BIG decision to make!

[BrummieDave]

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

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

Moot point tbh, HL are financial advisers: https://www.hl.co.uk/financial-advice and wether they are IFAs or not doesn't change the sentiment I was expressing.

But if you prefer: "Such a series of illustrations is what is what I would ask any financial adviser to show me."

[tikunetih]

Moot point tbh, HL are financial advisers: https://www.hl.co.uk/financial-advice and wether they are IFAs or not doesn't change the sentiment I was expressing.

Agreed, I was making that point independent of this thread's context or the point you were making...

Instead, it was to ensure that no one, as a side effect of having read this thread, erroneously gained the notion of HL being IFAs. Good to be vigilant on these things!

[Alaric]

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.

Until such time as you take any benefits from the DB scheme, you can always ask again for a transfer value. It's possible in the meantime that the Company will take a more aggressive view about de-risking its pension liabilities, in other words offer those with benefits over the odds to take them away.

You may also need to explore what if any enhanced benefits the DB scheme would offer to those in poor health.

[jonesa1]

I looked at the option of transferring out of a DB pension. In the end I stayed with the DB scheme and took early retirement last year (with quite a large reduction because of the early retirement discount). I also had some money in a DC scheme (resulting from closure of the DB scheme in 2011), plus some AVC investments and was able to take both of these as my tax-free lump sum (now invested, along with funds from an ISA) in ITs paying dividends). Transferring based on the CETV was very tempting, but in the end 2 things dissuaded me:
1) the high fee required by IFAs to make the transfer, plus insistence on signing up for expensive ongoing advice and management
2) a feeling that we're overdue an economic down-turn and concerns about sequence of returns risk (even though I hadn't heard that phrase at the time)

If I'd been able to transfer half the DB pot, I'd have done that, but it was all or nothing. If I'd known then what I think I know now (i.e. however little I know about investing, it's a lot more than I knew a year ago), I would probably have gone ahead and ditched the IFA & wealth management as soon as possible. I now have a core income (ca 2/3 of net income) that's partially protected from low levels of inflation (high inflation is now my main financial risk), topped up with dividends (which I hope will be more resilient re inflation).

If you do decide to transfer your pension, as others have mentioned it's getting increasingly difficult to find IFAs willing to take the risk, so probably best done sooner, rather than later, if that's what you want to do (bearing in mind it's an irreversible step). It's important to avoid being lumbered with significant ongoing costs, so make sure you can ditch the IFA and any additional services (such as wealth management) as soon as you can, which also requires you to have enough knowledge to sensibly invest and manage your own wealth (provided you keep it simple, that shouldn't been too difficult).

[Watis]

I've just been through this process with an IFA paid for by my DB pension provider, who wrote to me offering a telephone meeting with their chosen IFA to discuss my options.

It transpires that they are required by law to do this for everyone with a pension pot in excess of £30,000 but it was presented as if they were doing me a favour.

And I did wonder whether the pension scheme is looking to de-risk its pension liabilities as suggested by Alaric, given that the scheme is under water at this time.

Either way, the recommendation at the end of the 45 minute telephone meeting is to stay in the scheme.

Watis

[genou]

I've just been through this process with an IFA paid for by my DB pension provider, who wrote to me offering a telephone meeting with their chosen IFA to discuss my options.

It transpires that they are required by law to do this for everyone with a pension pot in excess of £30,000 but it was presented as if they were doing me a favour.

Watis

I think you'll find that advice is required to take more than 30k out of a DB pension, but there is no obligation on the pension provider / employer to pay for it. They were doing you a favour.

[BrummieDave]

I've just been through this process with an IFA paid for by my DB pension provider, who wrote to me offering a telephone meeting with their chosen IFA to discuss my options.

It transpires that they are required by law to do this for everyone with a pension pot in excess of £30,000 but it was presented as if they were doing me a favour.

Watis

I think you'll find that advice is required to take more than 30k out of a DB pension, but there is no obligation on the pension provider / employer to pay for it. They were doing you a favour.

Think we need to clarify the language here...

There is no 'pension provider' as such with a DB Scheme; in simple terms, there is the sponsoring company (ie the employer, who ultimately has responsibility for funding the scheme), an administrator (ie the third party that manages the scheme and pays out the monthly pension payments), and the scheme trustees (ie the appointed body of individuals who comprise a board, and oversee all aspects of the scheme on behalf of the members, be they retired, deferred or active, and are subject to legal frameworks and other formal governance, as well as oversight by the Pensions Regulator). I could expand as I'm sure others could, but this is a reasonable illustration of who does what.

