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Options

Including Financial Independence and Retiring Early (FIRE)
chrissyr
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Options

#266620

Postby chrissyr » November 23rd, 2019, 9:11 pm

So I'm again looking at withdrawing my db pension and have been discussion option with a financial company.
They have had info from my pension provider that I could take a part pension which as far as I can calculate is a exchanging £200k for £5.6k pension (so about 2.75% return).
So my questions are
- does this looks reasonable it would be indexed linked (to 5%) and has a reduced spouse payment in death
- The 200k represents about 1/3rd of pension to be invested so do I count that as a guaranteed/guilt investment so be a bit more 'risky' with the rest? Just as an example , and not saying what I would do, invest in Vanguard lifestyle 80 rather than VLS 60 or 40 - hope the concept comes across.
- Because of the odd calculation mismatch between what hmrc consider the value ie x20 and what the provider would payout ie x35 the cash value would be some £85k less and so reduce the tax free amount by about 10%

Although I see the benefits of the secured income it does come at quite a cost. And complicates things.
Any thoughts or advice?

Chris

Chrysalis
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Re: Options

#266667

Postby Chrysalis » November 24th, 2019, 8:22 am

Sorry I’m confused about the situation you’re describing, and also would need more information.
What is the nature of the current DB pension? How much is the pension, what is the retirement age, how old are you and do you have a spouse, are you in good health?
What exactly are you trying to do? What is the financial company trying to offer you? Are you trying to transfer your DB pension into an invested pension pot, and what is the £200k for £5.6k pension - is that a part annuity? Do you have a CETV for the pension? (Cash equivalent transfer value)

And are with the reduction of tax free cash is that because you exceed the lifetime allowance?

Trying to make sense of the pieces of information you’ve given, I may well have misunderstood what you’re trying to do and what the role of the financial company is.

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Re: Options

#266670

Postby Chrysalis » November 24th, 2019, 8:32 am

So I’ve had a look at your previous thread here:
viewtopic.php?f=30&t=13893&p=170052#p170052
Some useful answers in there, I thought.

So yes you are looking to transfer the pension out. I’m not sure who is providing the £5.6k annuity or what options you have around that. Agree that on the face of it transferring out and buying an annuity doesn’t make sense. Especially buying an annuity at age 55. Secured income is great, totally risk free, but you’ve already got that with the DB.
I’m also not clear what your other assets are, how risk averse you are etc etc.
I note you were quoting 1% contingent fee for your financial adviser and 1.5% fee for ongoing management. These are high fees, would you be planning to manage the pension yourself? Are you getting good, balanced advice which outlines the pros and cons?

chrissyr
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Re: Options

#266738

Postby chrissyr » November 24th, 2019, 12:24 pm

Hi and thanks for the replies.

It is a db pension which I am looking to move out as I see it being a more flexible option and leaving some money to my children is one of the key goals. Having such a large part of our wealth all in one pot is also a bit of a concern.

I received a new cetv value this year and that had taken the values up to x35 (based on me taking the pension now at 56).
The £5.6k would be a part of the db pension(so index linked, reduced spouse pension). The pension is split into 3 section (as the rules changed over time) and they allow you take them independently. This is the first two parts together with the bulk of the value in the last part (approx a 5/25/70 split).

Just out of interest I did do an online annuity check just to see what the 200k would give and this came out at about £9k with Aviva but assume that would not have the index linking etc.

I was going to see if I could not draw the first parts and let them mature to when I am 60 as this would add a further 15% plus rpi - plus it's a safety net for the invested part.

One drawback of taking it this way is impact on any tax free allowance I would get (this can range from 150 to 230k depending on what options I take).

It's just getting bit more complicated with these new options. Again thanks for your ideas and opinions.

C

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Re: Options

#267504

Postby Hariseldon58 » November 26th, 2019, 8:50 pm

Ummmm... the default position is to do nothing unless you are convinced it’s a good deal, that’s clearly not the case.

Is the financial product you are offered with the 5.6k yield an annuity ? If not what is it, is it some form of insurance life bond ?

chrissyr
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Re: Options

#268199

Postby chrissyr » November 29th, 2019, 8:52 pm

Hi all

The 5.6k would have been as a part payment of the dB pension ie index linked, spouse pension etc.


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