Pension advice, Keep DB or move to AVC
Discussion
Hi,
Can any of the finance guys confirm what seems clear cut to me?
Have been in a employers career average scheme for the last 5 years, making contributions every month. In addition when I joined the scheme I bought with me a separate pot from an old pension (circa 5k) which was added as an AVC.
I have now come out of that scheme.
The valuation sits as follows
Deffered benefit
Members total pension at date of leaving £3863pa
Transfer value £43200
Also a mention of post 1997 section 92B at £35400
AVC £7814 (i'm guessing this is the 5K I brought with me).
I have a letter from my new pension provider confirming the total transfer value is 43200 (so thats the 35K plus the 7K AVC)
If I decide to transfer it will go into a system called BRASS and be invested.
Isn't that basically turning that guaranteed £3863 a year into a defined contribution type deal where I don't know what I'll come out with?
Should I stick or twist?
Thanks
Rick, age 34.
Can any of the finance guys confirm what seems clear cut to me?
Have been in a employers career average scheme for the last 5 years, making contributions every month. In addition when I joined the scheme I bought with me a separate pot from an old pension (circa 5k) which was added as an AVC.
I have now come out of that scheme.
The valuation sits as follows
Deffered benefit
Members total pension at date of leaving £3863pa
Transfer value £43200
Also a mention of post 1997 section 92B at £35400
AVC £7814 (i'm guessing this is the 5K I brought with me).
I have a letter from my new pension provider confirming the total transfer value is 43200 (so thats the 35K plus the 7K AVC)
If I decide to transfer it will go into a system called BRASS and be invested.
Isn't that basically turning that guaranteed £3863 a year into a defined contribution type deal where I don't know what I'll come out with?
Should I stick or twist?
Thanks
Rick, age 34.
Rick,
Basically, what you're asking is, is the cast iron guarantee of 3.5k or so worse than the chance of getting 4k or so.. or, on the other hand, better than ending up with 3k or so.
Set that aside for one moment. The question is this.. how much are you going to need, and by when. Think how you'd like your money to be delivered when you envisage retiring. The issue is not simply growing a pension fund that's as large as you can make it for the sake of it, rather, identifying what retirement is going to look like, and when, and extrapolating backwards to a point now that allows you to clearly define how you can best meet that objective.
That might mean you keep the existing fund where it is, in the CARE pension you have, or, if you have no choice in the matter, and you have to move it anyway, what funds are best placed for you in the new scheme. Instinctively, if I were sitting down with you, I'd ask why you couldn't keep it where it was and use that as the core - along with the state pension(s) - income for you (both?) in retirement and start afresh from here.
Let's assume (and in very general rounded terms) then, that you (both) want £35k pa in retirement, by aged 68. Let's assume for the moment too, that your existing personal and state provision will bring you 12k pa, and your partner's, if any, a further 8k. Your shortfall is therefore, 15k pa, to be achieved over the next 34 years. The question isn't should you transfer, but consider how that money is going to be delivered to you, in the most tax efficient and 'safe' manner, and what you have to do, in concert with your other life planning financial objectives, to achieve that.
It might be that you decide to throttle a little back on your pension contributions and add to a non working partner's retirement provision, it might be that you add an inheritance into the mix, or it might be that if you want to retire earlier than the BRASS scheme allows without an actuarial reduction of your benefits, you start personal provision which is independent and allows (currently) earlier access than the train drivers scheme (I am assuming, I had to look your scheme up).
The first point is important; if, as anticipated, George Osborne pledges to creep the personal allowance up to £12,500 per annum by the end of the next Parliament. A-typically, many coupled clients usually have one member who has all the retirement income in their name, and the other partner has very little. Consequently, the one partner who has all the loot gets taxed over the annual personal allowance whilst that same allowance goes begging in their partner. It isn't just about what you make, it's about what you keep.
