Being forced to use a Financial Advisor to transfer pension to pension.

Hoenir

scoobyjones1 said:

Prism said:

scoobyjones1 said:

 I would like to think we can grow more than 5% ourselves because we HAVE already done so for 10 years and the amount she is being offered per annum is not really going to help her much.

The thing is that the last 10 years have been incredibly easy investing, where making 10-15% returns with almost no effort has been easy. We haven't had a real crash for 15 years now, and that time we all got bailed out with QE. Are you so sure that will happen next time. The previous bad time, many of us can barely remember, was 2000 into a small recovery followed by 2008 - almost a decade and a half of below inflation equity returns. All of this could happen again. Wouldn't it be nice to have a small DB pension paying out if it does.

It has not been easy. Trump caused a big pullback when he almost caused WWIII blowing up Iranian Generals...we pulled out of the market at that time. Covid caused a massive crash but some stocks boomed...then crashed after Covid, then we had Ukraine which caused a huge spike in oil prices with supply chain issues...we have had the Fed flooding the market with cash but then over tightening and now talk of easing. 2022 was a down year but 2023 is looking good at the moment.
Not easy at all but if you look at the markets over our lifetimes they have gone up before and after any crashes. It takes time and patience but easy? I would disagree. We have beaten the S&P though, every year.
We have other pensions between us and we would like to use this small one to invest with. Sadly it seems we can't. This type of DB pension is dying out and I can see why people want to leave them. We certainly do!

QT has barely scratched the surface in the US. Going to take over a decade for the Fed to shrink it's balance sheet. 

scoobyjones1

JoeCrystal said:

scoobyjones1 said:

A question for you, xylophone. The amount of tax free cash is clear, approx £12k and then annual amounts of £12k, rising with CPI...but capped at 5% (not great). But...with a DB pension, might she be able to take a larger lump sum, some taxable, with a lower annual payment, or would that be against the rules or if allowed, still be subject to expensive advice? 

What do the DB pension scheme rules say in this case? There is no point in asking about it if the scheme-specific rules do not allow it.  There are cases, generally in many public sector pension schemes, in which you can commute in exchange for a lower annual pension scheme. Here is NHS pension scheme for example: https://chasedeveremedical.co.uk/the-nhs-pension-scheme-tax-free-lump-sum-explained

Good point, Joe. We do not know the rules of this pension, never have done, we will have to phone in and ask but that has not been mentioned as an option to her so far, so I suspect they will have a maximum amount of 25%. 

scoobyjones1

Dazed_and_C0nfused said:

Noted, good points but we are trying to transfer from one pension pot to another...no tax bill there. Then when you go into drawdown from your SIPP you pay tax as you go. 

Again you seem to be lacking understanding of what a DB pension actually is.

There is no "pot", there is a promise to pay £x/year for the rest of her life.  Often with spouses pension if she does before you.

than get a small amount (£166) every month for 20/30 years

It's only £166/month in year 1 though.  It will be more in year 2.  And more again in year 3 and so on.

This type of DB pension is dying out and I can see why people want to leave them. We certainly do!

They may well by dying out but I think you will find there are more people trying to get one (local government, NHS, civil service, teachers jobs etc) than there are people wanting to transfer out of them.

Yes we fully understand that...a loose term, sorry...referring to the lump sum as a "pot" to us. 
But our feelings remain the same. If it were a larger, more significant pension then maybe we would feel differently but this is a surprise bonus and she wants to use it now...rather than have that small but perhaps useful amount, for however long she may live. I would too.

Dazed_and_C0nfused

scoobyjones1 said:

JoeCrystal said:

scoobyjones1 said:

A question for you, xylophone. The amount of tax free cash is clear, approx £12k and then annual amounts of £12k, rising with CPI...but capped at 5% (not great). But...with a DB pension, might she be able to take a larger lump sum, some taxable, with a lower annual payment, or would that be against the rules or if allowed, still be subject to expensive advice? 

