Defined Benefit Pension

MX5huggy

JoVSl said:

excuse my ignorance but i do not understand if this is my money, why can i not chose to move it at my own risk, it is not that it worth a massive amount each year and dies with me? i am single and tbh the bulk sum is needed at the moment - if i could just afford to leave it there i would - thank you i really appreciate your advice 

Because we live in a society which protects the little guy from the unscrupulous. The costs of putting mistakes right are then born by us all. https://www.bbc.co.uk/news/uk-wales-66982512.amp

Linton

JoVSl said:

excuse my ignorance but i do not understand if this is my money, why can i not chose to move it at my own risk, it is not that it worth a massive amount each year and dies with me? i am single and tbh the bulk sum is needed at the moment - if i could just afford to leave it there i would - thank you i really appreciate your advice 

A  DB pension is not "your money".  It is a promise made by your employer and implented by trustees to provide for your needs for as long as you live.. The regulators now go to great efforts to ensure that the the benefits are used appropriately. 

There were many cases in the past where someone cashed in a DB pension at their own risk  and then bitterly regretted doing so later in life, blaming the pension administrators for allowing them to do so.

dunstonh

excuse my ignorance but i do not understand if this is my money, why can i not chose to move it at my own risk, it is not that it worth a massive amount each year and dies with me? 

Currently, there is no pot of money.  What you are doing is asking to give up a range of guaranteed benefits in exchange for a pot of money.   However, in 9 out of 10 cases, the pot of money offered is not enough to make giving up those benefits worthwhile.

It is partly a nanny state but partly common sense.  Many DB pensions are hundreds of thousands or £1m+ when transferred.    Often the people with these have no investment background whatsoever.  So, they haven't experienced a stock market crash or a bonds crash.    So, when a 40% drop in the markets comes along, seeing their £1m go to £600k is very uncomfortable.     Yet, their CETVs have just had a 50% drop but they didn't see it.   The modern transparency on investments means they will see that.     And then complaints follow despite the investments doing what investments always do.

Some got blown away by the size of their CETV and values were artificially high due to low gilt yields.  They want on to blow that money quickly and then they go looking to blame someone.   

Or they complained when their funds went down from November 2021 to October 2023, when gilts had their worst period in over 100 years.       They may have made all the right noises at the point of transfer and been told of the volatility and shown examples and said they would accept it, but when it actually happened on their pot, they back tracked on that.  Often with the help of claims companies advertising on facebook and the like.

 and tbh the bulk sum is needed at the moment

Unfortunately, that doesn't help the justification to transfer.    Having alternative means and sufficient money that you do not need the DB pension income and want to pass it on as a legacy is a justification.   Not having alternative means is the exact opposite.

Brie

Have you checked the early versus retirement date possible for this?  You can likely take the pension at a reduced value at 55 and likely there would be a tax free lump sum available too.  This may be sufficient for you to get beyond what your current need for cash is.  

As for why things are so strict - just think back over the last 10-20 years when we had the pension review of advisers talking people into leaving excellent work schemes for mediocre private ones, following by the PPI issues, followed by packaged bank accounts complaints and there's likely another 5 complaints/reviews going on now.  So the financial industry is, quite rightly, being extra cautious with the FCA breathing down their necks.

LHW99

JoVSl said:

excuse my ignorance but i do not understand if this is my money, why can i not chose to move it at my own risk, it is not that it worth a massive amount each year and dies with me? i am single and tbh the bulk sum is needed at the moment - if i could just afford to leave it there i would - thank you i really appreciate your advice 

Thing is, it's not exactly "your money". You had money deducted from your salary in order to "buy a promise" of a, hopefully, increasing income when you retire.

Depending on the scheme, and its NRA (normal retirement age) you may be able to begin the pension at 55, although its likely that the income pa would be reduced for each year early you take it. Scheme rules would give some idea.

If you leave it to NRA, you may be able to swap income for more lump sum, or vice versa, although sometimes that isn't a good exchange.