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Pensions again

If an individual could take any pension option for a defined contribution/stakeholder, is drawdown better than an annuity ?
Taking the whole amount in cash is an obvious "no", unless you want to pay loads of unnecessary tax.
I know it depends on the individual circumstances, but if you are looking to get the most money and pay the least tax, which is best ?

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Comments

  • I'd ask an IFA, may cost short term but worth it long term.
  • edited August 3
    A standard annuity currently buys you a guaranteed income for life, though the rates are no longer great. 10 years ago or so, if you had a pension pot of £!00,000, you would have got c £15k pa. Now you will get c£4.6k. And the £100k has gone.

    If you opt for drawdown, you could take 25% tax free, so a £25k lump sum, which you can then spend or reinvest in an Isa and get c900pa income, depending on investments. This income would be tax free. But you still have the £25k, which hopefully will also be growing. The £75k you then put into drawdown and can hopefully achieve c£2700pa income. This income would be liable to tax, dependent on your other income. Once again, you'd still have the £75k which could be growing.

    So on that hypothetical scenario, you could either have a guaranteed income of £4.6kpa for life with an annuity, or you could have a flexible income of c3.6k pa but with £100k on top.

    There's lots of other issues too, so as Large said, I'd ask an IFA.



  • Agree - ask an IFA.

    One is an income for life (annuity), one might run out before your life does (drawdown). So, if you know your life expectancy, then you can make a sensible judgement. Unfortunately, nobody knows that, although health and family history etc can assist with making a judgement, which you can then compare with standard life expectancy tables that the pension company will use when working out your annuity, such as this one:

    https://www.direct.aviva.co.uk/myfuture/LifeExpectancy/AboutYou
  • edited August 4
    As an IFA :wink: I would say the main difference is not about yield or annuity rates but about flexibility.

    With an annuity you mainly trade flexibility for certainty......the flexibility of Drawdown is that you can take what you want when you want. The certainy of an annuity is you know exactly how much you are going to get throughout your life & its not going to run out.

    Everybody's situation is different but I don't generally see the benefit of an annuity anymore thesedays.....

    but as Large says........best to seek advice.
  • Have to agree with @golfaddick annuities have their place but less and less so now.

    My dad spent his pension pots on an annuity, was a fairly sizeable pot (his pensions gross were over £4.5k a month) - he died aged 74, 9 years after taking them....... so not great value/return.

    But then i'm sure there are people aged 100 who have done very well out of them as I think they are priced roughly for a 19/20 year take (which I guess is the average age - 84/5).
  • edited August 5

    @Covered End

    This is incredibly simple to answer if you know the following:-

    When are you going to die
    What are future interest rates going to be
    What are future stock market returns going to be
    What's future inflation likely to be
    What politicians will be in power for the remainder of your lifetime
    What will their attitude and approach be to pension and taxation
    What will the admin charges on a drawdown arrangement be
    What margins will the Insurance company build in to cover their future admin costs

    Once you have that info pm me and I will put all the data into my abacus and advise you to head for drawdown but at the end of the day it's a bit of a gamble. You could of course do both?

    I was a financial adviser until I took early retirement, although I wasn't an IFA & didn't offer annuities.
    Also, drawdown wasn't available then.

    As you say I'm contemplating doing both.
    It just seems to me that a drawdown looks far more favourable than an annuity, from the perspective of what you would get financially and also from a tax point of view.
    Assuming you take the drawdowns in a tax efficient manner, to minimise/eradicate paying tax.

    I am seeing someone from pension wise in a few weeks, but I want to do plenty of research before I meet them.
  • Two things I like about drawdown are:-

    Flexibility on annual drawdown

    I am 61 and in drawdown. I will reduce my drawdown by the amount of state pension when I am 66. Thereby levelling my annual retirement income.

    Residual Fund
    If any!! On my death will go to my wife and ultimately our children on her death. Our wills are structured around this. As a consequence I know every penny of my pension account will be spent by me or the family.

