What Would You Do?

GSP · 12 March 2017 at 11:01PM

Intend to transfer from my dual db/dc bank pension (31.5 years db, 6 years dc) for £780k. Reason being I'm 55 in July, have no job prospects and redundancy money from last year (invested half in dc pot, paid off mortgage, cards and all loans and have brought monthly outgoings to £4,400 p.a. excluding shopping and things going wrong) has nearly run out. To draw money early from bank pension scheme would take away a third of my pension through early penalties (NRD there is 60), another attraction through transferring.

Through transferring, expect c£192k tax free, then through the pensionwise adjustable income calculator to receive £2,775 a month until aged 80. From there would be financially okay from 13/14 years deferred state pension lump sum, monthly state pension thereafter and inheritances.

Had a couple say I should use up the £83k in my dc pension to age 60, then use the db pension.

Be interested to know what way you would you go in my position.
What steps into what instruments would you choose to do, and how active would you be?

kidmugsy · 12 March 2017 at 11:34PM

GSP wrote: »

Intend to transfer from my dual db/dc bank pension (31.5 years db, 6 years dc) for £780k. ... To draw money early from bank pension scheme would take away a third of my pension through early penalties (NRD there is 60), another attraction through transferring. ... until aged 80. From there would be financially okay from 13/14 years deferred state pension lump sum, monthly state pension thereafter and inheritances.

Had a couple say I should use up the £83k in my dc pension to age 60, then use the db pension.

(i) You can't take a lump sum from deferral of new-style State Pension. I suspect that deferral of new-style pension doesn't make much sense except for people who can use it to avoid tax, or people who are seriously short of annuity-like income.

(ii) Have you checked: can you draw/transfer the DC money while leaving the DB pension in place till 60? That might be a good wheeze even if you decide at the last moment to transfer out of the DB after all. It splits the risks: while you are emptying the DC pension free of income tax your DB entitlement is growing up to the full amount. Conceivably its CETV might be growing too.

(iii) Tell me, does your DB section pay an automatic tax-free lump sum in addition to the monthly pension?

GSP · 12 March 2017 at 11:51PM

Thanks kidmugsy.
(i) Okay. By deferring for so many years, assume my monthly amount received would be quite a bit higher if its not paid in the lump sum.

(ii). Believe I can. The CETV is so good at the moment at around x 35. Sure this is top end and can only go down from here.

(iii) I could choose to take a lump sum from the db pension, but this would reduce monthly amount I receive.

Be interested from my OP, what would you do?

kidmugsy · 13 March 2017 at 12:08AM

x35. How very tempting. Married? Health? Family lifespans?

GSP · 13 March 2017 at 12:27AM

Ha, crystal ball time. Nearly died when I was kid with asthma. Had many years on steroids and ephedrines and lots of chest xrays then and have a gut feel that will impact me later on. Dad died at 84, Mum still going strong at 87. If I get to 86 would of said have done well. Yes married, so wife to consider. My view is to make the most of life within reason. Granted if I live to 85 to 90 my db pension would have risen to something like £45k then, but what condition would I be in to enjoy it. I can't take it with me. Can imagine from 85, if I get there I will not be too active by then and slowing up, and would have hoped to achieve a good retirement and being more mobile earlier on would enjoy it more.

What Would You Do?

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