What do the DB pension scheme rules say in this case? There is no point in asking about it if the scheme-specific rules do not allow it.  There are cases, generally in many public sector pension schemes, in which you can commute in exchange for a lower annual pension scheme. Here is NHS pension scheme for example: https://chasedeveremedical.co.uk/the-nhs-pension-scheme-tax-free-lump-sum-explained

Good point, Joe. We do not know the rules of this pension, never have done, we will have to phone in and ask but that has not been mentioned as an option to her so far, so I suspect they will have a maximum amount of 25%. 

This might be worth a read.

https://www.mandg.com/pru/adviser/en-gb/insights-events/insights-library/pension-commencement-lump-sum-tax-free-cash

Pension Commencement Lump Sum limit

There’s an upper limit on the amount of pension commencement lump sum (PCLS or more commonly known as tax-free cash/ TFC) available to a member when they take benefits. In broad terms, it’s limited to the lower of 25% of the value of the member’s uncrystallised pension rights and 25% of their available lifetime allowance and there must be sufficient lifetime allowance remaining to be able to receive the tax-free cash. 

scoobyjones1

Hoenir said:

scoobyjones1 said:

Prism said:

scoobyjones1 said:

 I would like to think we can grow more than 5% ourselves because we HAVE already done so for 10 years and the amount she is being offered per annum is not really going to help her much.

The thing is that the last 10 years have been incredibly easy investing, where making 10-15% returns with almost no effort has been easy. We haven't had a real crash for 15 years now, and that time we all got bailed out with QE. Are you so sure that will happen next time. The previous bad time, many of us can barely remember, was 2000 into a small recovery followed by 2008 - almost a decade and a half of below inflation equity returns. All of this could happen again. Wouldn't it be nice to have a small DB pension paying out if it does.

It has not been easy. Trump caused a big pullback when he almost caused WWIII blowing up Iranian Generals...we pulled out of the market at that time. Covid caused a massive crash but some stocks boomed...then crashed after Covid, then we had Ukraine which caused a huge spike in oil prices with supply chain issues...we have had the Fed flooding the market with cash but then over tightening and now talk of easing. 2022 was a down year but 2023 is looking good at the moment.
Not easy at all but if you look at the markets over our lifetimes they have gone up before and after any crashes. It takes time and patience but easy? I would disagree. We have beaten the S&P though, every year.
We have other pensions between us and we would like to use this small one to invest with. Sadly it seems we can't. This type of DB pension is dying out and I can see why people want to leave them. We certainly do!

QT has barely scratched the surface in the US. Going to take over a decade for the Fed to shrink it's balance sheet. 

You may be right there, Hoenir. As they cut rates then many stocks, especially those that were hammered due to high interest rates, will climb strongly...as has happened a little this week / month already. Best.

Prism

scoobyjones1 said:

Hoenir said:

scoobyjones1 said:

Prism said:

scoobyjones1 said:

 I would like to think we can grow more than 5% ourselves because we HAVE already done so for 10 years and the amount she is being offered per annum is not really going to help her much.

The thing is that the last 10 years have been incredibly easy investing, where making 10-15% returns with almost no effort has been easy. We haven't had a real crash for 15 years now, and that time we all got bailed out with QE. Are you so sure that will happen next time. The previous bad time, many of us can barely remember, was 2000 into a small recovery followed by 2008 - almost a decade and a half of below inflation equity returns. All of this could happen again. Wouldn't it be nice to have a small DB pension paying out if it does.

It has not been easy. Trump caused a big pullback when he almost caused WWIII blowing up Iranian Generals...we pulled out of the market at that time. Covid caused a massive crash but some stocks boomed...then crashed after Covid, then we had Ukraine which caused a huge spike in oil prices with supply chain issues...we have had the Fed flooding the market with cash but then over tightening and now talk of easing. 2022 was a down year but 2023 is looking good at the moment.
Not easy at all but if you look at the markets over our lifetimes they have gone up before and after any crashes. It takes time and patience but easy? I would disagree. We have beaten the S&P though, every year.
We have other pensions between us and we would like to use this small one to invest with. Sadly it seems we can't. This type of DB pension is dying out and I can see why people want to leave them. We certainly do!