    On a different note with the paye tax allowance nudging £12000 if you retire before state pension age you can effectively draw this amount of income tax free. So although the 25% lump sum is tax free it may be possible to juggle with the remainder of your drawdown pot to minimise tax. This of course is very much dependant on your total financial position and this is where I think a financial adviser can be beneficial.

    My working background was administration of final salary schemes. For the last 15 years of my career I was dealing solely with schemes in wind up. There were some very sad and unfortunate outcomes as the protective legal backdrop was very weak until the PPF was introduced. I also witnessed some very strange discretionary decisions by Trustees and employers which again meant the outcomes from the much heralded final salary schemes were again a disappointment to some.

    I am not a 100% advocate for transferring from final salary schemes but often ex employee deferred pensions do have weaknesses in the benefits payable on death before normal retirement age.
  • Two things I like about drawdown are:-

    Flexibility on annual drawdown

    I am 61 and in drawdown. I will reduce my drawdown by the amount of state pension when I am 66. Thereby levelling my annual retirement income.

    Residual Fund
    If any!! On my death will go to my wife and ultimately our children on her death. Our wills are structured around this. As a consequence I know every penny of my pension account will be spent by me or the family.

    On a different note with the paye tax allowance nudging £12000 if you retire before state pension age you can effectively draw this amount of income tax free. So although the 25% lump sum is tax free it may be possible to juggle with the remainder of your drawdown pot to minimise tax. This of course is very much dependant on your total financial position and this is where I think a financial adviser can be beneficial.

    My working background was administration of final salary schemes. For the last 15 years of my career I was dealing solely with schemes in wind up. There were some very sad and unfortunate outcomes as the protective legal backdrop was very weak until the PPF was introduced. I also witnessed some very strange discretionary decisions by Trustees and employers which again meant the outcomes from the much heralded final salary schemes were again a disappointment to some.

    I am not a 100% advocate for transferring from final salary schemes but often ex employee deferred pensions do have weaknesses in the benefits payable on death before normal retirement age.

    I'm thinking on exactly these lines.

    Rather than draw the pensions at the same time as the state pension and thereby almost certainly paying more tax.
    I could do a drawdown and receive up to £11,800 tax free (taxed but reclaimable) per annum (less other income). Plus I can take a 25% tax free lump sum at the start.

    I'm inclined to do drawdown on a money purchase and a stakeholder and am still debating on an earlier final salary scheme.

    The way I read the figures on the final salary scheme was the transfer value was 48 X the annual pension payable at age 60.
    So I'd need to live to 108 to make it worthwhile leaving it there.
    I can't believe it's that cut and dried and think I must be misunderstanding something.
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  • edited August 5

    Two things I like about drawdown are:-

    Flexibility on annual drawdown

    I am 61 and in drawdown. I will reduce my drawdown by the amount of state pension when I am 66. Thereby levelling my annual retirement income.

    Residual Fund
    If any!! On my death will go to my wife and ultimately our children on her death. Our wills are structured around this. As a consequence I know every penny of my pension account will be spent by me or the family.

    On a different note with the paye tax allowance nudging £12000 if you retire before state pension age you can effectively draw this amount of income tax free. So although the 25% lump sum is tax free it may be possible to juggle with the remainder of your drawdown pot to minimise tax. This of course is very much dependant on your total financial position and this is where I think a financial adviser can be beneficial.

    My working background was administration of final salary schemes. For the last 15 years of my career I was dealing solely with schemes in wind up. There were some very sad and unfortunate outcomes as the protective legal backdrop was very weak until the PPF was introduced. I also witnessed some very strange discretionary decisions by Trustees and employers which again meant the outcomes from the much heralded final salary schemes were again a disappointment to some.

    I am not a 100% advocate for transferring from final salary schemes but often ex employee deferred pensions do have weaknesses in the benefits payable on death before normal retirement age.

    I'm thinking on exactly these lines.

    Rather than draw the pensions at the same time as the state pension and thereby almost certainly paying more tax.
    I could do a drawdown and receive up to £11,800 tax free (taxed but reclaimable) per annum (less other income). Plus I can take a 25% tax free lump sum at the start.

