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    • lexington013
    • By lexington013 13th Apr 18, 5:32 PM
    • 257Posts
    • 341Thanks
    lexington013
    What would you do?
    • #1
    • 13th Apr 18, 5:32 PM
    What would you do? 13th Apr 18 at 5:32 PM
    Ok I'm at a crossroads with the best route to take for my pensions.
    I'm aged 51 and want to semi retire at 55.
    I have received a CETV for a previous employer of 431,000 (valid for 3 months). Total scheme pension is 18,500 per annum, retirement date is 65 years of age (deferred scheme member). Significant penalties for taking pension early.
    I have a private pension which as of today has a value of 120,000 and is in a medium to lower risk fund.
    I also contribute 7.5% of salary to my employers pension scheme of which they add 7.5%. It's a cash balance scheme and by my calculations would have a fund value of 35,000 at age 55.
    I should qualify for full state pension at 67, looking at my contributions and the state forecast on the government website.
    Just looking for some advice.
    I will be mortgage free at 55 and have savings of circa 75,000.
    I have two grown up children and am single therefore spouse benefits not applicable.
    My CETV value has dropped by circa 18,000 from the first quote 12 months ago.
    Thanks.
Page 1
    • Brynsam
    • By Brynsam 13th Apr 18, 5:45 PM
    • 1,423 Posts
    • 1,020 Thanks
    Brynsam
    • #2
    • 13th Apr 18, 5:45 PM
    • #2
    • 13th Apr 18, 5:45 PM
    If you're serious about transferring your DB benefits, there is now a legal requirement to demonstrate that you have received advice from a suitably qualified/regulated adviser (even if you decide not to follow it). So I'd get the advice - and I'd get on with it; three months sounds plenty of time but the clock is already ticking and your adviser has masses to do before being in a position to report/recommend a course of action.

    CETVs change all the time in response to market conditions; it may increase or decrease the next time you apply for one.
    • Linton
    • By Linton 14th Apr 18, 7:37 AM
    • 9,560 Posts
    • 9,761 Thanks
    Linton
    • #3
    • 14th Apr 18, 7:37 AM
    • #3
    • 14th Apr 18, 7:37 AM
    How much money per year do you need to maintain you current lifestyle?

    My immediate thought is that the CETV is not that wonderful by current standards and may not be worth taking if you are intending to continue to invest in medium to lower risk funds. If you are someone who is only happy with medium to lower risk funds I would have thought that transferring out of a DB scheme is not the most logical choice.

    However an IFA should give you a properly worked out assessment.
    • PeacefulWaters
    • By PeacefulWaters 14th Apr 18, 8:00 AM
    • 8,318 Posts
    • 10,667 Thanks
    PeacefulWaters
    • #4
    • 14th Apr 18, 8:00 AM
    • #4
    • 14th Apr 18, 8:00 AM
    Gut instinct is to leave your DB scheme as it is and draw it at 65.

    Utilise the tax free lump sums and drawdown from your other schemes to fund 55-65.

    If it's not quite enough consider working an extra couple of years or going part time. Or significantly increasing your current contributions .
    Last edited by PeacefulWaters; 14-04-2018 at 8:39 AM.
    • Joey Soap
    • By Joey Soap 14th Apr 18, 8:08 AM
    • 173 Posts
    • 59 Thanks
    Joey Soap
    • #5
    • 14th Apr 18, 8:08 AM
    • #5
    • 14th Apr 18, 8:08 AM
    Unless you have another reliable source of future income then I would say giving up the DB pension would be a step too far. You should regard the DB pension as the foundation on which to build further income options for retirement.
    • chiefie
    • By chiefie 14th Apr 18, 8:48 AM
    • 334 Posts
    • 340 Thanks
    chiefie
    • #6
    • 14th Apr 18, 8:48 AM
    • #6
    • 14th Apr 18, 8:48 AM
    Unless you have another reliable source of future income then I would say giving up the DB pension would be a step too far. You should regard the DB pension as the foundation on which to build further income options for retirement.
    Originally posted by Joey Soap
    You will get a secure income of about 2,000 net p.m. with your dB pension and state pension.

    You have pensions and cash, which with a part time job will easily give you the same perhaps even by not touching your cash.

