DB vs SIPP vs pension planning

tiernsee · 15 June 2018 at 12:44PM

Dear all

I would welcome some different insights/views of my pension planning, which I will be honest I was rather late in starting and whether I need to reconsider.

Currently I have three frozen DB pensions - total annual payment from these projected at c£10k

I have a DC pension which I am not currently contributing to with about £70k in

I have my work DC pension which they and I contribute to which has approx. £330k in, I am contributing around £35-40k pa into this and am planning on retiring in 9 years which coincides (hopefully) with DD finishing Uni and I will be 62 then and totally ready to stop working!

Today a work friend asked me to witness some documents for her which were all about transferring her old pensions into a SIPP and having this managed.

I said that I couldn't do this as my pensions were DB but she said her husband was transferring a DB pension as they had looked into it and it was far better to do this than leave it as the frozen pension.

I'm going to speak to an advisor but before I do I wondered what the general views were of transferring DB pensions to SIPPS and if there are any questions I need to ask or other things I need to consider? I know there are some very financially savvy people on the forum so any wisdom you can share would be appreciated
Thanks

Brynsam · 15 June 2018 at 12:57PM

You don't have 3 frozen DB pensions - they increase in value between the time you left the schemes and the time you draw your benefits from the schemes, unless they were all built up in the dim and distant 1980s or before (unlikely, given your age).

If the transfer value of any one of these schemes is £30,000 or more, you are required to seek (although not necessarily follow) advice from a properly authorised and qualified adviser if you wish to transfer to a defined contribution arrangement such as a SIPP. That's the place to get your info. You'll get plenty of opinionated views on this forum (some of them well informed) but it is your personal circumstances, and especially your personal attitude to risk, that really matters.

OldMusicGuy · 15 June 2018 at 12:58PM

Think very carefully before you do it. As someone who has just retired with a very large DC pot (SIPP), I would much, much rather have some DB pensions to provide a guaranteed income with a smaller DC pot. IMO DB pensions are not something to be given up lightly. Too many people get stars in their eyes when they see the potentially large amounts they might get by cashing them in, but they do not realise the challenges of making that money last through a long retirement.

Get an SP forecast and do some pension planning before you rush to cash these in. Think about the income you will need in retirement and how much the combination of your DBs and SP will give you. You can of course keep saving into your SIPP as well.

MK62 · 15 June 2018 at 1:02PM

Impossible to answer I'm afraid, without knowing the specifics of the pensions in question, and what their transfer values would be.
You may get hit with a hefty bill too if the adviser has to investigate 3 pensions.

However, if you are going to see an adviser anyway, you may as well just wait and see what he/she says first - after all, you'll be paying for it anyway!

she said her husband was transferring a DB pension as they had looked into it and it was far better to do this than leave it as the frozen pension.

You'd have to get her to explain what she means by far better.
In some cases it may be better, but it depends on many things, and often it's worse!

AnotherJoe · 15 June 2018 at 1:10PM

There's no way to venture an opinion on whether it's a good deal to transfer the DB pensions without knowing the CETVs but I think another POV would be that since diversity is good, having a mix of DB, SP and a pot you can self manage (or use an adviser for) sets you up nicely.

By your late 60s for example you will have perhaps £18k of guaranteed income from (SP and 3x DBs) so you can afford to be a bit more speculative with your main pension pot derived from your employer, which you can keep with that scheme or move into a SIPP and manage it yourself or have an adviser manage it.

squirrelpie · 15 June 2018 at 5:17PM

What AnotherJoe said. Having a basic income that isn't dependent on the vagaries of the stock market is a very useful reassurance. Having said that, things do all depend on the individual schemes, so it's worth checking into each of them.

atush · 15 June 2018 at 5:25PM

I agree with AJ. If I had the chance, I'd choose to have a DB underpin to my pension savings.

AS a side note, I would like an explanation from your friend why the move was FAR BETTER. as that tends to be for those who have a short LE due to mediacl conditions, and have no spouse to get the survivors pension. Clearly there is a spouse in her instance as it is her.

LHW99 · 15 June 2018 at 8:08PM

AS a side note, I would like an explanation from your friend why the move was FAR BETTER. as that tends to be for those who have a short LE due to mediacl conditions, and have no spouse to get the survivors pension. Clearly there is a spouse in her instance as it is her.

Or possibly they have sufficient other pension for their needs and wish to leave the money to a non-spouse as part of inheritance tax planning?

enthusiasticsaver · 15 June 2018 at 8:46PM

I would not transfer DB pensions. You would need to take advice before you do this anyway. We used DB pensions and state pensions to underpin our pension arrangements as those are the certainties. DC pensions, SIPPs and other investments obviously depend on the market conditions so if markets doing ok then they would be accessible but in a downturn it is unwise to access them as you will then consolidate any losses.

Presumably when you say frozen pensions you mean deferred? They should still rise even if no contributions are being made.

jsinc · 15 June 2018 at 9:14PM

As others have said it depends on personal circumstances, and having a mix of benefits is perhaps best.

Shame there's not a retail market in DB-DC pension swaps. If I had the opportunity to acquire DB pension benefits on typical scheme terms using my SIPP/earnings I'd probably buy the max possible.

atush · 15 June 2018 at 9:49PM

LHW99 wrote: »

Or possibly they have sufficient other pension for their needs and wish to leave the money to a non-spouse as part of inheritance tax planning?

Possibly? Maybe. Far more likely o be a rush to cash in hand.

And unless you are post 75, there is no inheritance tax planning do do as the pension is inherited tax free.

DB vs SIPP vs pension planning

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