Defined Benefits Scheme - Transfer or Not
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My wife has a DB pension, today's value is around £300,000.00 and she is 56. Almost all of her colleagues have cashed in and reinvested in other schemes and are claiming they have made massive returns after fees and question why she has not done the same.
Obviously, everyone's circumstances are different and for most of her ex-colleagues the DB scheme was the only source of retirement income.
I have run successful businesses, we have a property portfolio with no mortgages value at £1.5M and I have my own pension £300K.
Common sense tells me she should back a winner and leave the DB scheme and take the £9K + inflation increase year she has been quoted and not cash as this is low-risk guaranteed income. Thoughts welcome.
Obviously, everyone's circumstances are different and for most of her ex-colleagues the DB scheme was the only source of retirement income.
I have run successful businesses, we have a property portfolio with no mortgages value at £1.5M and I have my own pension £300K.
Common sense tells me she should back a winner and leave the DB scheme and take the £9K + inflation increase year she has been quoted and not cash as this is low-risk guaranteed income. Thoughts welcome.
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My wife has a DB pension, today's value is around £300,000.00 and she is 56. Almost all of her colleagues have cashed in and reinvested in other schemes and are claiming they have made massive returns after fees and question why she has not done the same.
Obviously, everyone's circumstances are different and for most of her ex-colleagues the DB scheme was the only source of retirement income.
I have run successful businesses, we have a property portfolio with no mortgages value at £1.5M and I have my own pension £300K.
Common sense tells me she should back a winner and leave the DB scheme and take the £9K + inflation increase year she has been quoted and not cash as this is low-risk guaranteed income. Thoughts welcome.
You haven't told us anything about the DB pension other than a rough figure for the CETV. Please provide proper detail.0 -
My wife has a DB pension, today's value is around £300,000.00 and she is 56. Almost all of her colleagues have cashed in and reinvested in other schemes and are claiming they have made massive returns after fees and question why she has not done the same.
Obviously, everyone's circumstances are different and for most of her ex-colleagues the DB scheme was the only source of retirement income.
I have run successful businesses, we have a property portfolio with no mortgages value at £1.5M and I have my own pension £300K.
Common sense tells me she should back a winner and leave the DB scheme and take the £9K + inflation increase year she has been quoted and not cash as this is low-risk guaranteed income. Thoughts welcome.
Does she really believe all her colleagues are telling her about their 'massive returns'? As for 'almost all' - sounds like lemmings going over a cliff, if it's true.
Your common sense sounds eminently sensible. Given that your own pension savings are relatively modest, her DB pension sounds an excellent foundation for her retirement and yours.0 -
Those of us old enough to remember the mis-selling of personal pensions in the late 1980s and 1990s may also remember all too well the peer pressure brought to bear (by genuinely well meaning individuals, who thought they were doing friends a favour) on those people silly enough to insist on staying in their final salary schemes. Why would you do that, when you could transfer out to the 'freedom' of a personal pension with promises of massive returns (based on interest rates of 15% or so which would, of course, never fall).
Given the size of her transfer value, she'd be required to seek independent financial advice before any transfer could proceed, so if you are seriously in doubt, do that. Might be interesting to see how many of those preaching the gospel of transferring out had IFAs who actually recommended these transfers.0 -
I've just dealt with a client under similar circumstances, whose colleagues were all suggesting that a transfer out of their deferred DB scheme would be a "no-brainer", and they would be mad to keep it.
After analysis, I recommended, with very good reasons, that my client keep the DB pension. It was a decent transfer value being offered, but the DB scheme was far more appropriate to my client's circumstances.
My client was not only very happy, they were also very relieved at the outcome I recommended.
This case was just a reminder that every DB transfer analysis is different, and personal circumstances are more important than the transfer value on offer.I am an Independent Financial Adviser. Any comments I make here are intended for information / discussion only. Nothing I post here should be construed as advice. If you are looking for individual financial advice, please contact a local Independent Financial Adviser.0 -
Sadly tied agents (sales people as such) are also allowed to give transfer advice even though I believe they shouldn't.0
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My wife has a DB pension, today's value is around £300,000.00 and she is 56. Almost all of her colleagues have cashed in and reinvested in other schemes and are claiming they have made massive returns after fees and question why she has not done the same.
Obviously, everyone's circumstances are different and for most of her ex-colleagues the DB scheme was the only source of retirement income.
I have run successful businesses, we have a property portfolio with no mortgages value at £1.5M and I have my own pension £300K.
Common sense tells me she should back a winner and leave the DB scheme and take the £9K + inflation increase year she has been quoted and not cash as this is low-risk guaranteed income. Thoughts welcome.
I transfered out approx 4 years ago for a similar figure and have had very good returns so it's quite conceivable that your wifes colleagues have as well.
All this is irrelevent to your situation as it's the returns going forward that matter.
I transfered beacuse I also had another BD pension which I won't transfer, IE I wasn't putting all my eggs in 1 basket.
I also consider myself to be knowledgable on pensions/investments and therefore happy to take this route.
I'm well aware that a crash could come at any time that could drop my portfolio by 30%.
I suspect your wifes colleagues are not aware of this and when it comes it will be a major "wake up" call for them. I doublt they'll then be preaching the virtues of transfering out.
Within my Co I see exectly the same thing, IE people (with little or no investment knowledge) who transfered out, telling people who didn't that they should.
This is a very dangerous thing & I suggest the next time someone tells your wife this, she tells them to mine their own business.
Having said all this it's a very personal decision so you'll have to decide what's right for you.
I'm a great beleiver in have wealth diversification.
You seem to be very "top heavy"with your property which is a fairly illiquid asset.
transfering out would put you less diversified in that you'd now now everything in a DC arrangement instead of being split between DB/DC.
Good luck with the decision.0 -
Based on the very limited information provided I would say it sounds sensible to keep the DB....
A 300k pot at a safe withdrawal rate of 3% would give you 9k pa....so the same amount more or less without all the risk, uncertainty, effort required in managing a 300k drawdown pot and being reliant on the markets. Sure, you could take 4% or more, but then risk running out of money in 20 or 30 years time,..just when what you really need is a hassle free safe income stream.
If you have multiple income sources (as you do) then a DB as a core source of guaranteed income is not to be given up easily. I know there are certain circumstances when cashing in a DB does make sense but imho too many are being lured by the large sums.... Your wife's colleagues perhaps. I think your instinct is correct.
My DB is going nowhere...despite a very decent CETV.0 -
And have you and your wife obtained new state pension statements?
https://www.gov.uk/check-state-pension0 -
My wife has a DB pension, today's value is around £300,000.00 and she is 56. ...
we have a property portfolio with no mortgages value at £1.5M and I have my own pension £300K.
If she stays in the DB scheme then your investments will be (i) £300k of yours, presumably mainly in equities, (ii) the equivalent of £300k in index-linked bonds (her DB pension), and (iii) £1.5 million in property.
There's a useful bit of diversification there though personally I might go for less property and a bit of cash, gold, and commodities instead. I think your inclination to suggest that she sit tight is the right way to bet.Free the dunston one next time too.0
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