It is true that for any CETV greater than £30,000 the law dictates that the trustees must see evidence that the member has sought financial advice from a registered adviser prior to making their decision. The adviser may advise against taking the CETV and the member decide to go ahead anyway, but either way the trustees must see evidence that advice was sought and guidance given, even if ignored.

Trustees sometimes also make arrangements for members approaching retirement to have a discussion with a preferred company of financial advisers, selected so they can become familiar with the scheme rules and options at retirement and thus provide a useful service to the scheme members, and may have reached agreement that this initial consultation is free, perhaps with any subsequent, deeper engagement between the member and financial advisers being paid for by the member, often at contractually reduced rates, and possibly paid for out of their pension up to a pre-defined limit (ie taken from their lump sum).

As DB schemes are relatively straightforward, such arrangements are more often put in place for DC schemes where there is now greater flexibility and choice of how a pension can be taken of course (annuity, flexi-drawdown, cash lump sums etc.). I mention this because many members of DB schemes are also members of DC schemes with the same employer, due the the DB scheme being closed and employees then joining the DC section of that same employer's scheme. Hence the advisers can give illustrations of different tunes that can be played using the combined DB and DC pensions at retirement.

Finally, and whilst in theory it is limited to DC pensions, I would strongly advise anyone with any questions to seek answers from Pensionwise, the government funded agency. If you are aged 50 or over, you can have a free 30 minute consultation over the phone or face to face, and also they have a very good webchat facility (that I often use) with direct access to pension experts who in my experience are very knowledgable indeed, and can clarify the complex tangle of options and associated limitations that recent pensions legislation has created. I am often very surprised at how few people are aware of this service: https://www.pensionwise.gov.uk/en

All of the above is simplified, so any experts out there could pedantically pick holes I'm sure, but nevertheless I hope it's useful to some readers.

[SoBo65]

I am no expert, but even if you took the £660k (£650k plus £100k less £90k mortgage) and divided by say £25k per annum, that would last 26 years, before you factor in any investment returns......... I agree the £10k spouse pension is a big factor.

[Nen2319]

I am no expert, but even if you took the £660k (£650k plus £100k less £90k mortgage) and divided by say £25k per annum, that would last 26 years, before you factor in any investment returns......... I agree the £10k spouse pension is a big factor.

I agree it sounds great but the problem starts when the market takes a plunge and you lose 20% . Imagine the stress??

[xxd09]

Stress is a problem-maybe more for you after one heart attack
Have at least 2 years living expenses in cash-maybe 3-4 years in your case-you can then ride out market falls
A conservative Portfolio will lesson stress-does not jump about so much-makes you less inclined to panic and sell.
I am 73(16 years retd)-Portfolio is 30% Equities,65% Bonds and 5% Cash
You are at the start of your investment journey-take your time-a year or two at least -a lot of learning to do
xxd09

[Gan020]

I am no expert, but even if you took the £660k (£650k plus £100k less £90k mortgage) and divided by say £25k per annum, that would last 26 years, before you factor in any investment returns......... I agree the £10k spouse pension is a big factor.

I agree it sounds great but the problem starts when the market takes a plunge and you lose 20% . Imagine the stress??

Yes but that's the purpose of holding some bonds in an investment portfolio. The returns are lower but carry far less risk. As a very broad comment if you hold 50% in bonds and the market falls 20%, your portfolio will only fall around 10%.

Perhaps my own sitution may illustrate. I retired at 50 with 0% in bonds and 100% in equities and knew I had to change the balance of my portfolio. 2 years on I am 12% in bonds, 1% in cash and the rest in equities.

My equity portfolio is unbalanced and skewed towards UK construction and banking stocks. The part of the equity portfolio that was supposed to provide some protection to the UK has been too exposed to Trump's trade war with China. My portfolio is down 20% in the last 3 months but still 12% up year to date. That's telling me what I already know in that I should continue to cut my risk and buy more bonds.

In order to sleep well I need to raise my bond percentage to at least 30%. I have found it difficult to implement my plan to buy more bonds as the returns on equity always seem to pull me towards them. It's a balance that each individual needs to strike depending on their personal circumstances.