    I'm inclined to do drawdown on a money purchase and a stakeholder and am still debating on an earlier final salary scheme.

    The way I read the figures on the final salary scheme was the transfer value was 48 X the annual pension payable at age 60.
    So I'd need to live to 108 to make it worthwhile leaving it there.
    I can't believe it's that cut and dried and think I must be misunderstanding something.
    The main thing about drawing a final salary scheme is that you know that the amount is guaranteed every month & (in most cases) is inflation proofed. If you have one of these plus a personal pension (or two) then it may be a good idea to keep the FSS intact, and then taking drawdown from the PP's (combining them first of course)

    Again, in all depends on your own personal circumstances. On death the Drawdown plan will be totally tax-free to your dependants/beneficiaries (before age 75) - the Final salary scheme will usually pay out half of the annual pension to a spouse, until they die.

    Transfer values have never been so good - but that doesn't mean you should transfer away your benefits into a PP that could be ravaged by Brexit over the next few years.
  • Conventional wisdom is to use part for drawdown to provide initial level of income, and use part to secure an annuity from a selected age after say 75. All the back running of scenarios show buying an annuity outright at the beginning delivers less than a mixture of the two. Don't forget annuities cost less and less as you get older and you can start looking at the annuity provider as a bookmaker offering odds on how long you will live. Smoke 40 a day and down 8 pints a night I would go for drawdown, or check out special rates for bad lifestyle.

    Drawdown allows your fund to be invested for some growth, while an annuity takes away investment control in return for a guaranteed return (currently around 1.56%) and a guaranteed income for life. Best to regard an annuity as an insurance policy you take out against living longer than you reckon. Inflation and living too long are your biggest challenges. They can be covered, but at a high price, so most people have to compromise.

    @Imissthepeanutman perfectly sums up the impossibility of knowing what is the right decision. You can only decide where you where you want to take or avoid the risks - market risk, inflation risk, mortality risk, income deficiency risk.
  • edited August 6

    Conventional wisdom is to use part for drawdown to provide initial level of income, and use part to secure an annuity from a selected age after say 75. All the back running of scenarios show buying an annuity outright at the beginning delivers less than a mixture of the two. Don't forget annuities cost less and less as you get older and you can start looking at the annuity provider as a bookmaker offering odds on how long you will live. Smoke 40 a day and down 8 pints a night I would go for drawdown, or check out special rates for bad lifestyle.

    Drawdown allows your fund to be invested for some growth, while an annuity takes away investment control in return for a guaranteed return (currently around 1.56%) and a guaranteed income for life. Best to regard an annuity as an insurance policy you take out against living longer than you reckon. Inflation and living too long are your biggest challenges. They can be covered, but at a high price, so most people have to compromise.

    @Imissthepeanutman perfectly sums up the impossibility of knowing what is the right decision. You can only decide where you where you want to take or avoid the risks - market risk, inflation risk, mortality risk, income deficiency risk.

    Pretty much my thinking.

    My planning is around securing a relatively modest guaranteed income after the age of 80 (if I live that long) and using other investments to live a less modest lifestyle from 65-80 front loaded with something like using 45% of capital investment between 65-70, 30% between 71-75 and 25% between 76-80.
  • @Covered End

    I am not sure about the transfer value x48 bit.

    Have you made allowance for your deferred pension with ex employer revaluing between date of leaving and 60. Normally it will increase in line with rpi/cpi capped at 5%. That's an oversimplification but normally the case.

    This is different to the rate at which the pension increases in retirement. Again similar to revaluation but there are wide variations across schemes.

    The transfer value will also include the value of any spouses/dependants benefits, whether or not you are married/partnered. Again an over simplification but that could amount to say 3 years of your pension on the basis of 6yrs x 50% spouse pension the assumption being she would outlive you by 6 years.

