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  • FIRST POST
    • Lucys Da
    • By Lucys Da 13th Jun 19, 2:41 PM
    • 13Posts
    • 1Thanks
    Lucys Da
    Query around Defined Benefit Pension Transfer
    • #1
    • 13th Jun 19, 2:41 PM
    Query around Defined Benefit Pension Transfer 13th Jun 19 at 2:41 PM
    Ok folks I was hoping to get a bit of advice prior to seeking full blown financial advice (which I appreciate if I proceed I will legally require but will cost me a few quid and I am dubious how independent those nice folk are at times!!)


    Ok so my situation is as follows:


    - I am 43 yrs of age.
    - Have two dependent children (one is 9 and the other a new born).
    - I am getting married in 18 mths time.
    - I have two pensions from two separate employers.
    - I have a stakeholder pension with my current employer with a pension value of £192k and between the employer and myself there is approx. £765 being contributed a month in to it.
    - I have been getting very strong growth in this (76% over the past 3 yrs).
    - I have a defined benefits pension from a previous role that according to the most recent information is going to give me an annual pension of £10,250 per annum (this will be subject to the annual % increase of course).
    - My current transfer value is a healthy £306k (a jump of about 20% from when I last checked it a month or so ago!!).
    - My defined benefits pension is from employment with M&S - everyone would love a crystal ball but retail is not exactly the rock that it once was and who's to know where the likes of M&S will be in 18 yrs time.
    - I would like to retire when I'm approx. 61 (18yrs from now)
    - I've always been in good health, like most people I have periods of lots of exercise and fitness and then less so - pretty average, non smoker that likes a few drinks at the weekend.


    So I know that logical wisdom says that staying with a defined benefit scheme is the correct decision. However, there are matters to consider around this that are making me wonder whether I should pursue investigating the potential to transfer out.


    Ok, my thinking is that a 306k pension pot at todays annuity rates would get me approx. 10k per annum, so basically the same as my final salary pot (not suggesting I'd opt for an annuity but showing this for the purposes of this exercise).


    Also, I have 18yrs before I retire, so I personally think that the upside opportunity to allow for solid growth on that pot over the next 18yrs, could make it worth a lot more than it is now and potentially a lot more to me than the defined benefit scheme annual pension (I appreciate that I will be subject to market volatility so my 300k could be 150k in 18 yrs!!). In essence my thoughts are, that if I was 55 I'd be sticking where I am but is my age a factor in considering this more seriously.


    The idea of taking a nice 25% tax free lump sum would defo appeal to me and I like flexibility, so being able to offer long term financial stability for my future wife (who is 10yrs my junior) and my two kids is important to me.


    Just as a gauge, what would others on here do? Million dollar question, but I'm curious to get your ideas and thoughts...
Page 1
    • xylophone
    • By xylophone 13th Jun 19, 2:57 PM
    • 31,368 Posts
    • 19,448 Thanks
    xylophone
    • #2
    • 13th Jun 19, 2:57 PM
    • #2
    • 13th Jun 19, 2:57 PM
    long term financial stability for my future wife (who is 10yrs my junior) and my two kids is important to me.
    What widow/ child pension benefits/death pre retirement benefits are offered by your deferred DB pensions?
    • Lucys Da
    • By Lucys Da 13th Jun 19, 3:35 PM
    • 13 Posts
    • 1 Thanks
    Lucys Da
    • #3
    • 13th Jun 19, 3:35 PM
    • #3
    • 13th Jun 19, 3:35 PM
    What widow/ child pension benefits/death pre retirement benefits are offered by your deferred DB pensions?
    Originally posted by xylophone

    Just looking into this now. I believe the standard benefit is 2/3rds of my preserved pension, but according to the scheme rules this will reduce as we will be married after I left service and she is more than 10 years younger than me.


    Not sure about the child pension benefits again will check.


    But looks like she would get less than 2/3rds of it...
    • Albermarle
    • By Albermarle 13th Jun 19, 4:00 PM
    • 1,564 Posts
    • 997 Thanks
    Albermarle
    • #4
    • 13th Jun 19, 4:00 PM
    • #4
    • 13th Jun 19, 4:00 PM
    One point to keep in mind, is that if you continue to work until 55+ , you will have built up quite a large DC /stakeholder pot anyway .
    If you still have the DB scheme then you will have a nice balanced situation with a fixed guaranteed inflation proof income on one side, and flexibility with the DC pot as well.
    If you transfer out of the DB , you will have one larger DC pot only. Then you are 100% at the mercy of the markets .
    • shinytop
    • By shinytop 13th Jun 19, 8:33 PM
    • 509 Posts
    • 588 Thanks
    shinytop
    • #5
    • 13th Jun 19, 8:33 PM
    • #5
    • 13th Jun 19, 8:33 PM
    One point to keep in mind, is that if you continue to work until 55+ , you will have built up quite a large DC /stakeholder pot anyway .
    If you still have the DB scheme then you will have a nice balanced situation with a fixed guaranteed inflation proof income on one side, and flexibility with the DC pot as well.
    If you transfer out of the DB , you will have one larger DC pot only. Then you are 100% at the mercy of the markets .
    Originally posted by Albermarle
    That's a very good point; I have a DB/DC mix and it's a good combination to have.
    • AnotherJoe
    • By AnotherJoe 13th Jun 19, 9:25 PM
    • 15,957 Posts
    • 19,169 Thanks
    AnotherJoe
    • #6
    • 13th Jun 19, 9:25 PM
    • #6
    • 13th Jun 19, 9:25 PM
    Ditto. I have a small DB pension due at pretty much the same time as my SP, the two of those will cover all my day to day expenses and take the pressure off managing the DC's
    Please dont criticise my spelling. It's excellent. Its my typing that's bad.
    • ewaste
    • By ewaste 13th Jun 19, 9:58 PM
    • 72 Posts
    • 46 Thanks
    ewaste
    • #7
    • 13th Jun 19, 9:58 PM
    • #7
    • 13th Jun 19, 9:58 PM
    I'd keep the DB pension, they've bumped the transfer value for a reason and just about nobody offers a DB pension these days outside of the public sector for similar reasons.

