Not all DB funds are suitable. The pension I will receive next year when I retire will be £1500 p.a for a CEV of £112k ( it was £146k, 3 years ago). It would work out better for me to transfer it out and purchase an annuity.
Hello Thank you for your comment. Unfortunately however, you have some duff information there. One of those figures, at least, is wrong. A DB of c.£1,500 per annum would have a CETV now of c.£25-30k, not £112k. Perhaps you are looking at the income at the date you retired, and not the income revalued to now. It will never be remotely worth transferring out of a DB to buy an annuity replicating the benefits, unless you can get an enhanced annuity. I would ask for an Immediate Retirement Quote from your Scheme, that will show you the annual income they'd pay you now. If that CETV value is correct, then your quote will probably be c.4.5-6.5k per annum
"I have a pension from the USS which is a defined benefit scheme. I have accumulated a total of £12,000 in my pension pot, which will provide me with an annual income of £1,030 when I retire. I left the USS after switching jobs. I am unsure if I should keep my USS pension, transfer it to my current pension provider L&G, or move it to a SIPP with Vanguard. Can you advise me on what would be the best option?"
Hello Thank you for your comment. Being in the USS, I imagine you don't have a pension pot, but rather a transfer value, which is the schemes actuaries estimation of how much your guranteed income stream they owe you in retirement, is worth in todays money. Unfortunately, that question can only be answered by obtaining formal Advice from a Pension Transfer Specialist. All I can tell you that it is the regulators view that most people should not transfer their pension, and keep the DB Scheme as the benefits they give up are not as valuable as what the Scheme provides as a transfer value, along as for another myriad bunch of reasons. If you go through some of our other videos, hopefully some of the generic information will help guide you on what to do. Kind regards CJ Team
What is your opinion on Hunts reform framework that is going to give 5% of everyone pension to edge fund managers and place it into high risk gambles each year for the a charge of 2% even if the pension loses money?
Hello Thank you for your comment. Without getting too political, I can say with pretty high confidence that just about every financial adviser, not to mention anyone with a functioning brain, think it is a truly ludicrous idea. The FCA would have our licence taken away from us if we told joe public to go start sticking 5% of their retirement savings in incredibly risky private UK companies, that very well could, if not likely will, go to zero. It's frankly bizarre. But, at least it will make our job easier justifying why clients should transfer out of their workplace schemes in retirement.
@@cameronjamespensiontransfer Many thanks for taking the time to reply. I'm worried that all financial governing bodies have no answers to questions posed about the plans put forward by Hunt. I for one would hope there is an opt out option provided as this seems ludicrous.
What is the source of these reports? The UK Government typically doesn't leak big things in advance. Like how many reports did you see online about the recent abolishment of LTA?
The wording is important here. "Allocate 5% of assets in their default funds to unlisted equities by 2030". Firstly, if you are not in their default funds, then you would be default you would have no money allocated to this new idea. So you can easily 'opt out' by selecting your own funds and not being in the default funds. Secondly, by 2030. But I agree, it is a ludicrous idea. Pension schemes may be lambs to the slaughter in the VC space, which is a highly technical and specialist area!
I have a DB pension - costing me £700 pcm. I earn circa £62k.. I’m 43 I’m I better taking my £700 pcm plus my employer contributions and investing in the DC pension in all stocks. Its a 80th career average, paid in for 10 years already.
Hi Philip Thank you for your comment. Whilst we can't say for certain without having all the information, but even in a 1/80th Scheme, it is likely that the value you are accruing from the DB far outweighs the contributions you are providing, and using the funds for a DC, even if in 100% equities, would be significantly less valuable than staying with a DB. There is a reason that employers are doing everything they can to stop providing a DB Scheme, and that is because the benefits they have to provide members is so much more significant than the contributions that the members made, and they need to make up the shortfall. Of course, wouldn't be able to confirm without all the information, but that is very often what the anlysis shows
I have since found your DB v DC video . Demonstrating the benefits and differences. I think based upon your answer I’ll stick with the DB and you’re right my employer has closed it to new entrants. Also fortunately I have a SIPP which I funded partly with buy to lets profits so similar to DC with 100% equities. Anyhow many thanks. Great content:)
@@philiphayton8261 Hi Philip. Glad you found our content so useful. Whilst we can't tell which is better, and you should keep, as that is advice, we can give you general information and guidance for you to be able to make such decisions yourself, or put off finding out until closer to retirement etc. If you are feeling nice, we do appreciate any likes and subscribes, and even a Google Review wouldn't hurt, even if it's only to say you found the TH-cam channel so helpful when looking at your pension arrangements etc.
