Transfer out or guaranteed benefits

wats0062 · 14 April 2019 at 11:57AM

Hi all, first post but been reading for a while. I realise there are many threads discussing the the pros and cons of FS transfers (or not) however each circumstance is slightly different and here's mine.
I have been investigating my options for at least a couple of years. I have spoken with 3 IFAs about this subject, one of them in great detail. So like to think I now have a good background knowledge.
I suppose I'm asking should I / shouldn't I? so here's the SP.
I have a CETV of £936,000.
I have guaranteed FS benefits of £29k per annum 1/3 rising annually with a £192,000 TFLS and £18k spouse pension. This is if I take pension this summer.
Cost to transfer is £28k and running costs £10k per annum.
I have a wife and 2 teenage kids.
My biggest concern (I'm 56 now) is that the pension built up could be largely lost if I die early, potentially throwing away many thousands of pounds and leaving my family to survive on £18K per annum, when we have been used to having nearer £60.
There are other factors such as a second pension which could be potentially worth about £70k by Summer 2021 (if I don't transfer out). I also have a couple of cheaper end rental properties bringing in £825 a month.
I feel like I'm being forced to make a huge decision and each option has it's own fairly large risks.
Personally I would like to transfer out but the charges are very hefty with no guaranteed performance from the provider who gets paid even If they lose most of the pot!
The only sure way to make the right decision would be knowing how long I have to life but (fortunately I suppose) I don' t have that knowledge.

Many thanks In advance and thanks for your patience.

coyrls · 14 April 2019 at 12:14PM

Why don't you look at life assurance if you're worried about not leaving money if you die early? That would seem a much simpler and vastly less risky solution.

xylophone · 14 April 2019 at 12:33PM

Does your pension protect your dependent children if you die while they are still in education?

Your widow will be entitled to an index linked pension?

Would your widow have pension entitlement of her own?

Your widow could sell the properties?

Do you both have life assurance?

Have you both checked your state pension position?

https://www.gov.uk/check-state-pension

Prism · 14 April 2019 at 12:41PM

Lets do some quick maths

£936k - 28k cost to transfer leaves you with £908k. Using the simplified but over optimistic 4% guideline this means you couldl consider taking a £36.2k yearly amount with low risk of running out of money. However that doesn't include the 10k fee, so you are down to £26.3k, which isn't guaranteed. Compare that to your guaranteed £29k per year with a £192k lump sum.

Personally I wouldn't transfer. Make the lump sum work for you to cover the reduced amount if you die early. Using the same logic as before that lump sum could be used to provide a top up to income of maybe £6.5k after fees, asuming you don't spend it early and allow it to grow with inflation.

sheslookinhot · 14 April 2019 at 1:22PM

Similar situation to myself. Reduced pension and the lump sum is my likely option.

The pension built up could largely be lost -- the pension is to provide you with a standard of living comparable to when you were working until you take your last breath. It was never seen as an inheritance. That's how FS schemes work, some will live long lives and be secure some will not and so reduce liabilities for the scheme to benefit the longevity of such a scheme for members.

Who is forcing you to make a huge decision ? There are no risks with the FS option.

Albermarle · 14 April 2019 at 1:40PM

Although the CETV is a very large sum , by my calculation it works out as 29X the worth of the FS pension. This would be seen at best as average from reading other threads and my own experience .

Also if you cashed it in you will probably have problems with the Lifetime Allowance .
If you took the TFLS and the annual pension this would count as £772K towards the LTA ( current limit £1.05Million) If you took the CETV and it grew at 4% and you have another £70K pension then you could be paying a lot of extra tax.

Brynsam · 14 April 2019 at 2:15PM

wats0062 wrote: »

I feel like I'm being forced to make a huge decision and each option has it's own fairly large risks.

So much for pension freedoms! You aren't being 'forced' to do anything, so perhaps cut out the drama such a sentiment brings. If you are still in employment, what sort of life cover does your employer provide? If you aren't, any reason why you can't take out your own cover?

Thrugelmir · 14 April 2019 at 3:26PM

wats0062 wrote: »

I have guaranteed FS benefits of £29k per annum 1/3 rising annually with a £192,000 TFLS and £18k spouse pension. This is if I take pension this summer.

If you are used to a £60k lifestyle. Why not work a couple of years longer. That'll boost your pension income considerably. Likewise provide your wife with a far higher guaranteed lifetime income.

Thrugelmir · 14 April 2019 at 3:30PM

Prism wrote: »

Using the simplified but over optimistic 4% guideline this means you couldl consider taking a £36.2k yearly amount with low risk of running out of money.

If 4% is optimistic then the risk of running the pot dry is greatly increased surely. One cannot have ones cake and eat it.

C_Mababejive · 14 April 2019 at 3:49PM

Thrugelmir wrote: »

If 4% is optimistic then the risk of running the pot dry is greatly increased surely. One cannot have ones cake and eat it.

IS 4% optimistic..?

Thrugelmir · 14 April 2019 at 4:01PM

C_Mababejive wrote: »

IS 4% optimistic..?

If one selects the wrong investments to hold then yes.

Transfer out or guaranteed benefits

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