Yet Another DB Transfer Question

Albermarle

leosayer said:

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

Also what I was going to suggest.

OP - If you take a DB pension early, the annual income is reduced, but you get the pension for longer. If you live to an average age it usually works out about the same. 

Qyburn

Pat38493 said:

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.

Is that a consideration? The advice fee will be incurred where the answer is yes or no. 

Pat38493

Qyburn said:

Pat38493 said:

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.

Is that a consideration? The advice fee will be incurred where the answer is yes or no. 

That's an interesting question - if the adviser looks at whether the pension should be transferred out, after already deducting the committed charges that they are going to charge, you are right.

However, if you then looked at whether you would have been better off if you had never engaged the adviser in the first place because you are already £5K down, it's a different story?

theoretica

As others have asked, what is the reduction for taking your DB pension early?  How much of that reduction would be covered by the extra annual payment from this smaller pension?

Pat38493

theoretica said:

As others have asked, what is the reduction for taking your DB pension early?  How much of that reduction would be covered by the extra annual payment from this smaller pension?

It is specific to the scheme so each scheme will have its own calculations based on the rules.  As a rough rule of thumb I think it's about 4-5% per year taken early.  To get the numbers you'd have to ask for a quote from the provider - unfortunately the calculations are pretty opaque and it's very difficult to get details of how and why the calculations are done that way, and the early retirement reduction factors with some schemes can change from one year to the next according to the actuaries calculations.

What we can say is that the pension trustees have a duty to (atttempt to) ensure that you are not penalised unduly from taking the pension early, so in theory, you should get roughly the same benefit from the pension if you live to the expected average longevity of the members on that scheme.