Annuity or take the CETV

murphy10fs

I have descent DC pot which I intend to use drawdown income from and together with partners DB income and ISA interest and State Pension we will be comfortable during retirement. we are both 56, and retiring in the next year.

I also have a DB pension from an old employer which is worth to me £4500 per annum as an annuity (increasing with inflation) plus a £24000 TF lump sum.

The CETV of this DB pension is £127000.

My initial thought is to take the CETV, and use it as drawdown income, being optimistic about future growth/interest I think this would be a better option for me, as I'd hope to achieve a £4.5K income from the £127K each year without drastically decreasing the £127 pot. 

If anything we to happen to me in the next 10 years, the pot would still be there for partner and children.

In order to change this DB to a CETV I must get FA to advise whether this is a good idea or not, so I will speak to one. I'm being quoted £2K plus for this service.

What do people think, annuity or CETV? What would you do?

flaneurs_lobster

You need an IFA not a FA. Who is quoting you £2k (even with a "+"). Triple that number at least.

I'll let others explain why it's hard to do what you suggest (and rightly so).

chuffinnora

Also if you did manage to take the CETV you'd only benefit by £103k as it stands today. Would that be enough to replicate £4.5k indexed linked income and provisions for your spouse if you die early? 

molerat

As above, "2K+" is extremely optimistic for the fee.  In good health and with a partner and family it is unlikely you would receive a positive recommendation which would limit your options on transfer - the existing scheme is likely guaranteed to look after your dependents if anything happens to you.  Loads of posts similar to yours on here, do a bit of reading and most of the answers to your thoughts will crop up.

SVaz

Has anyone *ever* come back on here who has managed to transfer their DB?
I remember plenty of talk of transferring to a Stakeholder over the last few years but I can’t remember anyone actually doing it. 

Marcon

murphy10fs said:

If anything we to happen to me in the next 10 years, the pot would still be there for partner and children.

...and if you aren't married, subject to IHT after the expected changes come in from 2027.

murphy10fs said:

What do people think, annuity or CETV? What would you do?

But nobody here IS you, so what anyone here would do is totally irrelevant.

Have a browse on this forum and read some of threads about transferring out of a DB scheme.

SVaz said:

Has anyone *ever* come back on here who has managed to transfer their DB?
I remember plenty of talk of transferring to a Stakeholder over the last few years but I can’t remember anyone actually doing it. 

Just became people haven't posted here doesn't mean it isn't being done, and I've certainly seen it happen more than once. The situation is unchanged: stakeholder pensions must accept any transfer from a UK registered pension scheme. If the transfer value is £30K+ and the scheme has safeguarded benefits, then advice is mandatory before the ceding scheme can pay over the transfer.

flaneurs_lobster

SVaz said:

Has anyone *ever* come back on here who has managed to transfer their DB?
I remember plenty of talk of transferring to a Stakeholder over the last few years but I can’t remember anyone actually doing it. 

Vague memory of someone doing so but it was an amount only just exceeding £30k and it was pursued as a "point of principle that I should have access to my money how I want" rather than other considerations. 

dunstonh

My initial thought is to take the CETV, and use it as drawdown income, being optimistic about future growth/interest I think this would be a better option for me, as I'd hope to achieve a £4.5K income from the £127K each year without drastically decreasing the £127 pot. 

That CETV would have been closer to £260k 3 year years ago.    It may have been viable to transfer it on the basis you are looking at back then.    However, at this time, it seems unlikely.

In order to change this DB to a CETV I must get FA to advise whether this is a good idea or not, so I will speak to one. I'm being quoted £2K plus for this service.

2k seems very low for DB transfer advice.  Unless that is just the first stage of the process.  

What do people think, annuity or CETV? What would you do?

Why have you selected an annuity or transfer and not considered the scheme pension?

Marcon

chuffinnora said:

Also if you did manage to take the CETV you'd only benefit by £103k as it stands today. Would that be enough to replicate £4.5k indexed linked income and provisions for your spouse if you die early? 

Where does the £103K come from? Transfer advice is expensive, but not £24K expensive!

The CETV is £127K and that's the amount which would be transferred, assuming OP and their adviser manage to plough through the whole process before the 3 month guarantee period expires.

chuffinnora

Marcon said:

chuffinnora said:

Also if you did manage to take the CETV you'd only benefit by £103k as it stands today. Would that be enough to replicate £4.5k indexed linked income and provisions for your spouse if you die early? 

Where does the £103K come from? Transfer advice is expensive, but not £24K expensive!

The CETV is £127K and that's the amount which would be transferred, assuming OP and their adviser manage to plough through the whole process before the 3 month guarantee period expires.

Because as it stands he gets £24k LS. So with a CETV of £127k, he's really only getting 103 more than now to cover the equivalent benefit in an annuity or drawdown. Yeah the full £127k can be used but then the £24k LS is lost. Either way not a good deal. 

murphy10fs

dunstonh said:

My initial thought is to take the CETV, and use it as drawdown income, being optimistic about future growth/interest I think this would be a better option for me, as I'd hope to achieve a £4.5K income from the £127K each year without drastically decreasing the £127 pot. 

That CETV would have been closer to £260k 3 year years ago.    It may have been viable to transfer it on the basis you are looking at back then.    However, at this time, it seems unlikely.

In order to change this DB to a CETV I must get FA to advise whether this is a good idea or not, so I will speak to one. I'm being quoted £2K plus for this service.

2k seems very low for DB transfer advice.  Unless that is just the first stage of the process.  

What do people think, annuity or CETV? What would you do?

Why have you selected an annuity or transfer and not considered the scheme pension?

Sorry, I meant Scheme pension, not annuity. Thank you.