[swill453]

My equity portfolio is unbalanced and skewed towards UK construction and banking stocks. The part of the equity portfolio that was supposed to provide some protection to the UK has been too exposed to Trump's trade war with China. My portfolio is down 20% in the last 3 months but still 12% up year to date.

Meanwhile a basket of investment trusts would continue grinding out the dividends, quarter after quarter, with inflationary increases.

That's telling me what I already know in that I should continue to cut my risk and buy more bonds.

It's not telling me that, but each to their own

Scott.

[BrummieDave]

And I did wonder whether the pension scheme is looking to de-risk its pension liabilities as suggested by Alaric, given that the scheme is under water at this time.

Two things the trustees may agree to when requested by the sponsor as mechanisms to derisk the overall scheme liabilities are a 'Pension Increase Exchange' (PIE) exercise where members are offered a single uplift to their pension in return for losing the annual indexation, and a 'Winding-Up Lump Sum' exercise where members with small pensions are offered a single payment and then leave the scheme.

Both share the objectives of reducing scheme liabilities by reducing or removing longevity risk and inflationary risk, whilst giving members, particularly with those with small pensions, an additional option they may welcome.

I don't think this is O/T as it relates to the above comment by Watis and other comments further up the thread, and may help some to understand some of the features of DB schemes that they may come across.

[Nen2319]

Stress is a problem-maybe more for you after one heart attack
Have at least 2 years living expenses in cash-maybe 3-4 years in your case-you can then ride out market falls
A conservative Portfolio will lesson stress-does not jump about so much-makes you less inclined to panic and sell.
I am 73(16 years retd)-Portfolio is 30% Equities,65% Bonds and 5% Cash
You are at the start of your investment journey-take your time-a year or two at least -a lot of learning to do
xxd09

I’m lucky. It was very minor with no damage. Thx for your words of wisdom. Really appreciate it. My thinking now is to use my DC money 100k to pay into my DB scheme to get at least 100k pcls and 30k a year. I’ve asked for the figures so let’s see.

[Hariseldon58]

An interesting question that has drawn a lot of sensible responses.

I noted the remark about investing the 650k and growing to a £1m over 11 years.

My situation was a similar sum in late 2007 ( about £800k) and 12 years on , it has supported a comfortable life style since and has grown to about £2m ( largely in Equities)

This might sound encouraging to the OP but.....

I had the benefit of almost 20 years previous investing to get the majority of the 800k or so and I was lucky.

The lucky bit came after the nasty shock of 2007-2009 bear market where the 800k almost halved to 400k plus , that’s never going to be pleasant, my investment choices worked out well in the recovery and I would like to think that was great investment skill, with the hindsight it was mostly luck, the ability to keep my nerve and a minute amount of investment judgement.

For the OP, it could be very uncomfortable..... the outlook going forward with the present market valuations, low interest rates etc must make the DB pension an attractive option.

[Nen2319]

Maybe another option is to transfer my DC pot into my DB pot which is allowed and then start taking the pension at 55 inc the tax free lump sum to pay the mortgage. Then increase my salary contribution to match what I’m getting from the DB. This would pay the mortgage off which saves me £850 a month whilst I could reinvest in my ISA. Does anyone see any Benefit in that?

[flyer61]

Nen2319

be very careful with this. If the DB scheme runs into trouble you could lose heavily. Seen it a number of times.

[Nen2319]

Nen2319

be very careful with this. If the DB scheme runs into trouble you could lose heavily. Seen it a number of times.

Thx. Good point but the fund is in surplus so hopefully ok !

[jonesa1]

Maybe another option is to transfer my DC pot into my DB pot which is allowed and then start taking the pension at 55 inc the tax free lump sum to pay the mortgage. Then increase my salary contribution to match what I’m getting from the DB. This would pay the mortgage off which saves me £850 a month whilst I could reinvest in my ISA. Does anyone see any Benefit in that?

I think I'd be inclined to keep DC and DB pots separate, unless the DB Ts&Cs, including the extent of inflation proofing, are compelling. The DB will ultimately provide a secure base, the DC gives you additional flexibility (not a one-off decision about taking a lump sum) and some scope for dealing with the unexpected (such as inflation running ahead of the maximum DB linkage, or an unforeseen need for a lot of cash).

[Nen2319]

Well it’s certainly not an easy decision to make and nor should it be! Thx for your answers and suggestions!!!