    I am not an Actuary but I would expect a figure in the range 20-30 x your revalued pension at 60. I may be well adrift there!!
  • @Covered End

    I am not sure about the transfer value x48 bit.

    Have you made allowance for your deferred pension with ex employer revaluing between date of leaving and 60. Normally it will increase in line with rpi/cpi capped at 5%. That's an oversimplification but normally the case.

    This is different to the rate at which the pension increases in retirement. Again similar to revaluation but there are wide variations across schemes.

    The transfer value will also include the value of any spouses/dependants benefits, whether or not you are married/partnered. Again an over simplification but that could amount to say 3 years of your pension on the basis of 6yrs x 50% spouse pension the assumption being she would outlive you by 6 years.

    I am not an Actuary but I would expect a figure in the range 20-30 x your revalued pension at 60. I may be well adrift there!!

    My wife was offered 42 times her (small) revalued pension. I tried to allow for inflation etc. but just could see any 'reasonable' scenario where it would have been worth not taking the offer unless my wife lived well past a hundred.

    The financial advisor assigned to her agreed but advised her to leave it for now and hold out for more!

    I don't think any normal human being really understands what is going on. These pensions seem like hot potatoes for the companies responsible for them! Someone knows something we don't!
  • Transfer values used to be in the region of 20-25 x the pension, but the last few years have seen this increase to over 40 x

    Lots of companies are wanting to get the liability of their books & so are offering greater & greater transfer values.

    I'm not generally in this market as 90% of my clients are Doctors (I used to work for the BMA) and so transferring out of the NHS scheme was always a no no.......but has now been taken out of my hands in any case as transferring out of Public sector schemes have now been banned by The Government.
  • @Covered End

    I am not sure about the transfer value x48 bit.

    Have you made allowance for your deferred pension with ex employer revaluing between date of leaving and 60. Normally it will increase in line with rpi/cpi capped at 5%. That's an oversimplification but normally the case.

    This is different to the rate at which the pension increases in retirement. Again similar to revaluation but there are wide variations across schemes.

    The transfer value will also include the value of any spouses/dependants benefits, whether or not you are married/partnered. Again an over simplification but that could amount to say 3 years of your pension on the basis of 6yrs x 50% spouse pension the assumption being she would outlive you by 6 years.

    I am not an Actuary but I would expect a figure in the range 20-30 x your revalued pension at 60. I may be well adrift there!!

    My wife was offered 42 times her (small) revalued pension. I tried to allow for inflation etc. but just could see any 'reasonable' scenario where it would have been worth not taking the offer unless my wife lived well past a hundred.

    The financial advisor assigned to her agreed but advised her to leave it for now and hold out for more!

    I don't think any normal human being really understands what is going on. These pensions seem like hot potatoes for the companies responsible for them! Someone knows something we don't!
    It's true as golfie says that many schemes are keen to offload their deferred pension liabilities. The problem is it's difficult to match the liability in the scheme with similar investments thereby smoothing or flattening the level of contributions payable by the employers. Finance Directors hate final salary schemes except the ones they are in themselves of course!!

    The problem is partly the mortality tables that are updated from time to time but more so the return on long dated gilts which are often the benchmark interest rates used in the calculations. As the long dated gilts may have a 15 year projection this means for a 35 year old deferred pensioner with a likely life expectancy to 80 - 45 years of guaranteed investment needs to be secured to match the liability. That's 3 cycles of long dated gilts with the need to reinvest in the future at unknown rates. This is my simple understanding of why Actuaries tend to value these liabilities conservatively using low assumptions for future interest income. They have a responsibility with the trustees to ensure the appropriate contributions are paid by the employer. It's a delicate balance.

    Many Companies I believe now have pension liabilities greater than the asset value of the Company. British Airways was one such case.

    I do know when it comes to a Scheme considering buying out in bulk it's deferred annuities liabilities with an Insurance Company the cost is often twice the value or more of the corresponding transfer values.

    I agree it's hard to digest and I worked in the business
  • I've requested quotes from the companies concerned and now can't re access the information online.
    So I'll have to wait for receipt.

