Has anyone heard of this company

Kynthia

SandraBam said:

I'm getting the impression that it is not a good idea to transfer a Defined Benefit Pension into an annuity 

What does an annuity offer you that your defined benefit pension doesn't? Usually people transferring out want the lump sum for greater flexibility or inheritance reasons rather than an annuity.

Lowtrawler

SandraBam said:

I'm getting the impression that it is not a good idea to transfer a Defined Benefit Pension into an annuity 

That's a separate question and you need to overcome the first hurdle before considering it.

A defined benefit scheme will give you an income for life that will grow by the scheme rules and may also give you some additional death benefits / dependants benefits. If you wish to transfer a defined benefit scheme, the advisor will look into whether it is in your best interests and make a recommendation. 

Following this exercise, if the advice is to transfer the defined benefit scheme, you and your advisor may decide to look at what annuities are available to you if you intend to buy an annuity immediately or, more likely, they will look at how best to invest the proceeds from the DB scheme until your retirement.

If you are close to retirement and intend to use any proceeds from transferring the DB pension to buy an annuity, the advisor will consider whether this is in your best interests. For sure, some transfer values from DB schemes are generous and will permit you to replace the key benefits of the company scheme by way of an equivalent annuity and so they will take that into account.

Albermarle

A DB pension is a type of annuity, so very little logic in transferring out of the DB pension to buy an annuity.

Most people want to transfer out to a DC pension, where it will be invested but you can get your hands on it more flexibly. However the DB pension is guaranteed and clearly an invested pension may do well, or may not. So it is still not a good idea to transfer for the large majority.

Lowtrawler

Albermarle said:

A DB pension is a type of annuity, so very little logic in transferring out of the DB pension to buy an annuity.

Although a DB pension is similar to an annuity, transferring to an actual annuity might give more options e.g. 100% beneficiary benefits rather than 50% from a workplace scheme - choosing a different beneficiary from what the workplace scheme might offer etc. I have also seen schemes offering multiples of over 35 to encourage transfer and many people might be able to replace the DB scheme with an annuity at multiples of 30 or less giving them a windfall.

Pat38493

Lowtrawler said:

Albermarle said:

A DB pension is a type of annuity, so very little logic in transferring out of the DB pension to buy an annuity.

Although a DB pension is similar to an annuity, transferring to an actual annuity might give more options e.g. 100% beneficiary benefits rather than 50% from a workplace scheme - choosing a different beneficiary from what the workplace scheme might offer etc. I have also seen schemes offering multiples of over 35 to encourage transfer and many people might be able to replace the DB scheme with an annuity at multiples of 30 or less giving them a windfall.

When did you see that?  A couple of years ago this might have been the case but CETV values have gone down a lot since then.  There was a short period of time I think back in 2022 when you could often get ridiculously higt CETV values.

My impression is that for the majority of cases, transferring out of an existing DB scheme in order to buy an annuity is not going to work out well.  Fundamentally you are transferring out of a trust based arrangment, and then you want to purchase an annuity from a profit making company, so you are unlikely to get a better deal.

Notepad_Phil

Pat38493 said:

Lowtrawler said:

Albermarle said:

A DB pension is a type of annuity, so very little logic in transferring out of the DB pension to buy an annuity.

Although a DB pension is similar to an annuity, transferring to an actual annuity might give more options e.g. 100% beneficiary benefits rather than 50% from a workplace scheme - choosing a different beneficiary from what the workplace scheme might offer etc. I have also seen schemes offering multiples of over 35 to encourage transfer and many people might be able to replace the DB scheme with an annuity at multiples of 30 or less giving them a windfall.

When did you see that?  A couple of years ago this might have been the case but CETV values have gone down a lot since then.  There was a short period of time I think back in 2022 when you could often get ridiculously higt CETV values.

My impression is that for the majority of cases, transferring out of an existing DB scheme in order to buy an annuity is not going to work out well.  Fundamentally you are transferring out of a trust based arrangment, and then you want to purchase an annuity from a profit making company, so you are unlikely to get a better deal.

And one of the reasons for the high CETV values was the low interest rates at that time, which of course meant much lower annuity values then you can get now. So you'd need to have kept the transfer value somewhere safe for possibly several years before you could take advantage of today's better annuity rates.

MarkCarnage

Lowtrawler said:

Albermarle said:

A DB pension is a type of annuity, so very little logic in transferring out of the DB pension to buy an annuity.

Although a DB pension is similar to an annuity, transferring to an actual annuity might give more options e.g. 100% beneficiary benefits rather than 50% from a workplace scheme - choosing a different beneficiary from what the workplace scheme might offer etc. I have also seen schemes offering multiples of over 35 to encourage transfer and many people might be able to replace the DB scheme with an annuity at multiples of 30 or less giving them a windfall.

