Transfer out or leave in, thoughts please

BlackCat68

Yes I got a state benefit pension forecast of £230.25 a week, £1,001.18 a month, £12,014.12,  It says can't do anything to improve it, its the maximum as I've worked and paid NI since the age of 16.  I'll have to look into all of the other things.  I feel overwhelmed with it all, its so much to consider

Bostonerimus1

Let's make sure we have some numbers right. So:

What is your DB pension CETV today?

What lifetime income will your DB pension provide and what are the terms ie index linked, single or dual life and age of participants?

Let's start there and if enhancements are possible we can think about those later.

BlackCat68

The CETV is £214,469, I've emailed the Scheme Administrator to ask what the increases will be in place when the pension is in payment and to see how/if my pension has revalued in deferment.

Bostonerimus1

BlackCat68 said:

The CETV is £214,469, I've emailed the Scheme Administrator to ask what the increases will be in place when the pension is in payment and to see how/if my pension has revalued in deferment

£214,469 should get a 65 year old a single life RPI income of around 11.5k, more with health related enhancements. So what is your DB benefit if you were to take it today?

jimjames

BlackCat68 said:

Can anyone help me understand why final salary pension schemes are so good and shouldn't be transferred out of?  I can't see what the advantage to me is

Because it's a guaranteed income with guaranteed increases for life. If you get money out as a transfer and invest it then you are at the mercy of the markets so it can go up and down all the time, potentially by as much as 50%. Even if you keep as cash then you will drain the money faster - over the last 15 years when interest rates were under 1% you'd have needed to eat into the capital to supplement your income which would have decreased year on year. If you have a very limited life expectancy and no spouse then there may be a case for getting the transfer.
You've also given a quote for the payment of the pension "now", is that your normal retirement age? If not then it will have been reduced to take account of being paid earlier and for longer.

BlackCat68

I'm not planning on investing I'm purchasing an annuity.  I'm 57 now.  My dad and everyone his side of the family died aged 58 with heart issues.  On my mum's side, mum and her brother both died of heart related issues. I was diagnosed with cardiac problems last year and have a number of comorbidities.  My fear may be slightly irrational, but if If I die before normal pension age/before taking this pension this is lost. I've checked with the pension administrator and they have confirmed that there is no death benefit, apart from when the pension is being drawn.  I don't understand why, but this is what I have been told

LHW99

Have you looked into drawing the DB pension early? It would be reduced because it will (probably) be paid for more years, but will still likely increase from year to year by an amount determined by the scheme.

Even with your own health problems, you may still live till not far off the average (although no one knows of course) as medicine is improving all the time, and is likely better now than when family members suffered.

megacatt

BlackCat68 said:

I really don't understand why the scheme has provided me a pension forecast, saying if I were to take it now I would get just under £6k p.a. and £45k lump sum.  Surely they'd need to tell me what the 20 years deferment have done to the pension?  There is a small spouses pension but I don't have a spouse and they have confirmed there is no death benefit for her.  I feel like I'm being really stupid here

You say that's the quotation if you retire now.  You're 57 so that will presumably include a hefty reduction for retiring early.  That might explain the apparent lack of revaluation over the 20 years.  The early retirement reduction could be around 40% (depending upon scheme rules, normal retirement date for the scheme and other stuff that I don't understand).