    The defined benefit scheme which I thought offered 48 X transfer value is Barclays, who do have £4M of liabilities, greater than pension assets, but this is improving.

    I'm thinking I'll drawdown the wife's stakeholder and my other employer money purchase scheme and am undecided on the Barclays defined benefit scheme.
    I thought it was offering £10K pa at age 60 or a £480K transfer value !
  • If financial advisers were really clued up they wouldn't be working as financial advisers.
  • If financial advisers were really clued up they wouldn't be working as financial advisers.

    r

    If financial advisers were really clued up they wouldn't be working as financial advisers.

    really......why ??

    can I ask what you do for a living ??
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  • I've requested quotes from the companies concerned and now can't re access the information online.
    So I'll have to wait for receipt.

    The defined benefit scheme which I thought offered 48 X transfer value is Barclays, who do have £4M of liabilities, greater than pension assets, but this is improving.

    I'm thinking I'll drawdown the wife's stakeholder and my other employer money purchase scheme and am undecided on the Barclays defined benefit scheme.
    I thought it was offering £10K pa at age 60 or a £480K transfer value !

    I'd be staggered if is was that much tbh.

    Also, I know its just terminology, but you probably wont be able to just drawdown your wifes pension if its a stakeholder plan. It will most likely have to be transferred into a proper "drawdown" plan (or flexi-access drawdown to give it its full name), especially if its over £30k & if so the provider may well tell you that you need an IFA to do it for you. FCA requirements & all that.
  • I got 38x from Barclays and that was around 3 years or so ago. Lucked out as the markets were quite low then so all but doubled what I took.

    I can quite believe Barclays are now offering much higher.
  • Rob7Lee said:

    I got 38x from Barclays and that was around 3 years or so ago. Lucked out as the markets were quite low then so all but doubled what I took.

    I can quite believe Barclays are now offering much higher.

    I've sent you a pm.
  • Two things I like about drawdown are:-

    Flexibility on annual drawdown

    I am 61 and in drawdown. I will reduce my drawdown by the amount of state pension when I am 66. Thereby levelling my annual retirement income.

    Residual Fund
    If any!! On my death will go to my wife and ultimately our children on her death. Our wills are structured around this. As a consequence I know every penny of my pension account will be spent by me or the family.

    On a different note with the paye tax allowance nudging £12000 if you retire before state pension age you can effectively draw this amount of income tax free. So although the 25% lump sum is tax free it may be possible to juggle with the remainder of your drawdown pot to minimise tax. This of course is very much dependant on your total financial position and this is where I think a financial adviser can be beneficial.

    My working background was administration of final salary schemes. For the last 15 years of my career I was dealing solely with schemes in wind up. There were some very sad and unfortunate outcomes as the protective legal backdrop was very weak until the PPF was introduced. I also witnessed some very strange discretionary decisions by Trustees and employers which again meant the outcomes from the much heralded final salary schemes were again a disappointment to some.

    I am not a 100% advocate for transferring from final salary schemes but often ex employee deferred pensions do have weaknesses in the benefits payable on death before normal retirement age.

    I'm thinking on exactly these lines.

    Rather than draw the pensions at the same time as the state pension and thereby almost certainly paying more tax.
    I could do a drawdown and receive up to £11,800 tax free (taxed but reclaimable) per annum (less other income). Plus I can take a 25% tax free lump sum at the start.

    I'm inclined to do drawdown on a money purchase and a stakeholder and am still debating on an earlier final salary scheme.

    The way I read the figures on the final salary scheme was the transfer value was 48 X the annual pension payable at age 60.
    So I'd need to live to 108 to make it worthwhile leaving it there.
    I can't believe it's that cut and dried and think I must be misunderstanding something.
    The multiple tells you nothing about value.

    The scheme calculates the capital value i.e its annuity cost at age 60. That capital value is discounted at a rate of return the scheme's investment strategy is assumed to produce. As schemes must follow gilt biased investment strategies to meet regulatory funding conditions, the rate of return might be only a few points above estimated gilt returns. So the transfer value - the current discounted value of your pension - compares favourably if you can take the same amount and invest it under an equity biased strategy yielding an inflation + return that is higher at a age 60 than the value at 60 put on your pension by the scheme.