In infantry terms (my previous proper career) there was never any point in setting out on a mission unless you spent countless hours and hours painfully defining the objectives, the contingencies, the possibilities and the threats. Only when you've done that, can you ask yourself if what you're doing now is the best course of action. That thinking, that sense of planning, can lead to some broad minded considerations such as which tax wrappers can you use and in what proportions, to what level of risk, etc.
That probably doesn't answer your question, but if it gets you thinking, it's a start. No one here can tell you whether or not to move it, because you and your needs, wishes and feelings are unique. So, another mil-ism is this (I'm full of them). Whenever lost whilst leading men, I was taught to sit down and just have a brew and think about anything other than the map, and erm, being lost. Unless of course, the brown stuff was about to hit the fan. So, on that basis, don't think about the pension, just think about what you'd like to achieve.. and then revisit what you should do with it, good luck.
Now, if anyone can help me about my question I'm going to put in the DIY section about oak floors, I'd be grateful!
Basically, what you're asking is, is the cast iron guarantee of 3.5k or so worse than the chance of getting 4k or so.. or, on the other hand, better than ending up with 3k or so.
Set that aside for one moment. The question is this.. how much are you going to need, and by when. Think how you'd like your money to be delivered when you envisage retiring. The issue is not simply growing a pension fund that's as large as you can make it for the sake of it, rather, identifying what retirement is going to look like, and when, and extrapolating backwards to a point now that allows you to clearly define how you can best meet that objective.
That might mean you keep the existing fund where it is, in the CARE pension you have, or, if you have no choice in the matter, and you have to move it anyway, what funds are best placed for you in the new scheme. Instinctively, if I were sitting down with you, I'd ask why you couldn't keep it where it was and use that as the core - along with the state pension(s) - income for you (both?) in retirement and start afresh from here.
Let's assume (and in very general rounded terms) then, that you (both) want £35k pa in retirement, by aged 68. Let's assume for the moment too, that your existing personal and state provision will bring you 12k pa, and your partner's, if any, a further 8k. Your shortfall is therefore, 15k pa, to be achieved over the next 34 years. The question isn't should you transfer, but consider how that money is going to be delivered to you, in the most tax efficient and 'safe' manner, and what you have to do, in concert with your other life planning financial objectives, to achieve that.
It might be that you decide to throttle a little back on your pension contributions and add to a non working partner's retirement provision, it might be that you add an inheritance into the mix, or it might be that if you want to retire earlier than the BRASS scheme allows without an actuarial reduction of your benefits, you start personal provision which is independent and allows (currently) earlier access than the train drivers scheme (I am assuming, I had to look your scheme up).
The first point is important; if, as anticipated, George Osborne pledges to creep the personal allowance up to £12,500 per annum by the end of the next Parliament. A-typically, many coupled clients usually have one member who has all the retirement income in their name, and the other partner has very little. Consequently, the one partner who has all the loot gets taxed over the annual personal allowance whilst that same allowance goes begging in their partner. It isn't just about what you make, it's about what you keep.
In infantry terms (my previous proper career) there was never any point in setting out on a mission unless you spent countless hours and hours painfully defining the objectives, the contingencies, the possibilities and the threats. Only when you've done that, can you ask yourself if what you're doing now is the best course of action. That thinking, that sense of planning, can lead to some broad minded considerations such as which tax wrappers can you use and in what proportions, to what level of risk, etc.
That probably doesn't answer your question, but if it gets you thinking, it's a start. No one here can tell you whether or not to move it, because you and your needs, wishes and feelings are unique. So, another mil-ism is this (I'm full of them). Whenever lost whilst leading men, I was taught to sit down and just have a brew and think about anything other than the map, and erm, being lost. Unless of course, the brown stuff was about to hit the fan. So, on that basis, don't think about the pension, just think about what you'd like to achieve.. and then revisit what you should do with it, good luck.
Now, if anyone can help me about my question I'm going to put in the DIY section about oak floors, I'd be grateful!
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