Drawdown Pensions

Aylesbury_Duck

https://forums.moneysavingexpert.com/discussion/6671080/drawdown-pensions

And to add to the comments along similar lines, you might turn out to be one of those people who posts here in a few years' time to complain that you hadn't realised you were giving up an annual income for life that was protected from inflation, and the market slump that's happened since has taken 30% off the value of the pension you want to draw from.

Linton

https://forums.moneysavingexpert.com/discussion/6671080/drawdown-pensions

The money is not yours - there is no bag of gold with your name on it. What you own is the right to receive an ongoing income until death according to the rules of the DB scheme to which you signed up to. It may be the case that the scheme trustees are prepared to give you a pot of money in exchange for you relieving them of the obligation. The size of that pot is determined by what the cost would be to them of providing you with the ongoing income. There is no link to what you or your employer paid in.

If they just paid out there is a danger that if you discovered that the lump sum is less valuable than the ongoing income you could sue the scheme for redress. That is one reason why IFAs are involved - acting on their advice moves the possible liability to them. But their insurers dont like the risk either and so charge high premiums to cover that sort of business.

BikingBud

https://forums.moneysavingexpert.com/discussion/6671080/drawdown-pensions

How much do you expect to need in retirement? What percentage of this is covered by the current commitment for life (index linked) DB payout? What is your state pension forecast? Are you short or do you have the luxury of excess?

How much does your partner expect to need in retirement? How do you currently expect to provide this?

What age are you both? Could be DB is paid at full rate for 20- 30 years or full for 5 years + 50% for 25 years or if both killed in a RTC full for 2 years then nothing or anything in between

Put the starting figures into a spreadsheet and index for 2% and see what the total value will be over your life expectenacy. Can you do that self help or in a DC fund with no risk?

Don't consider it as a cash pot, it isn't.

Consider it as pay for life with bonus of 50% paid to your partner as survivor benefits.

artyboy

I'm quite surprised that there is still a regular stream of these threads, given the (relatively) recent collapse in CETV values.

I mulled over a transfer about 5 years ago, when my £2k deferred DB could have been bought out for close to £100k - that was a pretty decent multiple. But even then I left it alone. No idea what the CETV on that would be like today - half maybe?

QrizB

I mulled over a transfer about 5 years ago, when my £2k deferred DB could have been bought out for close to £100k - that was a pretty decent multiple. But even then I left it alone. No idea what the CETV on that would be like today - half maybe?

Per the current best buy table, £100k would buy a 65-yo an RPI-linked single-life annuity of about £5400 pa with a 5-year guarantee.

A £2k annuity on those terms would be worth about £37k.

Albermarle

when my £2k deferred DB could have been bought out for close to £100k - that was a pretty decent multiple.

Somewhat of an understatement. I think even at the peak a good multiple was normally around the low 30's

dunstonh

https://forums.moneysavingexpert.com/discussion/comment/82026112#Comment_82026112

CETV's peaked late 2021. Now they are about half what they were. Some people seem to think that they will go back up again, however, they're actually back in the normal area of their long-term average.

artyboy

https://forums.moneysavingexpert.com/discussion/comment/82026149#Comment_82026149

To be fair, with revaluation it was probably worth closer to £2500 at that specific point in time. But yes it did seem like a very generous CETV…