    This is the only way to compare the worth of a transfer value, but it's not something every adviser is equipped to calculate as it applies actuarial principles to fix the numbers.

    It then comes down to how much investment risk do you have to take to match what's been given up, and is it worth while. The smaller the gap between the discount rate, and the rate you need to match the pension given up, the less is the risk. The investment rates need to be quoted as rates above assumed inflation, not the bare nominal return as you are taking the inflation risk.

    Remember you also now bear the mortality risks instead of the scheme.


  • Two things I like about drawdown are:-

    Flexibility on annual drawdown

    I am 61 and in drawdown. I will reduce my drawdown by the amount of state pension when I am 66. Thereby levelling my annual retirement income.

    Residual Fund
    If any!! On my death will go to my wife and ultimately our children on her death. Our wills are structured around this. As a consequence I know every penny of my pension account will be spent by me or the family.

    On a different note with the paye tax allowance nudging £12000 if you retire before state pension age you can effectively draw this amount of income tax free. So although the 25% lump sum is tax free it may be possible to juggle with the remainder of your drawdown pot to minimise tax. This of course is very much dependant on your total financial position and this is where I think a financial adviser can be beneficial.

    My working background was administration of final salary schemes. For the last 15 years of my career I was dealing solely with schemes in wind up. There were some very sad and unfortunate outcomes as the protective legal backdrop was very weak until the PPF was introduced. I also witnessed some very strange discretionary decisions by Trustees and employers which again meant the outcomes from the much heralded final salary schemes were again a disappointment to some.

    I am not a 100% advocate for transferring from final salary schemes but often ex employee deferred pensions do have weaknesses in the benefits payable on death before normal retirement age.

    I'm thinking on exactly these lines.

    Rather than draw the pensions at the same time as the state pension and thereby almost certainly paying more tax.
    I could do a drawdown and receive up to £11,800 tax free (taxed but reclaimable) per annum (less other income). Plus I can take a 25% tax free lump sum at the start.

    I'm inclined to do drawdown on a money purchase and a stakeholder and am still debating on an earlier final salary scheme.

    The way I read the figures on the final salary scheme was the transfer value was 48 X the annual pension payable at age 60.
    So I'd need to live to 108 to make it worthwhile leaving it there.
    I can't believe it's that cut and dried and think I must be misunderstanding something.
    The multiple tells you nothing about value.

    The scheme calculates the capital value i.e its annuity cost at age 60. That capital value is discounted at a rate of return the scheme's investment strategy is assumed to produce. As schemes must follow gilt biased investment strategies to meet regulatory funding conditions, the rate of return might be only a few points above estimated gilt returns. So the transfer value - the current discounted value of your pension - compares favourably if you can take the same amount and invest it under an equity biased strategy yielding an inflation + return that is higher at a age 60 than the value at 60 put on your pension by the scheme.

    This is the only way to compare the worth of a transfer value, but it's not something every adviser is equipped to calculate as it applies actuarial principles to fix the numbers.

    It then comes down to how much investment risk do you have to take to match what's been given up, and is it worth while. The smaller the gap between the discount rate, and the rate you need to match the pension given up, the less is the risk. The investment rates need to be quoted as rates above assumed inflation, not the bare nominal return as you are taking the inflation risk.

    Remember you also now bear the mortality risks instead of the scheme.
    On the other hand

    If you're sixty five and someone offers you a choice between £5000.00 now or £1000.00 + inflation every year until you die - you take the £1000 (unless you are very sick).

    If someone offers you a choice between £100,000.00 now or £1000.00 + inflation every year until you die - you grab the £100.000.