Hello Thank you for your comment. Do you mean whether to take some PCLS or not when you start accessing your benefits? The Spreadsheet answer is to take no lump sum, as the amount of income you give up (commute) to obtain that lump sum is rather poor value. But, it's subjective and a personal choice that suits you, as you may have a specific need at that time to access a lump sum, and your DB is the best source for that lump sum.
@@GregoryNorris Hi Gregory. Whilst it is tax-free, the amount of income you have to give up is substantial. If you don't need the lump sum, then taking as much income as possible will very likely result in the best "value" being taken.
Hello Thank you for your comment. If there is no indexation, then, of course, the value of that income stream is considerably less than if it were to be indexed. However, it is still guaranteed, and there is zero investment risk. But yes, all things considered then it is a higher chance that a transfer is suitable, even if still a low chance. If you leave your enquiry on our website, www.cjfinance.co.uk, one of our advisers can get in touch and help provide you with some guidance.
Hello Thank you for this. Yes, and that is why Ill health is just about the most common reason to transfer a DB. However, for those with good/decent health, then based on probabilities, they are going to derive more value staying in their Scheme. You need to make decisions based on the most likely outcomes. Giving up a guaranteed income stream at CETV levels where they are now just because you might get hit by a bus tomorrow is silly. A pension is designed to provide an income, so that is what needs to be prioritised. But yet, if life expectancy is significantly reduced than a transfer can indeed be advised, but it all depends on the individual. Hope that helps.
Correct typically 50% of the annual pension. The big risk re. Inheritance is if something happens to member and spouse. Often the pension will not pass to anyone. Some schemes will pay children or dependents but only at their discretion. You have a DB scheme at the moment?
Since the start of 2023 the transfer out value has been decimated. Mine was £300,000 less than the previous year… transfer out is about the worst /dumbest decision one could make at the moment!!!
Definitely one of the easier and better explanations for the DB mine field
Thanks for the feedback Tim. What is your current situation? Have you been tracking your DB CETV for some time, or just strating to research now?
Not all DB funds are suitable. The pension I will receive next year when I retire will be £1500 p.a for a CEV of £112k ( it was £146k, 3 years ago). It would work out better
for me to transfer it out and purchase an annuity.
Hello
Thank you for your comment.
Unfortunately however, you have some duff information there. One of those figures, at least, is wrong. A DB of c.£1,500 per annum would have a CETV now of c.£25-30k, not £112k. Perhaps you are looking at the income at the date you retired, and not the income revalued to now. It will never be remotely worth transferring out of a DB to buy an annuity replicating the benefits, unless you can get an enhanced annuity.
I would ask for an Immediate Retirement Quote from your Scheme, that will show you the annual income they'd pay you now. If that CETV value is correct, then your quote will probably be c.4.5-6.5k per annum
"I have a pension from the USS which is a defined benefit scheme. I have accumulated a total of £12,000 in my pension pot, which will provide me with an annual income of £1,030 when I retire. I left the USS after switching jobs. I am unsure if I should keep my USS pension, transfer it to my current pension provider L&G, or move it to a SIPP with Vanguard. Can you advise me on what would be the best option?"
Hello
Thank you for your comment.
Being in the USS, I imagine you don't have a pension pot, but rather a transfer value, which is the schemes actuaries estimation of how much your guranteed income stream they owe you in retirement, is worth in todays money.
Unfortunately, that question can only be answered by obtaining formal Advice from a Pension Transfer Specialist. All I can tell you that it is the regulators view that most people should not transfer their pension, and keep the DB Scheme as the benefits they give up are not as valuable as what the Scheme provides as a transfer value, along as for another myriad bunch of reasons.
If you go through some of our other videos, hopefully some of the generic information will help guide you on what to do.
Kind regards
CJ Team
What is your opinion on Hunts reform framework that is going to give 5% of everyone pension to edge fund managers and place it into high risk gambles each year for the a charge of 2% even if the pension loses money?
Hello
Thank you for your comment. Without getting too political, I can say with pretty high confidence that just about every financial adviser, not to mention anyone with a functioning brain, think it is a truly ludicrous idea. The FCA would have our licence taken away from us if we told joe public to go start sticking 5% of their retirement savings in incredibly risky private UK companies, that very well could, if not likely will, go to zero. It's frankly bizarre. But, at least it will make our job easier justifying why clients should transfer out of their workplace schemes in retirement.
Are you worried about reports the government are planning to stop leaving tax free DC pensions to family if you die before 75 as the rule is now !!!
@@cameronjamespensiontransfer Many thanks for taking the time to reply. I'm worried that all financial governing bodies have no answers to questions posed about the plans put forward by Hunt. I for one would hope there is an opt out option provided as this seems ludicrous.
