Advice re deferred defined benefits pension

bostonerimus · 19 May 2019 at 4:30PM

JillyC8 wrote: »

It's understandable how DB pension holders might feel it's better to transfer though. If you have a DB pension and croak it at 65 and there is no spouse where does it go?
.

The money is used to pay the pensions of people still alive. This is called the mortality credit.

Silvertabby · 19 May 2019 at 4:38PM

“ It's understandable how DB pension holders might feel it's better to transfer though. If you have a DB pension and croak it at 65 and there is no spouse where does it go?
.
Originally posted by JillyC8

Further to boston's answer, most DB schemes have a guarantee period (which runs from death before retirement to either 5 or 10 years after retirement), in which they pay a tax free lump sum to a nominated beneficiary. The beneficiary can be almost anyone - even a charity.

GDB2222 · 19 May 2019 at 5:02PM

I suggest getting a quote for an index linked annuity for £1000 pm, then comparing that to the cetv. That gives you an idea how much it costs the insurance company to provide your pension without taking an investment risk.

Silvertabby · 19 May 2019 at 5:45PM

GDB2222 wrote: »

I suggest getting a quote for an index linked annuity for £1000 pm, then comparing that to the cetv. That gives you an idea how much it costs the insurance company to provide your pension without taking an investment risk.

Plus survivor pension benefits on par with the DB scheme.

enthusiasticsaver · 19 May 2019 at 6:14PM

I have a deferred DB pension paying out next year (smaller than yours though) and asked exactly the same question. I have explored further and it will cost me in the region of £5000 for the advice as to whether it is advisable to transfer from a pension specialist and as this is around 7.5% of the CETV I have decided not to go ahead. I have another DB pension which I am already living off and my intention initially was to invest the CETV and drawdown more flexibly and tax efficiently if at all as it is surplus to requirements as our living expenses are already covered.

As silvertabby says no one can advise you but the fact it is so difficult to transfer it tells you something. Will it provide spousal protection?

Silvertabby · 19 May 2019 at 6:56PM

Funny old thing, but an item has just popped up on my 'phone. According to the Daily Telegraph, since Pension Freedoms the average pensioner has been drawing down at between 6% and 9% - meaning that some could be potless in less than 10 years.

Of course, some of these people may have other (DB?) benefits not included in the data, but it's still scary. For those for whom just a few hundred £s is untold riches, the temptation to take the lot and treat the family to a holiday/ buy a car/etc - or just live well for a year or two - must be hard to ignore.

mpension · 19 May 2019 at 7:18PM

Many thanks to all of you for taking the time to reply. Although Im 49, I haven't taken enough notice of my pensions and as such, I don't understand all of the acronyms, but I will learn in order that I can better understand your advice.

To answer one question, my DB pension does have spousal support.

5000 for advice - almost beyond belief!!

All the help much appreciated. Thank you

enthusiasticsaver · 19 May 2019 at 7:39PM

mpension wrote: »

Many thanks to all of you for taking the time to reply. Although Im 49, I haven't taken enough notice of my pensions and as such, I don't understand all of the acronyms, but I will learn in order that I can better understand your advice.

To answer one question, my DB pension does have spousal support.

5000 for advice - almost beyond belief!!

All the help much appreciated. Thank you

As others have said the insurance premiums for pension transfer specialists recommending or advising transfer for DB pensions are very high. Also I am not sure if the amount is in direct proportion to the CETV. The CETV of my DB pension is only 17 times the annual pension and the suggested cost for advice is £5000 against a £68k CETV. As your CETV is more than 5 times as much as mine I am not sure if the advisor cost will also rise proportionally so you could be looking at closer to £25k costs. That is a substantial DB pension to give up. When does it pay out?

mpension · 19 May 2019 at 8:03PM

Thank you. Pays out in 11 years. I have another, smaller DB pension that pays out around the same time. now i have a DC pension too with my current employer which i want to increase my payments into, but it has no provision for spouse, so i feel like i could be (or she will be) just losing money if I die early.

GunJack · 20 May 2019 at 8:40AM

mpension wrote: »

Thank you. Pays out in 11 years. I have another, smaller DB pension that pays out around the same time. now i have a DC pension too with my current employer which i want to increase my payments into, but it has no provision for spouse, so i feel like i could be (or she will be) just losing money if I die early.

Your DC pension should be inheritable by your spouse, check the specific scheme details and DC-DC transfer into a SIPP or similar if it isn't.

An alternative to transferring the DB scheme could be to load up the DC pot whilst still working and you'll get the best of both worlds - a guaranteed DB income + spouse pension on your death, plus an inheritable DC pot.

Advice re deferred defined benefits pension

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