Pensions

Found an old DB scheme from an employer I left in the mid 90’s.

It has a value of roughly £30k and a CETV of over £50k.

I’m 55 in Feb and we are planning a once in a lifetime holiday and I’m thinking of drawing down some pension.

Do I just take 25% lump sum or do I transfer to my DC pension the larger CETV and then take some cash from that?
 
blueinsa said:
Found an old DB scheme from an employer I left in the mid 90’s.

It has a value of roughly £30k and a CETV of over £50k.

I’m 55 in Feb and we are planning a once in a lifetime holiday and I’m thinking of drawing down some pension.

Do I just take 25% lump sum or do I transfer to my DC pension the larger CETV and then take some cash from that?
Click to expand...

Are you sure it’s DB? It would be unusual for a DB scheme to have a value and CETV.

Could it be an old group pension invested in a with profits fund that has a value and transfer value?
 
Millwallawayveteran1988 said:
Are you sure it’s DB? It would be unusual for a DB scheme to have a value and CETV.

Could it be an old group pension invested in a with profits fund that has a value and transfer value?
Click to expand...

Apologies, just read again and that’s exactly what it is mate.

Phoenix Britannic with profit -01 is the policy.
 
Quick question for any experts…

One of my pensions is a final salary one and at 56 I would get 25% tax free amounting to £70,000 but my “transfer value” if I were to transfer it is only £187000.
But if £70k is 25% of the value why would the entire pension transfer value be “only” £187000..?
 
blueinsa said:
Apologies, just read again and that’s exactly what it is mate.

Phoenix Britannic with profit -01 is the policy.
Click to expand...

Before you do anything you might want to ask them if the plan has any guarantees. Some old pensions have very high guaranteed annuity rates. That’s not to say you would go ahead with that but it’s worth the ask.

It is also very unlikely that a pension like that will allow you to take tax-free cash in isolation and go into drawdown with the balance but again it’s worth the ask.

If not and no guarantees then to access the cash you may need to move it.
 
Last edited:
Kazzydeyna said:
Quick question for any experts…

One of my pensions is a final salary one and at 56 I would get 25% tax free amounting to £70,000 but my “transfer value” if I were to transfer it is only £187000.
But if £70k is 25% of the value why would the entire pension transfer value be “only” £187000..?
Click to expand...

DB tax free cash is worked out in a different way. TV is more about how much it would cost the scheme to secure the income element of your DB.
 
Kazzydeyna said:
Quick question for any experts…

One of my pensions is a final salary one and at 56 I would get 25% tax free amounting to £70,000 but my “transfer value” if I were to transfer it is only £187000.
But if £70k is 25% of the value why would the entire pension transfer value be “only” £187000..?
Click to expand...
Gilt yields over the medium to long term, pretty much determine the CETV at any given moment. If they can get a secure decent return for most of the money they need to pay out then the CETV falls, but when gilt yields fall the CETV increases as the payer of the pension has more risk.

Interest rates when high also depress transfer values.

1000003103.png
To give you an idea the value on the index above is for a 64yr old man with a 10k per annum DB pension.
 
Kazzydeyna said:
Quick question for any experts…

One of my pensions is a final salary one and at 56 I would get 25% tax free amounting to £70,000 but my “transfer value” if I were to transfer it is only £187000.
But if £70k is 25% of the value why would the entire pension transfer value be “only” £187000..?
Click to expand...
A DB pension where the tax free payment is 70k would pay about £14k per annum if the lump sum wasn’t taken out. If the transfer value is just £187K the yield of the defined contribution scheme would need to be 7.5% to match the DB scheme which is unlikely to be consistently achievable.
 
48 years old.
Was self employed until I was 30 ish.
No pension before then.
Paid what ever is taken out of my wage since.
4 years left on my mortgage.
And earn over 60k.
Do I up my contributions or.
Wait till mortgage is paid sell up for 400k.
And buy something smaller
 
Not the brightest person on pension's but getting better.
After the government didn't raise the tax threshold for the 20% tax band in the budget I realised that if you retired at government retirement age you will get 12.5K state pension leaving 37.5K available to drawdown at 20% before it becomes 40%.
While I get you will think drawing down that much is lucky you will be surprised that if your pot is decent and mine is returning 8% a year you will take a good few years to get your money out at the 20%.
I don't know if the above is of use but it certainly will be a factor for more people than you think.
 
