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    • segovia
    • By segovia 10th Aug 18, 8:28 AM
    • 10Posts
    • 0Thanks
    segovia
    Defined Benefits Scheme - Transfer or Not
    • #1
    • 10th Aug 18, 8:28 AM
    Defined Benefits Scheme - Transfer or Not 10th Aug 18 at 8:28 AM
    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.
Page 1
    • hyubh
    • By hyubh 10th Aug 18, 8:46 AM
    • 2,212 Posts
    • 1,703 Thanks
    hyubh
    • #2
    • 10th Aug 18, 8:46 AM
    • #2
    • 10th Aug 18, 8:46 AM
    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.
    Originally posted by segovia
    You haven't told us anything about the DB pension other than a rough figure for the CETV. Please provide proper detail.
    • Brynsam
    • By Brynsam 10th Aug 18, 8:54 AM
    • 1,423 Posts
    • 1,020 Thanks
    Brynsam
    • #3
    • 10th Aug 18, 8:54 AM
    • #3
    • 10th Aug 18, 8:54 AM
    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.
    Originally posted by segovia
    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.
    • Dox
    • By Dox 10th Aug 18, 9:00 AM
    • 839 Posts
    • 617 Thanks
    Dox
    • #4
    • 10th Aug 18, 9:00 AM
    • #4
    • 10th Aug 18, 9:00 AM
    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.
    • HappyHarry
    • By HappyHarry 10th Aug 18, 9:38 AM
    • 690 Posts
    • 1,011 Thanks
    HappyHarry
    • #5
    • 10th Aug 18, 9:38 AM
    • #5
    • 10th Aug 18, 9:38 AM
    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.
    Last edited by HappyHarry; 10-08-2018 at 10:06 AM.
    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.
    • Seabee42
    • By Seabee42 10th Aug 18, 9:40 AM
    • 357 Posts
    • 215 Thanks
    Seabee42
    • #6
    • 10th Aug 18, 9:40 AM
    • #6
    • 10th Aug 18, 9:40 AM
    Sadly tied agents (sales people as such) are also allowed to give transfer advice even though I believe they shouldn't.
    • 232607
    • By 232607 10th Aug 18, 9:59 AM
    • 116 Posts
    • 51 Thanks
    232607
    • #7
    • 10th Aug 18, 9:59 AM
    • #7
    • 10th Aug 18, 9:59 AM
    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.
    Originally posted by segovia

    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.
    • ams25
    • By ams25 10th Aug 18, 11:01 AM
    • 192 Posts
    • 241 Thanks
    ams25
    • #8
    • 10th Aug 18, 11:01 AM
    • #8
    • 10th Aug 18, 11:01 AM
    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.
    • xylophone
    • By xylophone 10th Aug 18, 11:47 AM
    • 26,099 Posts
    • 15,462 Thanks
    xylophone
    • #9
    • 10th Aug 18, 11:47 AM
    • #9
    • 10th Aug 18, 11:47 AM
    And have you and your wife obtained new state pension statements?

    https://www.gov.uk/check-state-pension
    • kidmugsy
    • By kidmugsy 10th Aug 18, 1:24 PM
    • 11,343 Posts
    • 7,877 Thanks
    kidmugsy
    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.
    Originally posted by segovia
    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.
    • segovia
    • By segovia 11th Aug 18, 7:52 AM
    • 10 Posts
    • 0 Thanks
    segovia
    You haven't told us anything about the DB pension other than a rough figure for the CETV. Please provide proper detail.
    Originally posted by hyubh
    I have no idea what a CETV is
    • segovia
    • By segovia 11th Aug 18, 7:59 AM
    • 10 Posts
    • 0 Thanks
    segovia
    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.
    Originally posted by Dox
    We did seek some advice from a few years ago from an IFA who said under no circumstances leave the DB, it's too good. We went back to the same IFA about 3 years after the advice and she said it's worth considering and if we wanted to move the costs would be 750.00 for the advice and 2.5% of the pot to move, total 8250.00.

