DB pension transfer......update

Kempstongirlsboy · 20 August 2019 at 9:04PM

So I posted recently whilst away about a potential DB transfer to SJP and was advised to add some specific details so here we go.
DB scheme was closed by my company after 29 years of contributions. I then started a DC pot.
I’m 53 with a view to retire at 60.
My reason for considering a transfer out is I want more flexibility and the option to leave the children some funds after we pass away.
My wife is 8 years younger than me and has no pension to mention so the transfer out would also ensure her financial position should I pass away. She’d only get 2/3rds of my DB if we left it in and the kids get nothing.
So then the numbers, CETV is £1.2m, DB pension is offering £36k annual pension or £180k lump and £27k. My DC pot will be worth c.£175k at 60 assuming very modest annual growth. There should also be c. £100k cash/shares at 60 plus full state pension later on in 60’s.
So my question is, general thoughts about SJP, fees, lock ins and anything else given some things I’ve been reading about them recently.
Appreciate thoughts on the above.
Thanks, DG

SonOf · 20 August 2019 at 9:22PM

My reason for considering a transfer out is I want more flexibility and the option to leave the children some funds after we pass away.

Can you afford that flexibility?

So then the numbers, CETV is £1.2m,

Do you have experience with investing. Even a cautious investment could lose £200,000 in a year. The larger the value, the greater the monetary changes are when going up and down. No-one bats an eyelid when it goes up but how are you going to feel when it goes down?

So my question is, general thoughts about SJP, fees, lock ins and anything else given some things I’ve been reading about them recently.

Loads of threads on them recently. So, not much point repeating those as nothing has changed. They are still one of the most expensive firms out there. Their investments are still nothing special and some are downright awful. And there are concerns over their ethics due to their charging structure which is unique and many feel not in the spirit of the retail distribution review (now one else ties you in and IFAs are not allowed to. Yet SJP FAs do just that).

hyubh · 20 August 2019 at 9:36PM

Kempstongirlsboy wrote: »

My wife is 8 years younger than me and has no pension to mention so the transfer out would also ensure her financial position should I pass away. She’d only get 2/3rds of my DB if we left it in

8 years younger, has no serious pension of her own, and would get 2/3rds your pension for life... that's quite a thing to give up. What are the pension increases like...?

So then the numbers, CETV is £1.2m, DB pension is offering £36k annual pension or £180k lump and £27k. My DC pot will be worth c.£175k at 60 assuming very modest annual growth.

As an aside, transferring out will give you a Lifetime Allowance problem that you currently don't have, such is the relative generosity towards DB pension holders - presumably you've factored that in? (Not saying it should be a killer.)

hyubh · 20 August 2019 at 9:38PM

SonOf wrote: »

Do you have experience with investing.

Or indeed - does the wife have experience with investing if the DB spouse's pension being 'only' 2/3rds is considered a reason to transfer out...!

jamesd · 21 August 2019 at 12:49AM

hyubh wrote: »

Or indeed - does the wife have experience with investing if the DB spouse's pension being 'only' 2/3rds is considered a reason to transfer out...!

The DB pays only 3% of the transfer value so the wife would end up with 2%.

In drawdown the wife gets 100% so with Guyton-Klinger at 5% after 1.5% costs she'd get two and a half times as much. Subject to investment performance during retirement, though. Starting so high getting down to only 2% is unlikely - a 60% drop without recovery which implies equities dropping close to 100% in 60:40 mixture.

I'd also suggest her deferring her state pension for ten years.

Two thirds and 8 years younger looks good in a world consisting only of DB and annuities but we're not in that world.

Kempstongirlsboy · 21 August 2019 at 7:45AM

Thanks James, get the 100% piece, completely part of my thinking. Can you explain the Guyton-Klinger at 5% part?
DG

AnotherJoe · 21 August 2019 at 7:48AM

Kempstongirlsboy wrote: »

So my question is, general thoughts about SJP, fees, lock ins and anything else given some things I’ve been reading about them recently.

If previous posts on them haven't ruled them out for you, they've certainly done a number on you. They must have made a strong impression on you first time , kudos to their sales tactics.
One thing to ponder, many have asked you how you'd cope, psychologically, with a big drop in the stock market. I suggest you consider that going with SJP would be like the stock market permanently performing 25% worse than if you went with an IFA. Bearable in boom times, really bad news at all other times. (Though if course wife and kids will still be worse off. A million quid worse off over 30 years on your size of pension.
Please can you explain why you still have them under consideration? Is it glossy marketing brochures? Swish offices ? The particular adviser? If the latter, consider them like a car salesperson. They can only sell you what that dealership offers even though yiu and they know,that dealership sells pretty c**p cars. Must have been a very good salesperson!
Or is it just that you haven't found a good Independent adviser yet so SJP seems like the easy choice?

SeniorSam · 21 August 2019 at 8:09AM

This review of SJP may give you a clearer picture of how SJP operate. I hope it helps.
https://www.youtube.com/watch?v=F-UP-XDUPWM&t=3s

Kempstongirlsboy · 21 August 2019 at 8:09AM

The reason I’ve followed the SJP route thus far is that an initial IFA told me to transfer out of the fund if it valued at £3-400k, and that felt wrong.
I sought a 2nd opinion and was recommended this advisor from a friend who is very happy with his work. Initially the CETV was £900k and he advised me not to do it. 12 months on an a review shows nearly £1.2 and that has swung the decision to being more favorable.
I’m happy with the DB if it was just me but with my wife’s poor pension, her being much younger and thinking of the kids these elements are steering my thoughts.
Now looking for a 3rd opinion that isn’t tied to SJP to compare costs etc.
Thanks for all comments it’s appreciated.
DG

LHW99 · 21 August 2019 at 10:12AM

As your wife is 8 years younger, you have time to put money into a pension for her. Even with no earned income that would be over £60k by the time she reaches SPA by my calculation, & then there should be growth on top. That could be used to defer her SP, so that with 2/3 DB to inherit, her SP would be higher to compensate. Also one person can live on less than 2, although not on half the amount. If you / she would worry about finding / maintaining a relationship over many years with an IFA, this would be one solution. Money could continue to be added up to age 75 at a similar level, if there is spare available.

hyubh · 21 August 2019 at 11:28AM

jamesd wrote: »

The DB pays only 3% of the transfer value so the wife would end up with 2%.

In drawdown the wife gets 100% so with Guyton-Klinger at 5% after 1.5% costs she'd get two and a half times as much. Subject to investment performance during retirement, though.

The 2/3rds is with zero effort and limited worry. It's nutty to handwave away as 'only' 2/3rds.

Starting so high getting down to only 2% is unlikely - a 60% drop without recovery which implies equities dropping close to 100% in 60:40 mixture.

Or stick with the DB and don't spent one minute thinking about such things.

Two thirds and 8 years younger looks good in a world consisting only of DB and annuities but we're not in that world.

It looks good in the current world precisely because it's only 'normal' in legacy DB plans. Even modern 'gold plated' public sector pensions typically give survivor pensions of no more than 50%, some (e.g. CARE LGPS) rather less.

DB pension transfer......update

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