Should I 'sell' my Final Salary Pension

JPMcQueen

I have a (very) small final salary pension from a job I had whilst at college and uni. The prediction is that it will pay me an annual income of £1000 per year or I could transfer it at a value of £30k. 

Whilst everyone says final salary pensions are the best thing since sliced bread (and I'd agree if I'd worked their longer and contributed more) but I'm wondering if I wouldn't be better cashing it in for the £30 and moving this to a SIPP on the basis I still have about 15 years of working life left and that the 30k could appreciate over that time to pay more than the £1k per year currently estimated. 

Marcon

JPMcQueen said:

I have a (very) small final salary pension from a job I had whilst at college and uni. The prediction is that it will pay me an annual income of £1000 per year or I could transfer it at a value of £30k. 

Whilst everyone says final salary pensions are the best thing since sliced bread (and I'd agree if I'd worked their longer and contributed more) but I'm wondering if I wouldn't be better cashing it in for the £30 and moving this to a SIPP on the basis I still have about 15 years of working life left and that the 30k could appreciate over that time to pay more than the £1k per year currently estimated. 

If the transfer value is £30K or more you'd need to receive regulated advice at a cost of at least £5K - but the chances of finding an adviser willing to provide that advice is pretty close to zero.

Browse some of the threads on this forum about transferring a DB pension.

Voyager2002

JPMcQueen said:

I have a (very) small final salary pension from a job I had whilst at college and uni. The prediction is that it will pay me an annual income of £1000 per year or I could transfer it at a value of £30k. 

Whilst everyone says final salary pensions are the best thing since sliced bread (and I'd agree if I'd worked their longer and contributed more) but I'm wondering if I wouldn't be better cashing it in for the £30 and moving this to a SIPP on the basis I still have about 15 years of working life left and that the 30k could appreciate over that time to pay more than the £1k per year currently estimated. 

The value of that pension (and its transfer value) will also increase over the next decade. If cashing it in were free and easy, the decision would be finely balanced. Given the cost and difficulty of getting the regulated advice that you would need, I suggest that it is not worth bothering.

Does your current job have a pension scheme that would accept this as an inward transfer?

Qyburn

What does the scheme offer in terms of inflation linking?

Pipthecat

I had similar thoughts on a small DB pension of my own.  After reviewing the scheme rules and understanding the index linking, I came to the conclusion, that whilst small, it was very valuable and a complement to my more risky SIPP

kempiejon

I use mostly equity investments to fund my eventual retirement. I plan a cash balance for basic expenses, I will get an index linked pension eventually when that pension comes in I can reduce my cash holding by that amount as the pension is index linked and guaranteed.

Though if @JPMcQueen can get £30k today, invest it for 15 years and get acceptable returns there's a good chance it could yield more than £1k pa index linked until death and leave a residual legacy. However there's a chance it might not. Ask yourself do you want to take that risk?

Dazed_and_C0nfused

kempiejon said:

I use mostly equity investments to fund my eventual retirement. I plan a cash balance for basic expenses, I will get an index linked pension eventually when that pension comes in I can reduce my cash holding by that amount as the pension is index linked and guaranteed.

Though if @JPMcQueen can get £30k today, invest it for 15 years and get acceptable returns there's a good chance it could yield more than £1k pa index linked until death and leave a residual legacy. However there's a chance it might not. Ask yourself do you want to take that risk?

But it is highly unlikely to be £1k pa that is the relevant figure in 15 years time.

The op needs to clarify if the £1k is the latest revaluation or a figure estimated for 15 years in the future.  And if the latter how has that been calculated as it's unlikely the scheme administrator would have provided such a figure.

dunstonh

I have a (very) small final salary pension from a job I had whilst at college and uni. The prediction is that it will pay me an annual income of £1000 per year or I could transfer it at a value of £30k. 

Has that projection been updated to show in today's terms?
Usually, they don't get updated unless you request it or you are getting close to scheme age and they are issuing the paperwork to claim it.

£1k from 15 years ago, won't be £1k today.