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Small DB Pension Transfer or not?

IronHorse
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Small DB Pension Transfer or not?

#207269

Postby IronHorse » March 12th, 2019, 7:28 pm

Hi There

I have a really small DB pension from an employer many moons ago and I recently looked into transferring it out of the current scheme and into a SIPP that I have already.
However after doing a bit further research I'm not quite sure whether its a good idea, its CETV was only sub 20k so I don't legally have to get IFA involved but as its very small is it worth doing at all?
Of course ultimately its my decision what I do but I wonder what anyone else would do in this situ, as I far as I know there is no benefit loss and there are no fees for the transfer and its roughly 66 x income.

I'd be grateful for any views on this.

Jabd2001
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Re: Small DB Pension Transfer or not?

#207380

Postby Jabd2001 » March 13th, 2019, 10:26 am

Can you give a few more figures?
What are the benefits - how much income payable at what age (and how old are you now)? - spouses pension? Inflation increases?
What is the exact transfer value?

What is your overall financial position/retirement funding like?
What would you do with the money if you cashed it in?

IronHorse
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Re: Small DB Pension Transfer or not?

#207468

Postby IronHorse » March 13th, 2019, 4:37 pm

Jabd2001 wrote:Can you give a few more figures?
What are the benefits - how much income payable at what age (and how old are you now)? - spouses pension? Inflation increases?
What is the exact transfer value?

What is your overall financial position/retirement funding like?
What would you do with the money if you cashed it in?


Tbh I'm not that clear on exactly what the benefits there are other than a fixed sum of £312 pa, I'm 50 now, spouses pension is not applicable, not sure what you mean in regards to inflation increases in what context?

The transfer value is £20,655.03 guaranteed for 90 days.

Overall financial position is ok/average no large debt or mortgage a couple of ISA's and a SIPP.

Obviously can only transfer until I get to 55 so wont be cashing in as such I presume you meant that, just was thinking adding it to my SIPP but as is very small amount is it actually worth it that's all.

Alaric
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Re: Small DB Pension Transfer or not?

#207474

Postby Alaric » March 13th, 2019, 5:08 pm

IronHorse wrote:Tbh I'm not that clear on exactly what the benefits there are other than a fixed sum of £312 pa


Rule changes over recent years mean that it's unlikely to be fixed and likely to contain a spouse's pension. More likely it would be revalued before and after retirement with capped CPI or RPI.

Perhaps a key point is whether you would find an extra £ 20,000 in the SIPP useful.

ursaminortaur
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Re: Small DB Pension Transfer or not?

#207627

Postby ursaminortaur » March 14th, 2019, 10:39 am

Alaric wrote:
IronHorse wrote:Tbh I'm not that clear on exactly what the benefits there are other than a fixed sum of £312 pa


Rule changes over recent years mean that it's unlikely to be fixed and likely to contain a spouse's pension. More likely it would be revalued before and after retirement with capped CPI or RPI.

Perhaps a key point is whether you would find an extra £ 20,000 in the SIPP useful.


The transfer value seems to be pretty good. £312pa is only about 1.51% of £20655.03. For comparison if at 55 you wanted to purchase a joint life annuity with 3% growth then current figures from HL show that

https://www.hl.co.uk/retirement/annuities/best-buy-rates

£100,000 would give an income of £2,291 so £20,000 would give an income of £458.20pa

Note that is just for comparison I'm not suggesting that you purchase an annuity at 55.
The downside is that you are giving up a high level of certainty with the DB by transferring and taking on the risk yourself. But the amount is relatively minor and you are already used to investing in a Sipp. You have at least another 5 years in which to grow the transferred amount in the SIPP and when in drawdown it shouldn't be too difficult to sustain your capital and still drawdown over 1.51%. The traditional sustainable withdrawal rate is supposedly 4% though many people nowadays think that is too high 1.51% should certainly be achievable.

Hope those few thoughts help.

IronHorse
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Re: Small DB Pension Transfer or not?

#207711

Postby IronHorse » March 14th, 2019, 5:02 pm

Thanks All for your detailed replies, reassuring that it might be worht looking into further.


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