£700k pension pot dilemma.

[ghamer]

The pot is in a DB scheme but I no longer work at the firm since becoming self employed.I am unsure whether to leave it be or take it and reinvest to try and maximise for retirement.I'm 45 and want to retire in 10 years.Any advise from you wise lot would be appreciated.

Thanks

[bitchstewie]

I thought the rules around DB pensions made it next to impossible to "take it"?

[ghamer]

O bugger I thought I was allowed to move it to another vehicle?

[Carbon Sasquatch]

Where did the £700k valuation come from ? Is that 20x the expected annual payout or did they provide a transfer value ?

You can move to a DC scheme, but need a financial adviser, with the right qualification & insurance to confirm its the right decision for you - and there's increasingly few in this market due to high claims levels of poor advice.

It may or may not be a good idea - lots of factors, age, marital status, dependents, life expectancy etc etc

I decided to leave mine DB & then build a decent enough DC + SIPP + ISA pot to bridge the gap between when I want to retire & when the DB & state pensions kick in.

You may also be able to start the DB early at a lower rate.

[ghamer]

Yep I received a transfer value when I left the company as I was interested in other avenues of growth but shelved the idea as I got cold feet.

[Carbon Sasquatch]

You can move it to a DC scheme but not another DB scheme - so it depends whether you value the spouse pension & indefinite term over the pot that you can leave to your spouse / kids.

No right answer

[timberman]

ghamer said:

Yep I received a transfer value when I left the company as I was interested in other avenues of growth but shelved the idea as I got cold feet.

You need to compare the transfer value with what your Db pension is forecast to pay when you retire and see if it still looks attractive,

i.e. if your forecast is £15K a year then you could argue that £700k would give you the equivalent of over 46 years money if you were to transfer,

but you also need to consider that DB pensions will increase every year inline with inflation + tend to include other benefits, like a spouse pension when you pass away and they are generally stress free, in that someone else takes all the risk and you just sit back while they stick money in your bank every month.

on the other hand, transferring means you can invest how you see fit + if the investments grow at a better rate than inflation you may actually end up achieving a higher income than if you'd not transferred,

also when you die your entire pot can be left to your kids which is not possible with a db pension and you can tailor your pension to suit your lifestyle, ( take more in the early years and reduce income later when state pension kicks in and you cut back on activities ).

this is obviously a very basic insight and there are many things to consider including different strategies possible with either option to achieve your goals,

with that amount of money you will have to consult with an IFA to get a report and recommendation,

this is getting more difficult but it's still possible

If the recommendation is not to transfer,
because you have complied with regulations and taken expert advice you don't have to accept the advice and can still transfer but may struggle to find anyone to take your money, this is because many pension providers are reluctant to accept any transfer that hasn't had a positive recommendation.

If you get a positive recommendation and transfer, or don't and manage to find someone to take the transfer without a recommendation there is nothing to stop you transferring again to your preferred provider once you have completed, but you need to be aware some charge an exit fee for transferring out which can be as high as 10%.


I think the best place to start would be to sit down and read whatever you have relating to your DB pension including any benefits and future projections,
consider what you want your future to look like and how that fits then see how it compares with what you could achieve by transferring.

taking advice will be expensive, often a percentage of your pot which in your case could well run to over £10k and you will have to pay whether you transfer or not so, you really need to have a good idea of what you want before you start the process.

most decent IFA's will quite happily sit down with you and discuss the pros and cons in an upfront meeting without you having to engage their services, which could sway you one way or the other before any money changes hands so worth the effort.

[GT03ROB]

As others have said it can be done but it is not a quick or guaranteed process.

I've just started the process. On the face of it to me it makes sense to do, but we are working through the options & scenarios to see if it makes sense.

It's important to be aware that transfer values are currently on the face of it attractive (there may well be a reason for that!) & it's only going to get harder going forward to make transfers work.

[Meeten-5dulx]

I did this at the end of 2019 - am at a similar age to you. I thought about it in 2018 but kicked it to the curb at that time.
IFA's said it was unusual for someone of this age to be looking to move from a DB scheme.

Talked to 3 IFAs , they all passed me on the criteria of being able to move out of the DB scheme.
Then it came down to whom I was most comfortable with as I view this as a longer term “relationship “.

Ended up taking it out at the end of 2020, investing in the market in 2021 and seeing values plummet as Rona hit global markets....

At the time it was sickening, but a year in and the pot has increased considerably.

Talking to my IFA he is a lot more stringent on clients he takes on board and mentioned how much his insurance costs have increased. This partly explains the high initial charge. Consider there are ongoing charges that endure as well.

Overall I’m happy as I now have the option to retire earlier without actuarial reduction which could have reduced the pot considerably, as well as the pot being able to pass on to wife / kids sans IHT. For me it was the term 'family wealth' that made a large impact. Obviosuly you are forgoing an enduring income, and associated benefits, but that was all considered and I opted to move, (hopefully) knowing all the risks that it entails.