    All of her colleagues who have gone to IFA's have all received the same advice i.e. leave the DB. But I have to question their reasons for the recommendation because if they recommend staying the IFA does not get the large commission.
    • segovia
    • By segovia 11th Aug 18, 8:03 AM
    • 10 Posts
    • 0 Thanks
    segovia
    I have no idea what a CETV is
    Originally posted by segovia
    Ok, I know now

    The CETV is what I quoted, 300,000.00. That was the last time we checked.
    • segovia
    • By segovia 11th Aug 18, 8:04 AM
    • 10 Posts
    • 0 Thanks
    segovia
    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.
    Originally posted by Brynsam
    True they only share the good news, they are unlikely to share bad news.
    • segovia
    • By segovia 11th Aug 18, 8:07 AM
    • 10 Posts
    • 0 Thanks
    segovia
    [QUOTE=xylophone;74642144]And have you and your wife obtained new state pension statements?

    Yes, we have checked and they are what we expected, although the dates they become payable are a bit of a shock. I think the government is hoping we'll be dead by then.
    • kidmugsy
    • By kidmugsy 11th Aug 18, 1:15 PM
    • 11,343 Posts
    • 7,877 Thanks
    kidmugsy
    if they recommend staying the IFA does not get the large commission.
    Originally posted by segovia
    What commission? IFAs aren't paid by commission.
    Free the dunston one next time too.
    • Thrugelmir
    • By Thrugelmir 11th Aug 18, 5:32 PM
    • 59,483 Posts
    • 52,799 Thanks
    Thrugelmir
    I'm well aware that a crash could come at any time that could drop my portfolio by 30%.
    Originally posted by 232607
    What's your expectation for growth though. Given the extended bull market. A sustained period of underperformance could be just as debilitating.
    Financial disasters happen when the last person who can remember what went wrong last time has left the building.
    • kidmugsy
    • By kidmugsy 11th Aug 18, 7:26 PM
    • 11,343 Posts
    • 7,877 Thanks
    kidmugsy
    I'm well aware that a crash could come at any time that could drop my portfolio by 30%.
    Originally posted by 232607
    Or by two-thirds.
    https://www.hussmanfunds.com/comment/mc180725/
    Free the dunston one next time too.
    • 232607
    • By 232607 11th Aug 18, 7:29 PM
    • 116 Posts
    • 51 Thanks
    232607
    What's your expectation for growth though. Given the extended bull market. A sustained period of underperformance could be just as debilitating.
    Originally posted by Thrugelmir

    I need 5,1/2% growth over the next 3,1/2 years to get my pot to what it needs to be to jump ship at 55. If it's not there I carry on.
    I then intend to draw out at 5%.
    I appreciate this withdrawal rate is pretty top end but this would be reduced when my DB kicks in at 65, then further by virtue of the upper level SP 2 years later.

    The contingency plan is to move 3 years of money in a cash fund to draw on when there is a crash, thus allowing time for a recovery.
    Further contingency plans are to reduce the 5% withdrawal rate and/or go back to part time work should things not be going well.
    All we can do is have robust plans and a good back up plan.

    Whilst we have been in a prolonged bull run it doesn't mean it will automatically turn anytime soon. If it was that simple we could all time the market & be much richer.
    • TBC15
    • By TBC15 12th Aug 18, 11:37 AM
    • 530 Posts
    • 270 Thanks
    TBC15
    I need 5,1/2% growth over the next 3,1/2 years to get my pot to what it needs to be to jump ship at 55. If it's not there I carry on.
    I then intend to draw out at 5%.
    I appreciate this withdrawal rate is pretty top end but this would be reduced when my DB kicks in at 65, then further by virtue of the upper level SP 2 years later.

    The contingency plan is to move 3 years of money in a cash fund to draw on when there is a crash, thus allowing time for a recovery.
    Further contingency plans are to reduce the 5% withdrawal rate and/or go back to part time work should things not be going well.
    All we can do is have robust plans and a good back up plan.

    Whilst we have been in a prolonged bull run it doesn't mean it will automatically turn anytime soon. If it was that simple we could all time the market & be much richer.
    Originally posted by 232607
    Why not 3 yrs of cash in bonds?
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