DB Pension

elphindoll

I recently found out that I have an old DB pension scheme (worked for the bank 38 years ago), which has a transfer value of approx 83k. The income from this is detailed as approx 1k per annum from retirement age. I am presently 58 years old, how can it be beneficial for me to keep this as a DB pension when I obviously cannot live until I am 138 years old - to get 1K out of this for the next 80 years to empty the pot ? I know it is very difficult to transfer this cash into my private pension, most will not look at arranging this for me as current regulations discourage this. Help appreciated.

pterri

elphindoll said:

I recently found out that I have an old DB pension scheme (worked for the bank 38 years ago), which has a transfer value of approx 83k. The income from this is detailed as approx 1k per annum from retirement age. I am presently 58 years old, how can it be beneficial for me to keep this as a DB pension when I obviously cannot live until I am 138 years old - to get 1K out of this for the next 80 years to empty the pot ? I know it is very difficult to transfer this cash into my private pension, most will not look at arranging this for me as current regulations discourage this. Help appreciated.

I think I’d be looking to extract that well, one thing though. The £1k would have some inflation indexation? 

p00hsticks

First question is - are you sure about the figures ?

CETV values have dropped significantly over the last few years, so how recent is that £83k value? 
There is no pot of money with a DB pension - it is a promise to pay you a certain sum annual until your death. The value quoted is how much the pension scheme is prepared to offer you at a particular time in order to get rid of the liability from its books. 

And is that income the projected value as at the date you left, what is currently expected at retirement age or something in between ? How does it increase annually ? 
 

Albermarle

Is the income of £1000 pa what was stated at the time of your leaving that employment.? If so it will have been revalued each year, usually in line with inflation, so in reality it will be maybe double that by now. Annoyingly most DB pension schemes do not keep you updated of this figure and you will only know for sure when you apply to take the pension. Although if you know the scheme rules you can approx work it out yourself.

Then you have to take into account that most DB pensions are also uprated each year when you are taking them.

elphindoll

Albermarle said:

Is the income of £1000 pa what was stated at the time of your leaving that employment.? If so it will have been revalued each year, usually in line with inflation, so in reality it will be maybe double that by now. Annoyingly most DB pension schemes do not keep you updated of this figure and you will only know for sure when you apply to take the pension. Although if you know the scheme rules you can approx work it out yourself.

Then you have to take into account that most DB pensions are also uprated each year when you are taking them.

The income of 1k per annum was 'pension at leaving date'. Thank you, I can ask what today's annual pension would be - this may change the outlook.

elphindoll

p00hsticks said:

First question is - are you sure about the figures ?

CETV values have dropped significantly over the last few years, so how recent is that £83k value? 
There is no pot of money with a DB pension - it is a promise to pay you a certain sum annual until your death. The value quoted is how much the pension scheme is prepared to offer you at a particular time in order to get rid of the liability from its books. 

And is that income the projected value as at the date you left, what is currently expected at retirement age or something in between ? How does it increase annually ? 
 

Value of 83K is today's figure - this was 130K when I first got wind of it 4 years ago.

FIREDreamer

elphindoll said:

Albermarle said:

Is the income of £1000 pa what was stated at the time of your leaving that employment.? If so it will have been revalued each year, usually in line with inflation, so in reality it will be maybe double that by now. Annoyingly most DB pension schemes do not keep you updated of this figure and you will only know for sure when you apply to take the pension. Although if you know the scheme rules you can approx work it out yourself.

Then you have to take into account that most DB pensions are also uprated each year when you are taking them.

The income of 1k per annum was 'pension at leaving date'. Thank you, I can ask what today's annual pension would be - this may change the outlook.

The following factors (first column) will show you how much it has increased by - just select your calendar year of leaving the scheme …

https://www.legislation.gov.uk/uksi/2023/1265/made

eg if you left in 1986 your £1,000 will have increased by 242.9% to £3,429.

elphindoll

pterri said:

elphindoll said:

I recently found out that I have an old DB pension scheme (worked for the bank 38 years ago), which has a transfer value of approx 83k. The income from this is detailed as approx 1k per annum from retirement age. I am presently 58 years old, how can it be beneficial for me to keep this as a DB pension when I obviously cannot live until I am 138 years old - to get 1K out of this for the next 80 years to empty the pot ? I know it is very difficult to transfer this cash into my private pension, most will not look at arranging this for me as current regulations discourage this. Help appreciated.

I think I’d be looking to extract that well, one thing though. The £1k would have some inflation indexation? 

Would you look to extract the 83K as a transfer ? I had a brief search and believe it is almost impossible to get an adviser who will help with this. There is an offer to take 25% tax free from the 83K with a reduced annual income.

p00hsticks

elphindoll said:

pterri said:

elphindoll said:

I recently found out that I have an old DB pension scheme (worked for the bank 38 years ago), which has a transfer value of approx 83k. The income from this is detailed as approx 1k per annum from retirement age. I am presently 58 years old, how can it be beneficial for me to keep this as a DB pension when I obviously cannot live until I am 138 years old - to get 1K out of this for the next 80 years to empty the pot ? I know it is very difficult to transfer this cash into my private pension, most will not look at arranging this for me as current regulations discourage this. Help appreciated.

I think I’d be looking to extract that well, one thing though. The £1k would have some inflation indexation? 

Would you look to extract the 83K as a transfer ? I had a brief search and believe it is almost impossible to get an adviser who will help with this. There is an offer to take 25% tax free from the 83K with a reduced annual income.

I understand that a lot of advisors don't take this sort of work on any more as the liability insurance they need is substantial. If you do find one they will charge a four figure sum for their advice.

Note that it isn't necessary for them to give positive advice, merely for you to have requested it, although many pension schemes apparently won't accept a transfer in  without it.

If you search previous threads on this board I think it has been said that stakeholder pensions are obliged to accept such transfers, whatever the advice says. 

dunstonh

Would you look to extract the 83K as a transfer ? I had a brief search and believe it is almost impossible to get an adviser who will help with this. There is an offer to take 25% tax free from the 83K with a reduced annual income.

Without knowing the annual income, there is no way to answer that.   Using the income at the date of leaving is not the figure you should be using.   So, it would be best if you waited until you are provided with an updated statement.

What do you mean by an offer to take 25% tax-free from the £83k?  Who has offered you this?    Is it a scam (as no one should be "offering" you that)?

Transfers are still possible.  It's just since CETVs halved from their peak back to their more typical historic range, that the number that would be deemed suitable has moved back towards the 1 in 10 cases.      

MallyGirl

elphindoll said:

Albermarle said:

Is the income of £1000 pa what was stated at the time of your leaving that employment.? If so it will have been revalued each year, usually in line with inflation, so in reality it will be maybe double that by now. Annoyingly most DB pension schemes do not keep you updated of this figure and you will only know for sure when you apply to take the pension. Although if you know the scheme rules you can approx work it out yourself.

Then you have to take into account that most DB pensions are also uprated each year when you are taking them.

The income of 1k per annum was 'pension at leaving date'. Thank you, I can ask what today's annual pension would be - this may change the outlook.

That will totally depend on your particular scheme rules - whether they revalued by CPI/RPI, whether there was a cap, was some of it GMP, all sorts.
As a very rough indicator I have an ancient final salary pension from a job I left over 30 years ago. Pension at leaving was about £600 and it is now quoting pension at 60 to be around £3,000 pa. You need to ask them for a projected income. There may even be a website for you to access the figures these days.
Note - transferring elsewhere will be difficult/expensive so maybe the best thing is just to find out the income and be glad you have something guaranteed on top of your state pension if everything else is DC