BIG decision to make!

[Nen2319]

Looking for some guidance pls as there seems to be some amazing helpful posters on here.

Hope this is the right board- if not pls advise.

So I’m 54 and just had a heart attack about 8 weeks ago which make me think about the future. I have a DB pension which was frozen 9 years ago and switched to a DC scheme which I continue to pay into approx 10k a year. I’ve worked for the company 35 years but I don’t really want to work another 11 years!

I asked for my transfer value and have been offered 650k to transfer.

The actual pension offer is as follows but the spouses pension is only 10k a year which is a major factor for the interest in transferring.

At 55. 21k a year
At 60. 26k a year
At 65. 33k a year

My SIPP with H&L has 100k in it and I have a 90k mortgage.

I have already asked about HYP and got some great answers but thought I’d go into a bit more detail in this question.

I’m having some professional guidance from H&L as I will have to given the size of the pot but then that means I have to invest it myself which is fine but also a bit scary especially in today’s political climate.

What are people’s experiences with this and can you offer any advice?

[EssDeeAitch]

I had a DB pension (smaller than yours) and received a 28 times multiple on the annual payout value at age 65. Anecdotally, a good friend of mine received a multiple of 26 on his (also smaller) DB pension.

The multiple offered to you is 20 and on my personal experience only, seems low so definitely more investigation needed.

[tjh290633]

I can see the point about the commutation rate, but presumably this combines DB and DC portions.

If your health is not good, an impaired health annuity might give a better figure, but at this time annuities are best avoided. In any case you get 100% spouse's pension if you are drawing down from a SIPP. As indicated elsewhere, 4% yield is easily obtained and the actual amount of annual dividends ought to increase ahead of inflation. Any excess income can be reinvested to enhance income in the future.

Tax levels and allowances will guide your thoughts on how much and when to draw down. Putting spare cash into ISAs can also be worthwhile to provide tax free income.

Just what you invest your money in is probably best discussed on specific forums.

TJH

[swill453]

I had a DB pension (smaller than yours) and received a 28 times multiple on the annual payout value at age 65. Anecdotally, a good friend of mine received a multiple of 26 on his (also smaller) DB pension.

The multiple offered to you is 20 and on my personal experience only, seems low so definitely more investigation needed.

That would depend a lot on what ages you and your friend were.

Scott.

[swill453]

I can see the point about the commutation rate, but presumably this combines DB and DC portions.

I would presume it's only the DB portion. Perhaps the OP can clarify.

Also is the DC portion distinct from "My SIPP with H&L"?

Scott.

[Nen2319]

Hi, the DB part was frozen 9 years ago and we moved to a new DC scheme so it’s completely separate.

I’m 54 now and being offered 650k to transfer from the DB scheme. So the way I see it I have 11 years to invest the money and at 65 see where I am. If it goes well I could look to retire early.

So if I got to say 1m and took 25% and left 750k, at 33k a year with no further investment performance it would last until I was 87. Bearing in mind I’d have the state pension from 67 as well.

[xxd09]

Some reading to be done!
This website,Monevator ,Books by John Bogle etc
A big step to move to self managing an investment portfolio from a works pension
Some parameters as guides
Asset Allocation- have your age in Bonds ie 54. = 54% Bonds in Portfolio
A million pounds would produce £30000 pa index linked - take more and capital at risk of depletion
Use Index linked funds like Vanguard-cheap and simple to follow-less stress!
Life Strategy Funds worth looking at -you could end up with one fund to manage plus a cash float(2years expenses)-Vanguard website-less stress!
H&L expensive-Interactive Investor work looking at
Take your time to get things right andGood luck
xxd09

[tikunetih]

Looking for some guidance pls as there seems to be some amazing helpful posters on here.

Hope this is the right board- if not pls advise.

The following is the best place to ask on this specific subject:
https://forums.moneysavingexpert.com/fo ... y.php?f=19

Please post your same question over there.

I’m having some professional guidance from H[&]L...

Our survey said... Uh! Uh!

[monabri]

Hopefully you will already have access online to your state pension forecasts (for both you & your partner) ?

If you haven't already, I would also check out "Class 3 Voluntary National Insurance" payments if you need to top up your state pension after leaving work - plenty of discussion on Class 3 Voluntary NI on The Lemon Fool boards if you search.

[BrummieDave]

Hi, the DB part was frozen 9 years ago and we moved to a new DC scheme so it’s completely separate.

I’m 54 now and being offered 650k to transfer from the DB scheme. So the way I see it I have 11 years to invest the money and at 65 see where I am. If it goes well I could look to retire early.

So if I got to say 1m and took 25% and left 750k, at 33k a year with no further investment performance it would last until I was 87. Bearing in mind I’d have the state pension from 67 as well.

Don't forget that the current DB value of £33k at 65 will be subject to compound indexing, likely to be CPI, over the next 11 years if left in the scheme. It will then continue to be indexed from when you are 65 of course, for however long you live.

