Pension available at 50 - but need some advice

1977Midlifer

Pension available at 50 - but need some advice

Hi there, I am 47 years old and have just taken voluntary redundancy.  Under my scheme rules I qualify for a DB Pension of £25k at age 50.  I also have a DC Pot of £150k which I can take as the cash free element of the DB scheme.

I am trying to figure out what options I have instead of taking the £25k at 50.  I already know I can defer payment to a later age (as I may still be working at 50) and the pension would increase by circa £1200 each year I defer plus inflation (so if I defer to 55, I will receive roughly £31k per year plus inflation).

The areas I need advice on are

- all things considered, is it better to take £25k at age 50 or just hold off as long as I can and take eg £31k at age 55?  It’s not much of a difference but I’m thinking ahead into retirement where that extra £6k per year might make a difference (and if I die, wife would get half of £31k rather than half of £25k)

- Is there any option to transfer the entire pot to a DC fund 

- if so, what sort of CETV would you get for a pension that is payable from age 50 (all the calculators online assume retirement from age 57+- I can’t seem to find one for this scenario)

- if I did like the CETV and transfer out, would I then lose the age 50 access age as I am no longer subject to the scheme terms (this isn’t necessarily a bad thing as I have cash to see me though to 57)

- would an IFA even consider this discussion or would I have to wait a few years and then make some equities 

I have other cash and assets so I’m thinking if the CETV was £1m or so, I might be better just taking it and adding it to what I’ve got and investing myself (I invest already so well versed on what is needed)

Thanks in advance for any advice

artyboy

I assume you know the hoops you'd have to jump through in terms of getting very expensive advice on transferring out of a DB scheme?

And this sounds on the face of it to be a very good pension, so you would probably have to go the 'stakeholder route' off the back of a negative recommendation. 

If it was me, I'd defer until I was actually ready to retire, build up the DC pot and then enjoy the security of the DB income...

Gary1984

As above your pension offers great security.  Personally I'd rather not be managing a £1m investment portfolio for the rest of my life knowing if I got it wrong I could run out of money, or end up with a lower income than the one I turned down. You could get an IFA to manage it for you but then that's more fees, after you've paid chunky fees to get it transferred to begin with. Transfer values have come down a lot in recent times as well.

If it were me I'd opt for simplicity and security of just commencing the pension when you're ready to stop working. In the meantime time keep contributing to your new employers scheme and build up your pot as much as you can before you call it a day.

You're in a great position though. You could always start drawing and work part time for a while as a transition into retirement.

Brie

Are you planning on working again, even part time?  If you are getting £25k from a pension then you'll very quickly get into the higher tax bracket even working pt on a fairly low wage.  

Marcon

1977Midlifer said:

- Is there any option to transfer the entire pot to a DC fund 

- if so, what sort of CETV would you get for a pension that is payable from age 50 (all the calculators online assume retirement from age 57+- I can’t seem to find one for this scenario)

You have a statutory right to transfer out of a pension scheme until you are within one year of reaching the scheme's Normal Retirement Date. 

Absolutely not a clue what the CETV would be - you'd need to ask the scheme. That's the only way to have any idea, BUT bear in mind that a CETV doesn't usually include any allowance for discretionary benefits, such as retiring early at 50 without a reduction being applied. It's not clear from your question if the pension is payable without reduction? If so, you'd lose out big time by transferring out if, as expected, the CETV makes no allowance for this huge benefit.

Albermarle

- would an IFA even consider this discussion or would I have to wait a few years and then make some equities 

An IFA with the right qualifications would consider it for a large fee of course. ( £10K?)
They would almost certainly give a negative recommendation to transfer, as this would be your only source of guaranteed retirement income, apart from the state pension in 20 years time. Plus CETVs have drooped a lot in the last couple of years.
This means you can still transfer but hardly any pension providers will accept the transfer, as they are frightened of litigation down the line.
It seems there are still a couple of options open for 'insistent clients' though.

dunstonh

Plus CETVs have drooped a lot in the last couple of years.

By a lot, we are talking around half their value compared to the peak in November 2021.

Cus

dunstonh said:

Plus CETVs have drooped a lot in the last couple of years.

By a lot, we are talking around half their value compared to the peak in November 2021.

But that's ok as the cost to fund the promised amount has also halved..