    Depends on what you need to live on, what cash surplus you need and whether you want to work or not.
    • justme111
    • By justme111 14th Apr 18, 1:42 PM
    • 3,020 Posts
    • 2,916 Thanks
    justme111
    • #7
    • 14th Apr 18, 1:42 PM
    • #7
    • 14th Apr 18, 1:42 PM
    how much you need to live on ?
    • lexington013
    • By lexington013 14th Apr 18, 3:46 PM
    • 257 Posts
    • 341 Thanks
    lexington013
    • #8
    • 14th Apr 18, 3:46 PM
    • #8
    • 14th Apr 18, 3:46 PM
    how much you need to live on ?
    Originally posted by justme111
    I reckon 15,000 per year is my target, having read through the replies then leaving the DB pension in place would be preferable.
    It's certainly doable to bridge the gap between 55 to 65 whilst working part time to 58.
    Thanks for the awesome replies.
    • bostonerimus
    • By bostonerimus 14th Apr 18, 4:10 PM
    • 2,121 Posts
    • 1,438 Thanks
    bostonerimus
    • #9
    • 14th Apr 18, 4:10 PM
    • #9
    • 14th Apr 18, 4:10 PM
    I'm not sure of the timing or the index linking here. An index linked pension of 18500 per year on 431,000, starting now and lasting 30 years is close to the amount you'd probably take out in drawdown.
    Misanthrope in search of similar for mutual loathing
    • justme111
    • By justme111 14th Apr 18, 5:38 PM
    • 3,020 Posts
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    justme111
    so if 15 k is fine why would you want to hold onto unreduced pension of 18 k plus SP of 7 k presumably paying tax on it all at 67+? Pension is usually reduced by about 4%/year taken early. I would play with numbers and see how early I can take it to transfer the wealth from future times when you have too much of it to now .
    without giving up the security of defined pension
    Last edited by justme111; 14-04-2018 at 5:51 PM.
    • kidmugsy
    • By kidmugsy 14th Apr 18, 6:11 PM
    • 11,337 Posts
    • 7,867 Thanks
    kidmugsy
    I'm aged 51 and want to semi retire at 55. ... Total scheme pension is 18,500 per annum, retirement date is 65 years of age (deferred scheme member). Significant penalties for taking pension early.
    Originally posted by lexington013

    Oh !!!!!! "significant": how much is it?
    Free the dunston one next time too.
    • singhini
    • By singhini 15th Apr 18, 12:39 AM
    • 346 Posts
    • 201 Thanks
    singhini
    I'm a bit confused, because according to my maths, you don't need to do anything other than get to age 55.


    Lets assume its Monday morning and you have turned 55 years old (you have a property with no mortgage worth x plus 75,000). So you now ring up your private pension company and ask for 25% drawdown = 30,000.


    Its now Tuesday and you have a property with no mortgage worth x plus 105,000 (you live off 15,000 from the 105k for one year)


    Next April you take tax free allowance (lets just say its 12,000) and you live off this + 3,000 from the 90k you have (you repeat this for 7 years). [BTW 8 years in total have now passed)


    In year 9 you only have 6k left in the pension pot so you need to live off 9k from your savings.


    at the start of year 10 you have to live off 15k from your cash savings which will be worth 60k.


    So by the age of 65 you will have a property worth x plus 45,000 and now you will be able to access your pension worth 18,500 per annum (which is plenty for you), and 2 years later you will also activate your state pension aswell


    Have I missed something? (I'm genuinely asking as its exactly the same thing I want to do and I'm hoping ive not missed something).
    • lexington013
    • By lexington013 15th Apr 18, 3:57 PM
    • 257 Posts
    • 341 Thanks
    lexington013
    Oh !!!!!! "significant": how much is it?
    Originally posted by kidmugsy
    If I take the pension 5 years early (age 60) the acturial reduction is 27%..........!
    Taking it one year early (age 60) it's 6.5% reduction.
    • Dox
    • By Dox 15th Apr 18, 4:04 PM
    • 833 Posts
    • 610 Thanks
    Dox
    If I take the pension 5 years early (age 60) the acturial reduction is 27%..........!
    Taking it one year early (age 60) it's 6.5% reduction.
    Originally posted by lexington013
    That doesn't look quite right. Why isn't five years early 5 x 6.5% = 32.5%?

    6.5% for one year early is a bit on the high side these days. Check with your scheme when the early retirement factors were last reviewed/when they will next be reviewed.
    • justme111
    • By justme111 15th Apr 18, 4:11 PM
    • 3,020 Posts
    • 2,916 Thanks
    justme111
    I think singhini has done the maths for you - you do not even need to draw your pension early.
    Keeping in mind yo will still have cash savings unused and pension more than you need you may even retire before 55 and live on them for a could if years before 55.
    I know people will say that cash loses purchase power so will not be worth the same , that there may be downturn in the investments etc but if you do leave a margin in your calculations so that you do not run them down to O it should be fine. Once in receipt of your pensions post 65 you can replenish the savings if you feel like it.
    • lexington013
    • By lexington013 15th Apr 18, 4:35 PM
    • 257 Posts
    • 341 Thanks
    lexington013
    That doesn't look quite right. Why isn't five years early 5 x 6.5% = 32.5%?

    6.5% for one year early is a bit on the high side these days. Check with your scheme when the early retirement factors were last reviewed/when they will next be reviewed.
    Originally posted by Dox
    I requested the actuarial reduction a couple of years ago and was sent a table with the reduction in pension from year 1 to year 10.
    However I will request a new summary of the "hit" to take pension early.
    • Dox
    • By Dox 15th Apr 18, 5:48 PM
    • 833 Posts
    • 610 Thanks
    Dox
    I requested the actuarial reduction a couple of years ago and was sent a table with the reduction in pension from year 1 to year 10.
    However I will request a new summary of the "hit" to take pension early.
    Originally posted by lexington013
    I know it feels like a hit (it is!), but don't forget you have the benefit of extra years of pension, paid sooner than expected. The reduction factors are intended to be cost neutral - i.e. by the time you die, you will have received the same amount of pension overall whether you retire early with a lower starting level, or retire at the scheme's normal retirement age with no reduction.
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