Yet Another DB Transfer Question

Dyesie

I am 58 and retirement is being funded from a SIPP.  I would like to "cash-in" a small DB scheme with a CETV of £40k to provide some useful additional funding until I can access my main DB scheme at 60.  I appreciate the whole area of DB Transfers is fraught with cost and difficulty.  Has anyone done anything similar and if so what was their experience of the FA firm they used ?     

Mark_d

Why do you want to cash-in your DB pension?  This defeats all the good points about DB pensions. Why not start drawing down on your SIPP?

Dyesie

I am but its running out ! Retirement is great but proving expensive.  Would benefit from the money now rather than a largely immaterial £3kpa later when I already have a main DB scheme paying more than enough.  Obviously means I am not taking on any investment costs or risks.     

Marcon

Dyesie said:

I am 58 and retirement is being funded from a SIPP.  I would like to "cash-in" a small DB scheme with a CETV of £40k to provide some useful additional funding until I can access my main DB scheme at 60.  I appreciate the whole area of DB Transfers is fraught with cost and difficulty.  Has anyone done anything similar and if so what was their experience of the FA firm they used ?     

Be aware that advice (which is mandatory because your transfer value is over £30K) is likely to cost at least £5K or more.

Other people's experiences aren't relevant. Whatever the advice says, you are still at liberty to transfer to a scheme which will accept a transfer. Even against advice, a stakeholder pension must do so.

If you already have the CETV, then the clock is ticking - it is only guaranteed for 3 months, and an adviser will need all that time to provide the advice. 

Dazed_and_C0nfused

Dyesie said:

I am but its running out ! Retirement is great but proving expensive.  Would benefit from the money now rather than a largely immaterial £3kpa later when I already have a main DB scheme paying more than enough.  Obviously means I am not taking on any investment costs or risks.     

Is a one off £40k (possibly just £35k after fees) worth giving up £3k/year for?

Especially when that £3k could be paid for 30+ years.

CETV multiple of 13.33 doesn't look good in the first place either.

What inflation protection does the £3k have?

MallyGirl

Maybe ask if it can be accessed earlier and what the maximum tax free lump sum would be. Throwing such a large proportion of it away to get the necessary advice seems bonkers

xylophone

Your post from two years ago

https://forums.moneysavingexpert.com/discussion/6340207/short-term-drawdown-investment-risk

Been lurking here awhile and I'm amazed at the number of people taking their time to offer very informed insight to other peoples pension questions.  So here's my starter for 10.  Hoping its a simple one.  Im 57 and will finish work at least for now, at the end of March.   At 60 I can access my DB pension which is more than enough for me to survive on.  In the meantime (57-60years) I plan to use my Aviva DC pension, squander my tax free cash before drawdown on the remaining £120k over the the next 3 years.     

As I understand it Mrs D is contributing to household finances and you had a  tax free lump sum  of £40,000 to cover (say) year one and 

£120,000 to cover the following two years.

Retirement must indeed be proving expensive!

And if you did transfer out and  "cash in" how much tax would you pay on the £30,000 remaining after the PCLS?

Are you sure that the DB from age 60 is going to be "more than enough"?

And have you checked your state pension forecast?

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

dunstonh

 Has anyone done anything similar and if so what was their experience of the FA firm they used ?     

Advice is not formed based on a couple of lines of text.  But based on what you have said so far, I can see no justification.

I am but its running out ! Retirement is great but proving expensive.

That is a serious blocker for advice to transfer a DB scheme.   Giving up a secure annually increasing income for life to blow it quickly is a no go.

  Would benefit from the money now rather than a largely immaterial £3kpa later when I already have a main DB scheme paying more than enough. 

You have contradicted yourself. First, you say money is running out, then you say you have a main DB scheme paying more than enough.     

"A largely immaterial £3k" would pay you more in less than 10 years than paying transfer costs and drawing it as a lump sum.     If you live to around 88, it would have paid out £127,138, assuming an annual 3% increase.

Dyesie

Thanks guys for taking the time to come back on this.  All fair points and certainly food for thought.  

To clarify, I largely retired in 6/2022 and have been living off the £120k in my SIPP until  9/25 when I am 60 and can access my main DB pension.  After using some of the SIPP money to pay off my remaining loan it works out around £35k pa.  So yes retirement is proving expensive but maybe not as much as it originally appeared.  £40k before advisor costs now would be useful, rather than £3kpa in 2031 which is just about the time I would expect to get an £11k pa state pension (yep Ive checked).  

None of this contradicts the key message that £3k pa indexed would quickly exceed any immediate lump sum and ultimately pay out far more.  Hmmm think I will dwell on this for a while.... I've little appetite for the advisor process or costs.   

Pat38493

Dyesie said:

Thanks guys for taking the time to come back on this.  All fair points and certainly food for thought.  

To clarify, I largely retired in 6/2022 and have been living off the £120k in my SIPP until  9/25 when I am 60 and can access my main DB pension.  After using some of the SIPP money to pay off my remaining loan it works out around £35k pa.  So yes retirement is proving expensive but maybe not as much as it originally appeared.  £40k before advisor costs now would be useful, rather than £3kpa in 2031 which is just about the time I would expect to get an £11k pa state pension (yep Ive checked).  

None of this contradicts the key message that £3k pa indexed would quickly exceed any immediate lump sum and ultimately pay out far more.  Hmmm think I will dwell on this for a while.... I've little appetite for the advisor process or costs.   

As others have pointed out, you will have to take advice which will probably cost 5K or more to get anywhere, and the advice may well be negative in which case you will have to jump through a few hoops to force a transfer.

The advice will very likely be negative if your opening gambit to the IFA is along the lines that you need to cash in you DB pension as you are running out of DC assets.  On the other hand if you can argue that the pension is not needed because there is plenty of other provision it might be a better argument, but even then given the proportion of the value that would go on one off advice charges I would still be surprised if it was a positive recommendation.

Another option could be to put the pension into payment early and take the lump sum.

leosayer

Why not start your other DB pension earlier than age 60?