In addition to what @Andyblain said, a DC pension will survive you and your spouse and go to your dependents.
My main concern is that I’m going to sail through the LTA probably before I reach 59 even though I’m not paying anything in and haven’t for a long time now. I guess that’s a first world type of problem really, and I guess most people on here will be well provided for one way or another.
@IanB61 my brother is an IFA but his company wouldn’t even consider my request to look at my DB pension.
The Gold Standard thing is kind of a ‘sign up and show this piece of paper on your wall/website’ thing. An IFA firm with Chartered status and a PTS (pension transfer specialist) with years of advice behind them will suffice. They will all follow the FCA’s nine principles of their ‘Gold Standard’.
HH is absolutely correct to follow his own desire for ‘comfort’, security etc. That’s what’s important for him and he doesn’t need to do anything else.
Others are also correct in that taking the transfer option will be the right thing for them because of flexibility, investment growth, post death benefit for the family etc.
Everyone has the option to consider their options!
Yes that’s another conversation!. I’ve been trying to find a bit more info about that also but I assume that if I am paying a fortune for transfer if it ever happens the IFA will cover tax planning at the same time or at least I’ll ask
Have you considered that stock markets can go down as well as up?
Have you considered, and factored into your estimates, what happens if you get money out of a DB pension, and then invest it in overvalued stock markets, fizzed up by central bank funny money, that are at world record highs (way above the probable earning power of the shares/firms) just before a possible crash/credit crunch?
Would you do this if the amount in the DB pension was a lot bigger - or is it just a fund for having a fun gamble on the side to get a kick out of day trading?
I think the LTA is calculated on a cumulative basis (I took some money a few years ago and used about 10% of it then). When I get to 100% of it then it will apply to withdrawals after that, but that will be some time off or maybe never.
@IanB61 my IFA does tax planning and cash flow forecasts as part of the service, I guess most will if the amount invested and hence their fees allow this.
I don’t fancy having to manage my money in my 80s. Happy to have a known quantity into my bank each month. And if I go first, the Mrs still gets half of the pension.
Yes you can transfer out, but like all these things the fundamental question that needs answering is, how long will you live?
Once you know that, you are well on your way to deciding the answer.
I went through this a few months back. I was made redundant about a year ago and decided to retire. I’ve got fairly solid finances and don’t ‘need’ my DB pension. The DB pension’s worth a reasonable amount and the transfer value was significant.
I wanted to cash it in because:
a) It transfers to my wife/kids on my death; outside of my estate.
b) It gave me more flexibility
c) I have significant concerns about DB schemes long term- I suspect many of them will stay underfunded, companies will go under and the ‘pension protection fund’ may find it hard to cope.
d) I suspect future generations will be ‘lacking in sympathy’ towards the plight of ‘boomer-pensioners’ so if the PPF goes under in 2030 I don’t expect the tax-payer to help.
So I wanted all of my assets under my control.
I realised that the transfer sum wouldn’t let me buy an annuity that matched my pension (and I don’t want to buy an annuity anyway!), I also realised it would be taxable due to exceeding the LTA. I think I had a fairly good view of the risks of what I was doing.
However… my IFA would not handle a transfer out for me, even if I signed a disclaimer for them. This was after paying several thousand to carry out some planning work (they also took over management of some other funds for me). I suspect all the vultures that circled PPI now focussing on pension transfers (plus increased obligations) has them scared. A shame really.
I might try again in a year or so. Or I might start drawing my (reduced) pension a few years early; I find living off investments a little psychologically uncomfortable and a regular income would help my peace of mind (my calculations suggest it’ll only be once I’m in my 80s that I’m worse off through doing this- and who knows if I last that long!)
Any thought on costs @Jamiewednesday if you’re an IFA?. When I starting investigating I thought it should cost no more than £5,000. That now appears to be a large underestimate
That is a hypothetical issue which would arise whether you stay in a DB scheme or opt out. I guess that’s down to careful management of the pension pot. Care costs are another legitimate expense which people need to bear in mind when assessing if they can afford to buy out of a DB scheme or not. I have set up Financial Powers of Attorney, in response to your latter point.
Since I did this in 2018 it seems that regulations have tightened, and IFA’s are under increased pressure to authorise DB scheme buyouts, and fees have also increased.
Yes, but statistically many people on this thread will very likely live long enough to get to the point where they can’t cope with financial decisions.
At that point someone else will (hopefully) take over.
And then you really want to have that nice simple DB income linked to inflation.
Unless, of course, the person was correct above who said the big pension schemes might collapse one day.
But even then, my BT pension has a ‘Crown Guarantee’ of some sort, where the govt has some responsibility to help out, AFAIK.