QT has barely scratched the surface in the US. Going to take over a decade for the Fed to shrink it's balance sheet. 

You may be right there, Hoenir. As they cut rates then many stocks, especially those that were hammered due to high interest rates, will climb strongly...as has happened a little this week / month already. Best.

Its actually the opposite. QE has been the main reason that stocks have risen strongly over the last 15 years. QT is the reverse of that, which removes money from the system. Its a headwind for stocks and bonds. 

scoobyjones1

Dazed_and_C0nfused said:

Noted, good points but we are trying to transfer from one pension pot to another...no tax bill there. Then when you go into drawdown from your SIPP you pay tax as you go. 

Again you seem to be lacking understanding of what a DB pension actually is.

There is no "pot", there is a promise to pay £x/year for the rest of her life.  Often with spouses pension if she does before you.

than get a small amount (£166) every month for 20/30 years

It's only £166/month in year 1 though.  It will be more in year 2.  And more again in year 3 and so on.

This type of DB pension is dying out and I can see why people want to leave them. We certainly do!

They may well by dying out but I think you will find there are more people trying to get one (local government, NHS, civil service, teachers jobs etc) than there are people wanting to transfer out of them.

Dazed_and_C0nfused said:

Noted, good points but we are trying to transfer from one pension pot to another...no tax bill there. Then when you go into drawdown from your SIPP you pay tax as you go. 

Again you seem to be lacking understanding of what a DB pension actually is.

There is no "pot", there is a promise to pay £x/year for the rest of her life.  Often with spouses pension if she does before you.

than get a small amount (£166) every month for 20/30 years

It's only £166/month in year 1 though.  It will be more in year 2.  And more again in year 3 and so on.

This type of DB pension is dying out and I can see why people want to leave them. We certainly do!

They may well by dying out but I think you will find there are more people trying to get one (local government, NHS, civil service, teachers jobs etc) than there are people wanting to transfer out of them.

"They may well by dying out but I think you will find there are more people trying to get one (local government, NHS, civil service, teachers jobs etc) than there are people wanting to transfer out of them."

Are these DB Pensions still available? I know that my Wife's firm stopped using them decades ago. Surely a DC pension or maybe stake holder type is better. I don't know... And with her one they changed the rules...and not to the benefit of the pensioners. Hence people scrambling to get out. But we are getting off topic... all the best.

scoobyjones1

Prism said:

scoobyjones1 said:

Hoenir said:

scoobyjones1 said:

Prism said:

scoobyjones1 said:

 I would like to think we can grow more than 5% ourselves because we HAVE already done so for 10 years and the amount she is being offered per annum is not really going to help her much.

The thing is that the last 10 years have been incredibly easy investing, where making 10-15% returns with almost no effort has been easy. We haven't had a real crash for 15 years now, and that time we all got bailed out with QE. Are you so sure that will happen next time. The previous bad time, many of us can barely remember, was 2000 into a small recovery followed by 2008 - almost a decade and a half of below inflation equity returns. All of this could happen again. Wouldn't it be nice to have a small DB pension paying out if it does.

It has not been easy. Trump caused a big pullback when he almost caused WWIII blowing up Iranian Generals...we pulled out of the market at that time. Covid caused a massive crash but some stocks boomed...then crashed after Covid, then we had Ukraine which caused a huge spike in oil prices with supply chain issues...we have had the Fed flooding the market with cash but then over tightening and now talk of easing. 2022 was a down year but 2023 is looking good at the moment.
Not easy at all but if you look at the markets over our lifetimes they have gone up before and after any crashes. It takes time and patience but easy? I would disagree. We have beaten the S&P though, every year.
We have other pensions between us and we would like to use this small one to invest with. Sadly it seems we can't. This type of DB pension is dying out and I can see why people want to leave them. We certainly do!

QT has barely scratched the surface in the US. Going to take over a decade for the Fed to shrink it's balance sheet. 