What is the source of these reports? The UK Government typically doesn't leak big things in advance. Like how many reports did you see online about the recent abolishment of LTA?
The wording is important here. "Allocate 5% of assets in their default funds to unlisted equities by 2030".
Firstly, if you are not in their default funds, then you would be default you would have no money allocated to this new idea. So you can easily 'opt out' by selecting your own funds and not being in the default funds. Secondly, by 2030.
But I agree, it is a ludicrous idea. Pension schemes may be lambs to the slaughter in the VC space, which is a highly technical and specialist area!
I have a DB pension - costing me £700 pcm. I earn circa £62k.. I’m 43 I’m I better taking my £700 pcm plus my employer contributions and investing in the DC pension in all stocks. Its a 80th career average, paid in for 10 years already.
Hi Philip
Thank you for your comment. Whilst we can't say for certain without having all the information, but even in a 1/80th Scheme, it is likely that the value you are accruing from the DB far outweighs the contributions you are providing, and using the funds for a DC, even if in 100% equities, would be significantly less valuable than staying with a DB.
There is a reason that employers are doing everything they can to stop providing a DB Scheme, and that is because the benefits they have to provide members is so much more significant than the contributions that the members made, and they need to make up the shortfall.
Of course, wouldn't be able to confirm without all the information, but that is very often what the anlysis shows
I have since found your DB v DC video . Demonstrating the benefits and differences. I think based upon your answer I’ll stick with the DB and you’re right my employer has closed it to new entrants. Also fortunately I have a SIPP which I funded partly with buy to lets profits so similar to DC with 100% equities. Anyhow many thanks. Great content:)
@@philiphayton8261 Hi Philip.
Glad you found our content so useful. Whilst we can't tell which is better, and you should keep, as that is advice, we can give you general information and guidance for you to be able to make such decisions yourself, or put off finding out until closer to retirement etc.
If you are feeling nice, we do appreciate any likes and subscribes, and even a Google Review wouldn't hurt, even if it's only to say you found the TH-cam channel so helpful when looking at your pension arrangements etc.
@@cameronjamespensiontransfer no worries Cameron I can do that for sure!
Much appreciated!
Thanks. But what about the take or don't take your tax free lump sum issue?
Hello
Thank you for your comment.
Do you mean whether to take some PCLS or not when you start accessing your benefits? The Spreadsheet answer is to take no lump sum, as the amount of income you give up (commute) to obtain that lump sum is rather poor value. But, it's subjective and a personal choice that suits you, as you may have a specific need at that time to access a lump sum, and your DB is the best source for that lump sum.
A video on that would be interesting. Won't getting a tax free lump sum always beat getting higher but taxable income for life?
@@GregoryNorris Hi Gregory. Whilst it is tax-free, the amount of income you have to give up is substantial. If you don't need the lump sum, then taking as much income as possible will very likely result in the best "value" being taken.
What about if you have emigrated and there is no indexation after retirement?
Hello
Thank you for your comment.
If there is no indexation, then, of course, the value of that income stream is considerably less than if it were to be indexed. However, it is still guaranteed, and there is zero investment risk.
But yes, all things considered then it is a higher chance that a transfer is suitable, even if still a low chance.
If you leave your enquiry on our website, www.cjfinance.co.uk, one of our advisers can get in touch and help provide you with some guidance.
If an individual dies not only they, but their family lose out massively with the DB scheme. Inheritance is a big issue here.
Hello
Thank you for this. Yes, and that is why Ill health is just about the most common reason to transfer a DB. However, for those with good/decent health, then based on probabilities, they are going to derive more value staying in their Scheme.
You need to make decisions based on the most likely outcomes. Giving up a guaranteed income stream at CETV levels where they are now just because you might get hit by a bus tomorrow is silly. A pension is designed to provide an income, so that is what needs to be prioritised.
But yet, if life expectancy is significantly reduced than a transfer can indeed be advised, but it all depends on the individual.
Hope that helps.
No.The spouse gets the DB pension at 50%.So still goes on.
Correct typically 50% of the annual pension. The big risk re. Inheritance is if something happens to member and spouse. Often the pension will not pass to anyone. Some schemes will pay children or dependents but only at their discretion.
You have a DB scheme at the moment?
No it's not. Pensions are not meant to be inherited, and they shouldn't be in my opinion. Hopefully the next government will stop this practice.
Since the start of 2023 the transfer out value has been decimated. Mine was £300,000 less than the previous year… transfer out is about the worst /dumbest decision one could make at the moment!!!
“Minus 5% charges.” Bye!👋
Thanks for your comment.
Minus 5% charges? What do you mean?
No music needed
Thanks for your comment. How do you mean no music needed?