Betterdeedthan red said:
48 years old.
Was self employed until I was 30 ish.
No pension before then.
Paid what ever is taken out of my wage since.
4 years left on my mortgage.
And earn over 60k.
Do I up my contributions or.
Wait till mortgage is paid sell up for 400k.
And buy something smaller
Click to expand...
Why would you sell an appreciating asset when it's obvious you can afford it?
The very obvious answer is to continue with the mortgage and when that is paid, up your pension contributions
Or, you could remortgage, have less monthly mortgage payments, but over a longer period and up your pension contributions now
 
dickie davies said:
Why would you sell an appreciating asset when it's obvious you can afford it?
The very obvious answer is to continue with the mortgage and when that is paid, up your pension contributions
Or, you could remortgage, have less monthly mortgage payments, but over a longer period and up your pension contributions now
Click to expand...
Thanks.
Don't really want to remortgage as I just want rid.
Want to stand back and say we did that.
Thanks blue
 
Not the brightest person on pension's but getting better.
After the government didn't raise the tax threshold for the 20% tax band in the budget I realised that if you retired at government retirement age you will get 12.5K state pension leaving 37.5K available to drawdown at 20% before it becomes 40%.
While I get you will think drawing down that much is lucky you will be surprised that if your pot is decent and mine is returning 8% a year you will take a good few years to get your money out at the 20%.
I don't know if the above is of use but it certainly will be a factor for more people than you think.
 
Betterdeedthan red said:
48 years old.
Was self employed until I was 30 ish.
No pension before then.
Paid what ever is taken out of my wage since.
4 years left on my mortgage.
And earn over 60k.
Do I up my contributions or.
Wait till mortgage is paid sell up for 400k.
And buy something smaller
Click to expand...
Generally, in pure financial terms, paying off the mortgage is the wrong decision, however there is something about doing it that makes us happy.

You've not got long left on your mortgage and you'll only be 52 when it's paid off, so unless it's got an unreasonably high interest rate, I'd just continue to pay it and put any spare money into pension and ISAs. As a minimum, make sure you are getting the maximum contribution from your employer and have a look what funds your pension is invested in - the default always seem to be higher cost with lower risk, meaning less growth. If you can use things like salary sacrifice at work, do that to increase pension contributions, as you not only get the 40% tax relief, you'll avoid NI contributions.

Depends when you realistically think you'll retire (57 will be the earliest you can access your pension), but you're hitting the point where you can start contributing the most to it - salary is higher, mortgage soon to be cleared and you can quickly build the pot to get you to where you need to be.
 
Blue Since 76 said:
Generally, in pure financial terms, paying off the mortgage is the wrong decision, however there is something about doing it that makes us happy.

You've not got long left on your mortgage and you'll only be 52 when it's paid off, so unless it's got an unreasonably high interest rate, I'd just continue to pay it and put any spare money into pension and ISAs. As a minimum, make sure you are getting the maximum contribution from your employer and have a look what funds your pension is invested in - the default always seem to be higher cost with lower risk, meaning less growth. If you can use things like salary sacrifice at work, do that to increase pension contributions, as you not only get the 40% tax relief, you'll avoid NI contributions.

Depends when you realistically think you'll retire (57 will be the earliest you can access your pension), but you're hitting the point where you can start contributing the most to it - salary is higher, mortgage soon to be cleared and you can quickly build the pot to get you to where you need to be.
Click to expand...
I thought 55 was the earliest he could get his pension?
 
Odd socks said:
Not the brightest person on pension's but getting better.
After the government didn't raise the tax threshold for the 20% tax band in the budget I realised that if you retired at government retirement age you will get 12.5K state pension leaving 37.5K available to drawdown at 20% before it becomes 40%.
While I get you will think drawing down that much is lucky you will be surprised that if your pot is decent and mine is returning 8% a year you will take a good few years to get your money out at the 20%.
I don't know if the above is of use but it certainly will be a factor for more people than you think.
Click to expand...
You can take more if you dont take the 25% tax free up front and crystallise it in smaller chunks. Say if you wanted to take out an extra 10k, you would crystallise 40k in a separate account within your pension which holds crystallised funds. 10k would then be tax free. You can do this until your entire fund is either fully crystallised or you reach the limit for tax free withdrawals (just over £268k).
 
You must log in or register to reply here.
Unread Posts

Don't have an account? Register now and see fewer ads!

SIGN UP
Back
Top