You may be right there, Hoenir. As they cut rates then many stocks, especially those that were hammered due to high interest rates, will climb strongly...as has happened a little this week / month already. Best.

Its actually the opposite. QE has been the main reason that stocks have risen strongly over the last 15 years. QT is the reverse of that, which removes money from the system. Its a headwind for stocks and bonds. 

That's not what I said. Yes many stocks have previously benefitted from the QE and floods of cash dished out by the Fed,,,but as rates rose, as the Fed raised rates to this high level then many businesses that were reliant on consumers needing finance...such as Autos, or maybe solar power or other larger commodities, those stocks have been hammered but will come back as the Fed cuts rates again, thus lowering interest rates and finance costs.
Don't forget also that there are still huge amounts of Covid cash on the side lines, waiting to be used. Less of this will go into bonds because bond rates are falling so more will go into stocks. I feel 2024 will be another good year for the markets, especially smaller cap stocks and the Russell. Good luck with yours.

QrizB

scoobyjones1 said:

"They may well by dying out but I think you will find there are more people trying to get one (local government, NHS, civil service, teachers jobs etc) than there are people wanting to transfer out of them."

Are these DB Pensions still available? I know that my Wife's firm stopped using them decades ago. Surely a DC pension or maybe stake holder type is better. I don't know... And with her one they changed the rules...and not to the benefit of the pensioners. Hence people scrambling to get out. But we are getting off topic... all the best.

On the whole, the DB pensions that remain available are much better deals than a DC one.

The reasons that many emloyers (including mine) closed their DB schemes was that they were too expensive to the employer, not because of any widespread preference for DC schemes among the employees.

Take the UK civil service Alpha scheme as an example, and consider an employee earning £40k pa.

The employee will contribute 5.45% of their salary, £2180 a year. In exchange they will earn a pension of 2.32% of their salary, £928 a year. Put another way, their contribution would pay for less than three years of their pension.

To buy a £928 index-linked annuity (a reasonable analogue to the Alpha scheme pension) would cost a 67-year-old something like £20000. That's ten times the employee's pension contribution.

OK, you might say that civil service pensions are famously generous. Let's use a private sector one as an example. There was a poster a few months back who was asking if he should bay 16% of his salary in order to keep his employer's pension that paid out 1.67% of his salary. So the pension was 1/10th of his contribution. The overwhelming opinion of the board was yes, it's still less than half the price of the equivalent annuity.

Pat38493

scoobyjones1 said:already done so for 10 years and the amount she is being offered per annum 

I am sure you are right, re the advice we would be given. Read the whole thread and hopefully you will see her reasons. In a nutshell, this is a bonus pension, a small amount she did not even know was there until recently. It was not part of our pension planning and she would rather have access to the amount (£60k) now, in her long established SIPP, aged 60 than get a small amount (£166) every month for 20/30 years. We feel we can make it grow and use it in the way we have other investments and savings. This would help us now...while we have some health and mobility left! We will be fine later on...we already have that put by and may even eventually get our State Pensions! You never know...
Also..this DB fund has recently changed it's rules so that it "grows" at inflation level but capped at 5% max. So a lot of members are trying to transfer out but seem to be finding it very expensive....and they have much larger pots, most of them. 

So if this is a bonus that she didn't know she had before, it seems to be causing a lot of stress for a bonus.  If you want the £60K to spend now.....

All other things equal, by putting this DB pension into payment at £3K per year or whatever it was, she will reduce the need to take out that money from her other pensions each year.  As such, if your calculations are that you had enough even before you found out about this pension, you can simply take out £60K from the existing DC funds that you have and spend it now.  That's the bonus.  You won't need that £60K in future as it would have been funding the amounts that are now covered by your DB.  In that way you have done a "theoretical" transfer and withdrawal of the money  

Sorted! 

However, as DunstonH said you seem to be assuming that investments returns will continue to deliver what they have done during the last 10 years - the last 10 years have been unusually good compared to the previous 100 years, so it might not be a good benchmark to assume that this will continue for another 30 or 40 years.  It has not done that in the past.