If, and nothing is guaranteed, your CETV of £650k is invested and does indeed increase to £1m over the next 11 years, and if you take the maximum PCLS (currently 25%, but that could change), then using the current DB value of £33k at 65 years of age in your calculation above is not accurate in my view, as the DB pension will be significantly greater than £33k on your 65th birthday if you remain in the DB scheme (and would continue to increase annually thereafter).

[Dod101]

Hi, the DB part was frozen 9 years ago and we moved to a new DC scheme so it’s completely separate.

I’m 54 now and being offered 650k to transfer from the DB scheme. So the way I see it I have 11 years to invest the money and at 65 see where I am. If it goes well I could look to retire early.

So if I got to say 1m and took 25% and left 750k, at 33k a year with no further investment performance it would last until I was 87. Bearing in mind I’d have the state pension from 67 as well.

I am not sure what your question is but with £650,000 now you could think about early retirement, at say no later than 60 with a fair investment wind, depending of course on what your expenditure is likely to be. With any lump sum you do not want to be exposing it all to the stockmarket. I would say 90% would be reasonable proportion and the rest split between cash and a bond fund or two. From the stock market you should be able to get currently at least 4% even net of tax if you are likely to pay any.

Dod

[swill453]

Asset Allocation- have your age in Bonds ie 54. = 54% Bonds in Portfolio

That's only a view, and quite contentious.

I'm 58, with 0% in bonds, retired for 5 years and mostly living off investment returns.

Scott.

[Alaric]

I’m 54 now and being offered 650k to transfer from the DB scheme.

How much is the DC scheme worth on top of this and where is it invested?

Your DB benefits are likely to contain an element of indexation by reference to the RPI or CPI, so aren't static. I'd also suggest revisiting what is said about the spouse's pension since restricting it to £ 10,000 per annum is a most unusual rule,

[BrummieDave]

Your DB benefits are likely to contain an element of indexation by reference to the RPI or CPI, so aren't static.

As I said three posts earlier.

Joking apart, I think this is the most significant potential misunderstanding in the OP and subsequent illustrative calculations above. Throwing away compounding indexation of a secure income is a dangerous game, and is why many IFAs will no longer advise on CETV from DB schemes. The possible liabilities from future accusations of miss-selling outweighs the fees they make, so fewer and fewer are now willing to undertake such work.

[EssDeeAitch]

I had a DB pension (smaller than yours) and received a 28 times multiple on the annual payout value at age 65. Anecdotally, a good friend of mine received a multiple of 26 on his (also smaller) DB pension.

The multiple offered to you is 20 and on my personal experience only, seems low so definitely more investigation needed.

That would depend a lot on what ages you and your friend were.

Scott.

Quite so - but it was not such a big difference as to make the numbers a nonsense. But it is one of the many things to consider with this type of decision.

[swill453]

Throwing away compounding indexation of a secure income is a dangerous game, and is why many IFAs will no longer advise on CETV from DB schemes. The possible liabilities from future accusations of miss-selling outweighs the fees they make, so fewer and fewer are now willing to undertake such work.

Now that PPI claims are history, the ambulance chasers are desperate to find another cash cow. Transferring anything to a SIPP is enough to make them try to convince you that you can make a claim for compensation.

Scott.

[tikunetih]

The upshot of the above is that:

1. the OP is most unlikely to be transferring out of his DB scheme
2. and that is highly likely to be the most appropriate outcome for him


I am interested in the OP's reference to H[&]L. Hopefully nothing in relation to exploring the above is current being paid to them....

[BrummieDave]

If "H&L" (sic) are indeed HL, I'm not sure they still advise on DB transfers, and they wouldn't be my first port of call for such advice anyway.

Based on what info is contained in the OP, if the scheme offers early retirement at 55 at the value shown, or any age prior to 65 which I assume is the NRA for the scheme, then taking the DB early at some stage over the next few years is another option and one more likely to be advantageous in the long term compared to a CETV. This will preserve the DB indexation, maintain the spouse's pension, and the remove the inherent investment risk of transferring out. Taking the PCLS of 25% would add to the flexibility of this option too of course.

The SIPP can then be used flexibly (with inherent investment risk) to complement the guaranteed DB income.

This would give a nice blend of guaranteed monthly income and preserve the spouse's pension under the DB scheme, satisfy any desire to directly manage investments via the SIPP and PCLS of either/both the DB and SIPP, and enable HL to show various illustrations of what this would look like at various ages between 55 and 65.

Such a series of illustrations is what is what I would ask HL or any other IFA to show me.

[Nen2319]

Hargreaves want £10k to advise on DB transfer. With no promise of positive recommendation. Anyway. I’ve decided not to touch it and just concentrate on my DC pot and work with that whilst leaving the DB as my safety net.

Thx for all the brilliant answers and advice. Some really good people on here. Thx BrummieDave especially.

[tikunetih]

...I would ask HL or any other IFA to show me.

To clarify, because that sentence is a little ambiguous, HL are not IFAs.


Regarding the OP talking to H[&]L about the transfer, he may find aspects of this (lengthy!) recent thread relevant, as it's about someone paying HL for a Transfer Value Analysis:

https://forums.moneysavingexpert.com/sh ... ?t=6032686