CETVs are calculated on what is estimated to be a cost neutral basis for the scheme...and not designed per se to 'encourage' transfer. They should not leave the rest of the scheme members worse off as a result and hence tend to have slightly conservative assumptions embedded. 
Most CETV factors are reviewed pretty regularly (monthly in the schemes I am involved in as a Trustee), and this should mean that the supposed 'arbitrage' opportunities between DB transfer values and annuity prices which you allude to above should not exist. There should be no benefit to members taking a TV just to buy an annuity, as essentially a DB is an annuity as others have said...yes some minor tweaks to options may be available but an annuity is only likely to be substantially better if you have significant health issues, and it's highly questionable whether you should be transferring out then anyway. 
The situations where it has worked is where members took CETVs a few years back, invested them in assets which outperformed long dated gilts (not difficult, even cash would do), and are NOW looking to buy an annuity. It wasn't riskless, but the odds were stacked in their favour. Unfortunately some took CETVs and 'invested' them into highly unsuitable unregulated vehicles through dubious advisers. 
Taking a CETV to go and buy an open market annuity now just doesn't make sense in almost all cases. 

GenX0212

Lowtrawler said:

Albermarle said:

A DB pension is a type of annuity, so very little logic in transferring out of the DB pension to buy an annuity.

Although a DB pension is similar to an annuity, transferring to an actual annuity might give more options e.g. 100% beneficiary benefits rather than 50% from a workplace scheme - choosing a different beneficiary from what the workplace scheme might offer etc. I have also seen schemes offering multiples of over 35 to encourage transfer and many people might be able to replace the DB scheme with an annuity at multiples of 30 or less giving them a windfall.

Agreed. Depends on personal circumstances which the OP might not want to disclose such as personal health/life expectancy but also what your own plans are. Retiring on a 40year DB can guarantee a nice stable income for life but if you have been fortunate enough then a nice Ferrari and then a generous enough income to life comfortably could equally be possible, not forgetting that 'getting hit by the double decker bus' can happen to any of us at any point....

Pat38493

GenX0212 said:

Lowtrawler said:

Albermarle said:

A DB pension is a type of annuity, so very little logic in transferring out of the DB pension to buy an annuity.

Although a DB pension is similar to an annuity, transferring to an actual annuity might give more options e.g. 100% beneficiary benefits rather than 50% from a workplace scheme - choosing a different beneficiary from what the workplace scheme might offer etc. I have also seen schemes offering multiples of over 35 to encourage transfer and many people might be able to replace the DB scheme with an annuity at multiples of 30 or less giving them a windfall.

Agreed. Depends on personal circumstances which the OP might not want to disclose such as personal health/life expectancy but also what your own plans are. Retiring on a 40year DB can guarantee a nice stable income for life but if you have been fortunate enough then a nice Ferrari and then a generous enough income to life comfortably could equally be possible, not forgetting that 'getting hit by the double decker bus' can happen to any of us at any point....

But we need to be clear here that as MarkCarnage implied, for the vast majority of normal cases, it would be mad to transfer out of a DB with the express intention of purchasing an annuity.  The situations in which this would make sense are few and far between so unless the OP gives further details, it’s more likely not one of those situations.

Lowtrawler

MarkCarnage said:

Lowtrawler said:

Albermarle said:

A DB pension is a type of annuity, so very little logic in transferring out of the DB pension to buy an annuity.

Although a DB pension is similar to an annuity, transferring to an actual annuity might give more options e.g. 100% beneficiary benefits rather than 50% from a workplace scheme - choosing a different beneficiary from what the workplace scheme might offer etc. I have also seen schemes offering multiples of over 35 to encourage transfer and many people might be able to replace the DB scheme with an annuity at multiples of 30 or less giving them a windfall.

CETVs are calculated on what is estimated to be a cost neutral basis for the scheme...and not designed per se to 'encourage' transfer. They should not leave the rest of the scheme members worse off as a result and hence tend to have slightly conservative assumptions embedded. 
Most CETV factors are reviewed pretty regularly (monthly in the schemes I am involved in as a Trustee), and this should mean that the supposed 'arbitrage' opportunities between DB transfer values and annuity prices which you allude to above should not exist. There should be no benefit to members taking a TV just to buy an annuity, as essentially a DB is an annuity as others have said...yes some minor tweaks to options may be available but an annuity is only likely to be substantially better if you have significant health issues, and it's highly questionable whether you should be transferring out then anyway. 
The situations where it has worked is where members took CETVs a few years back, invested them in assets which outperformed long dated gilts (not difficult, even cash would do), and are NOW looking to buy an annuity. It wasn't riskless, but the odds were stacked in their favour. Unfortunately some took CETVs and 'invested' them into highly unsuitable unregulated vehicles through dubious advisers. 
Taking a CETV to go and buy an open market annuity now just doesn't make sense in almost all cases. 

I think you are generally correct and more accurately describing the current market than I did. However, I did see an offer close to 35x pension early last year and the annuity tables were suggesting he could purchase an equivalent annuity for less. Given they were unmarried and did not wish to leave an inheritance, they could quote on single unprotected life. He advised a number of his colleagues had been quoted similarly generous multiples. He was actually upset because he had taken a quote a few years ago and been offered a multiple close to 50x which he had not acted on.

As others have said, in the absence of such a generous transfer value, the poster would need to have specific circumstances to make an annuity preferable to the DB scheme. This is why I was clear to say that the financial advisor will consider whether it is in their best interests to pursue that route. In most cases it will not be sensible.