Transfer of DB pension to SIPP - no brainer?

Aretnap

older_and_no_wiser said:

The pension benefits at date of leaving in 1997 is £2,400 a year - not index linked as far as we know.

As far as you know? First thing you should do is find out. Pointless trying to make decisions based on figures that might or might not be correct.

As the others have said, it seems unlikely that her pension has not increased since 1997 and even less likely that she would be offered a CETV of £134K for a £2400 pa pension so the likelihood is that she's mistaken about the figures and/or the index linking.

Dazed_and_C0nfused

Aretnap said:

older_and_no_wiser said:

The pension benefits at date of leaving in 1997 is £2,400 a year - not index linked as far as we know.

As far as you know? First thing you should do is find out. Pointless trying to make decisions based on figures that might or might not be correct.

As the others have said, it seems unlikely that her pension has not increased since 1997 and even less likely that she would be offered a CETV of £134K for a £2400 pa pension so the likelihood is that she's mistaken about the figures and/or the index linking.

Spot on.  That £2,400 could easily be a pension of over £5k now.

sausage_time

Hi @older_and_no_wiser - I moved this to the Pensions, annuities & retirement planning board.

artyboy

Yeah... that CETV is way off for a £2400 non-indexed pension. Using the statutory revaluation figures as a guide, I'd go with others in suggesting this will have more than doubled as of the end of last year (figures attached) 

https://www.legislation.gov.uk/uksi/2024/1174/article/2/made

Cobbler_tone

If the initial numbers posted were facts, it would be a no brainer. Hopefully you have read enough since to realise that they won't be accurate. The transfer value will be a bit lower and your pension will be higher, so hopefully some welcome news!
Be interested when you've requested the updated figures.

Qyburn

Hoenir said:

The CETV being the amount required to purchase equivalent benefits on the open market. 

Isn't the CETV more closely related to what the scheme expects it will cost to provide the defined benefit? Or to put it another way the amount they'd save if they didn't have to.

I'm not sure there's a requirement to make sure CETV is enough to obtain the same benefits elsewhere.

Marcon

Hoenir said:

The pension benefits at date of leaving in 1997 is £2,400 a year - not index linked as far as we know. 

Pointless speculating without first reading the Pension Scheme Rules. 

The numbers you've quoted suggest otherwise. The CETV being the amount required to purchase equivalent benefits on the open market. The pension scheme isn't going to hand out money willy nilly. 

A CETV certainly doesn't provide the amount needed to buy equivalent benefits on the open market. It reflects the projected cost to the scheme of providing those benefits - which will normally be far lower, not least because there is no 'commercial mark up' on pensions provided by an employer's trust-based occupational scheme.

Marcon

older_and_no_wiser said:

My partner (age 57) has a DB pension scheme from an old employer which looks like a no brainer for her to transfer into a DC SIPP. Am I right with my thoughts below? 

The pension benefits at date of leaving in 1997 is £2,400 a year - not index linked as far as we know. My partner thinks this will still be the annual pension she will get age 60.

The guaranteed transfer value as at March 2024 was £134,000.

This sounds like it makes more sense to transfer the guaranteed amount into a SIPP. Maybe the annual benefit of £2,400 is not up to date? I'll ask her to get an up to date quote on this. 

However, if she's getting £2,400 for, say, 30 years, then that's only approx £70k....much less than the transfer value. Of course there may be enhanced benefits of keeping the DB pension that she's not aware of. 

There is endless whinging (especially on this board) from people who object to being 'forced' to take advice they 'don't need because I know what I want to do'. 

Your post is a prime example of just why advice is vital for so many people who see a CETV, are dazzled by the figure and would otherwise (apparently) be quite happy to transfer without a clue what they were giving up.

Leavers on or after 1 January 1991 receive revaluation on the whole of their defined benefit pension scheme, so whatever the annual pension is projected to be, it quite definitely isn't a figure quoted more than a quarter of a century ago.

hyubh

older_and_no_wiser said:

The pension benefits at date of leaving in 1997 is £2,400 a year - not index linked as far as we know. My partner thinks this will still be the annual pension she will get age 60.

'Revaluation' before retirement is a different thing to 'pension increases' once in payment. There was no statutory requirement to increase pensions in payment apart from any post-88 GMP component before 1997. However as Marcon notes, leaving in 1997 is well under the bar for statutory revaluation for 'excess'. I make that around 60% (maybe 66% depending on exact dates) for the whole period.

That said, chances are that the £2.4K involves a GMP component. If so, depending on when exactly your partner left active membership, that may well carry a fixed revaluation rate of either 7% or 6.25% pa until the old state pension age. It would then increase in payment by inflation capped to 3%, assuming it was all post-88 GMP.

Albermarle

When you have got the correct figures and if she still wants to go ahead, then I  suggest you type 'DB transfer' into the search box at the top of the page and read the numerous threads on the subject.