question but jut wondering.

For what its worth, I am not planning to cash in my DB pension, I calculate that with the TFLS, and reduced tax (since if I cash in now the whole pot minus TFLS would be taxed at 42%- 47%).

Pat38493

player1_2 said:

hi all, I hope you don't mind another question ( this one is mainly out of curiousity ). All the conventional wisdom seems to be not to transfer out / cash in a DB pension, and if doing so you must take IFA advice, then find a provider that will accept the pension). Is there anything prevents you simply cashing in and banking the funds ?
Possibly a dumb question but jut wondering.

For what its worth, I am not planning to cash in my DB pension, I calculate that with the TFLS, and reduced tax (since if I cash in now the whole pot minus TFLS would be taxed at 42%) means that I break even in around 11 years or so)

No you can't do that because there is regulations now that basically forces you to take (expensive) IFA advice before any receiving scheme would accept the transfer.

If the IFA advises you not to transfer, which is highly likely except in a few extreme edge cases, and you are still determined to go ahead, you could try to open a stakeholder pension - stakeholder pensions are legally obliged to accept all transfers as long as you have taken the advice, even if you are ignoring your IFA's opinion.  It's been posted on here that there is only one provider who will actually open a stakeholder pension these days as it's considered a legacy product.

Also you would not be "cashing it in" - you would be transferring the value of it to a DC pension fund.  Cashing it in would be a terrible idea as you would incur an immediate and very large tax bill.

player1_2

Hi all, thanks for the expert advice over the last few weeks as I made my mind up on pension options. Just to round off this thread, I have decided to take the private  DB pension option that offers the maximum TFLS and a reduced monthly pension payment. I have also decided to leave the DC pension untouched, at least for now. I will continue to work and pay into my Civil Service pension until state retirement age when I can draw that along with my state pension. (I have the luxury of knowing that if my health deteriorates or I just get fed up working then I can simply retire.

Through this amazing site I have been able to learn loads about pensions, annuities, taxation etc to help steer me to the decision that is right for me. Thanks again!