    The fact your also well on the way to good DC pot somewhat answers the question, you'll be able to draw down your DC pot underpinned by a DB and eventually state pension comfortably covering basic living costs. Sure theoretically you could roll the dice and might end up better off in pure monetary terms at the end of your lifespan that's not guaranteed and involves taking an additional long term risk which can't be reversed.
    • Marcon
    • By Marcon 13th Jun 19, 10:14 PM
    • 1,266 Posts
    • 1,002 Thanks
    Marcon
    • #8
    • 13th Jun 19, 10:14 PM
    • #8
    • 13th Jun 19, 10:14 PM
    I'd keep the DB pension, they've bumped the transfer value for a reason
    Originally posted by ewaste
    ...yes, most schemes are 'bumping' TVs for younger members because of changes of market conditions, assumptions etc. Don't read too much into it. Unless it is an enhanced transfer exercise (and doesn't sound like it), these are just normal changes following a review of factors and a change of investment strategy on the part of the trustees.

    That said, M&S are quite open about the fact they are trying to reduce longevity risk (hence the massive and well publicised liability transfers to several insurers).
    • Thrugelmir
    • By Thrugelmir 13th Jun 19, 10:40 PM
    • 64,860 Posts
    • 57,225 Thanks
    Thrugelmir
    • #9
    • 13th Jun 19, 10:40 PM
    • #9
    • 13th Jun 19, 10:40 PM
    - I have been getting very strong growth in this (76% over the past 3 yrs).
    Originally posted by Lucys Da
    Is this down to your own skills, those of the investment manager you've entrusted your money with, or simply good fortune. Investing has a nasty habit of providing unwelcome surprises. Never ever be complacent. There's good reason for the endless health warnings.
    “If the financial system has a defect, it is that it reflects and magnifies what we human beings are like. Money amplifies our tendency to overreact, to swing from exuberance when things are going well to deep depression when they go wrong. Booms and busts are products, at root, of our emotional volatility.”
    ― Niall Ferguson
    • Gsmit131
    • By Gsmit131 13th Jun 19, 10:50 PM
    • 1 Posts
    • 1 Thanks
    Gsmit131
    Worth checking, my DB scheme deducts 5% ( if retirement is granted pre 65 by the company ) for every year before the age of 65, does yours ? And factor in any potential changes to the scheme in the next 18yrs
    • Lucys Da
    • By Lucys Da 13th Jun 19, 11:21 PM
    • 13 Posts
    • 1 Thanks
    Lucys Da
    Is this down to your own skills, those of the investment manager you've entrusted your money with, or simply good fortune. Investing has a nasty habit of providing unwelcome surprises. Never ever be complacent. There's good reason for the endless health warnings.
    Originally posted by Thrugelmir
    Thanks for all the thoughts. A balance sounds probably a good call and it is my aim to drive the performance of my current pension as much as I can over the next 18yrs or so.

    My current scheme is run by Aviva but I make all the investment decisions and have never used the services of an investment manager.

    In terms of my pension I avidly study the markets and track all my investments and the performance of other funds available to me on a very regular basis (there are about 50 funds I can choose from and I have benefitted from strong performance in UK Small Company funds and various North American funds).

    My ISA has grown by over 50% in the same time and my a share portfolio I created 3 months ago has already increased by 10% and I’ve sold out on 5 of the 8 shares and banked the money.

    I’m no wiz and have benefitted from the markets like many investors have, but I do keep a very close eye on things and track the performance of everything weekly and look out for trends. I’m also happy to be ruthless and move my money if it’s not working or stops working to the level I want or my analysis shows a fund that has trends indicating better performance over an appropriate period of time ( min 6-12 mths).

    But I totally get that it can bite you on the !!!! and I’ve had some !!!! times where the funds have plummeted, but I know they’ll come back and history tells you that they do for the most part! I’ve seen an £18k swing in the last 2 weeks alone but I know why that happened and I know it’s a blip. So I try to react on the basis of long term trends and swings and not Mf Trump trying to start trade wars across the world!
    Last edited by Lucys Da; 13-06-2019 at 11:33 PM.
    • Albermarle
    • By Albermarle 14th Jun 19, 8:55 AM
    • 1,564 Posts
    • 997 Thanks
    Albermarle
    A balance sounds probably a good call and it is my aim to drive the performance of my current pension as much as I can over the next 18yrs or so.
    In fact having the DB scheme as a backstop , allows you to be braver with your DC investments .
    Probably if you transferred the DB scheme , into one bigger DC pot only , you would probably be more cautious .
    Worth checking, my DB scheme deducts 5% ( if retirement is granted pre 65 by the company ) for every year before the age of 65, does yours ?
    Most schemes do this ( sometimes it is only 4% ) but as you are getting the pension for longer it works out about the same as waiting to 65 in the end.
    • LHW99
    • By LHW99 14th Jun 19, 8:27 PM
    • 2,192 Posts
    • 2,047 Thanks
    LHW99
    Also I believe DB schemes are counted as 20 x income against the LTA, whereas DC pots count at actual value.
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