Happy to pass on my IFA details if you want a chat, no kick back or anything, just someone that in the 2.5yrs that I’ve know him has helped me and some others I know considerably.

Edited by Meeten-5dulx on Tuesday 23 March 08:32

[Mabbs9]

ghamer said:

The pot is in a DB scheme but I no longer work at the firm since becoming self employed.I am unsure whether to leave it be or take it and reinvest to try and maximise for retirement.I'm 45 and want to retire in 10 years.Any advise from you wise lot would be appreciated.

Thanks

Most of what you ask has been covered. The fees changed recently, late last year. That means there's a large fee for this specific advice, which is necessary for the process. A pre-process should be able to establish if you're likely to be recommended to move your pension. This will reduce the risk of a huge fee to be told you're advised to leave it where it is.

More significantly is your age. Only maybe 2 or 3 advisors are insured to advise a move from DB at your age. (The industry can smell a miss-selling scandal).I know this because I'm close to your age and did a partial switch recently.

I can't offer advice, but if I were self-employed, I'd enjoy knowing a DB portion was there to back me up.

Good luck.

Eta, have a look at your DB inflation protection and compare that with how much growth would be required in a pot to match that minus fees.

Edited by Mabbs9 on Tuesday 23 March 07:23

Edited by Mabbs9 on Tuesday 23 March 07:32

[ghamer]

Pistonheads at it's very best,some fantastic advice just what I needed.

Thanks all,I now have some thinking to do.

[NickCQ]

Lots of great advice on this thread, perhaps the one thing that hasn't been mentioned is that you should have a look at your former employer and the scheme's solvency and creditworthiness. If you have a large pension and the scheme becomes insolvent your benefits would take a haircut if it were transferred to the Pension Protection Fund. The employer guarantees the scheme but if there is a funding shortfall and the employer goes bust the pensioners are in a tricky situation.

BA is one example that comes to mind.

[Welshbeef]

NickCQ said:

Lots of great advice on this thread, perhaps the one thing that hasn't been mentioned is that you should have a look at your former employer and the scheme's solvency and creditworthiness. If you have a large pension and the scheme becomes insolvent your benefits would take a haircut if it were transferred to the Pension Protection Fund. The employer guarantees the scheme but if there is a funding shortfall and the employer goes bust the pensioners are in a tricky situation.

BA is one example that comes to mind.

Isn’t the PPF guaranteed to 90% - so a risk of 10%.

[NickCQ]

Welshbeef said:

Isn’t the PPF guaranteed to 90% - so a risk of 10%.

I think the risk is greater than that for the scheme's highest earners (i.e. if you were top management) but I may of course be wrong on that.

[Mr Whippy]

Welshbeef said:

NickCQ said:

Lots of great advice on this thread, perhaps the one thing that hasn't been mentioned is that you should have a look at your former employer and the scheme's solvency and creditworthiness. If you have a large pension and the scheme becomes insolvent your benefits would take a haircut if it were transferred to the Pension Protection Fund. The employer guarantees the scheme but if there is a funding shortfall and the employer goes bust the pensioners are in a tricky situation.

BA is one example that comes to mind.

Isn’t the PPF guaranteed to 90% - so a risk of 10%.

Probably lots of fine details to consider.

In the current climate I’d definitely take proper advice.

[GT03ROB]

Mr Whippy said:

Welshbeef said:

NickCQ said:

Lots of great advice on this thread, perhaps the one thing that hasn't been mentioned is that you should have a look at your former employer and the scheme's solvency and creditworthiness. If you have a large pension and the scheme becomes insolvent your benefits would take a haircut if it were transferred to the Pension Protection Fund. The employer guarantees the scheme but if there is a funding shortfall and the employer goes bust the pensioners are in a tricky situation.

BA is one example that comes to mind.

Isn’t the PPF guaranteed to 90% - so a risk of 10%.

Probably lots of fine details to consider.

In the current climate I’d definitely take proper advice.

You don't have a choice these days!

[Mabbs9]

Welshbeef said:

Isn’t the PPF guaranteed to 90% - so a risk of 10%.

The PPF has a cap. Although it's been challenged. It could be a very big drop in pension for some.

[NickCQ]

Mabbs9 said:

The PPF has a cap. Although it's been challenged. It could be a very big drop in pension for some.

Thanks, that's what I must have been thinking of wrt the risk for higher earners.

[Mabbs9]

NickCQ said:

Thanks, that's what I must have been thinking of wrt the risk for higher earners.

Your example of BA is a very good one.

Edited by Mabbs9 on Tuesday 23 March 10:53

[cloud_dog]

AJ Bell will still take insistent clients, if that is the route you end up going down