  • If financial advisers were really clued up they wouldn't be working as financial advisers.

    r

    If financial advisers were really clued up they wouldn't be working as financial advisers.

    really......why ??

    can I ask what you do for a living ??
    It was a tongue in cheek comment aimed at those making a living as financial advisers who offer advice that isn't fit for purpose - it's not aimed at those independent advisers who deliver a good service. I'm sure you must have met some of these characters?

    I worked in finance in various capacities over a period of 30+ years and have seen some pretty dubious practices but also some very good ones. Most of my experience was in IT in Insurance, Reinsurance, Life Assurance and Corporate Banking.

    It's hard to find a good financial adviser - I'm under no illusions about that.

    I now work in healthcare.

  • Defined benefit schemes are pretty rare nowadays. If you have one value it massively. I certainly wouldn't get rid of it. People very much underestimate how good a DB scheme is, in most cases it's worth far more than the cash pot actually held. These schemes are hugely underfunded in an aggregate level.

    Anything that's defined contribution or a personal pension the I agree I would be wanting to go into drawdown.

    All a long way off for me anyway and I'm sure by the time I get there I will have been mugged off by a combination of govt greed, brexit and the collapse of the UK economy.

  • Defined benefit schemes are pretty rare nowadays. If you have one value it massively. I certainly wouldn't get rid of it. People very much underestimate how good a DB scheme is, in most cases it's worth far more than the cash pot actually held. These schemes are hugely underfunded in an aggregate level.

    Anything that's defined contribution or a personal pension the I agree I would be wanting to go into drawdown.

    All a long way off for me anyway and I'm sure by the time I get there I will have been mugged off by a combination of govt greed, brexit and the collapse of the UK economy.

    I don't think it's as black and white as that at all.

    Once upon a time yes, DB schemes were golden and many now drawing them are living very well.

    But these days many companies want it off their books. If you are approaching retirement and they offer you 48x the annual pension amount (not so long ago the average rate was probably 20x) it would be difficult to find reasons why not to do it unless you feel you are going to live to 110 or inflation gets out of control.

    I cashed mine in a few years back for 38x and since then I've roughly doubled it. So in essence I've achieved something like 70x compared to having left it in the DB scheme which would have had a little index linking. Yes I took some risk (as the return was not guaranteed and indeed could have reduced the capital value) but at the time with 20-25 years to go until official retirement I considered it a low and calculated risk.

    So from that DB I now have a far greater pension and flexibility and although yes I've taken on the mortality risk I've more than covered it with the growth (I'd argue at 38x it was all but covered before any growth greater than inflation).

    For me the bigger risk is a raid on pensions if Labour ever get in (or moving goalposts/changing rues etc) hence at least in part why I don't really pay anything into my own anymore.
  • Rob7Lee said:

    Defined benefit schemes are pretty rare nowadays. If you have one value it massively. I certainly wouldn't get rid of it. People very much underestimate how good a DB scheme is, in most cases it's worth far more than the cash pot actually held. These schemes are hugely underfunded in an aggregate level.

    Anything that's defined contribution or a personal pension the I agree I would be wanting to go into drawdown.

    All a long way off for me anyway and I'm sure by the time I get there I will have been mugged off by a combination of govt greed, brexit and the collapse of the UK economy.

    I don't think it's as black and white as that at all.

    Once upon a time yes, DB schemes were golden and many now drawing them are living very well.

    But these days many companies want it off their books. If you are approaching retirement and they offer you 48x the annual pension amount (not so long ago the average rate was probably 20x) it would be difficult to find reasons why not to do it unless you feel you are going to live to 110 or inflation gets out of control.

    I cashed mine in a few years back for 38x and since then I've roughly doubled it. So in essence I've achieved something like 70x compared to having left it in the DB scheme which would have had a little index linking. Yes I took some risk (as the return was not guaranteed and indeed could have reduced the capital value) but at the time with 20-25 years to go until official retirement I considered it a low and calculated risk.

    So from that DB I now have a far greater pension and flexibility and although yes I've taken on the mortality risk I've more than covered it with the growth (I'd argue at 38x it was all but covered before any growth greater than inflation).

    For me the bigger risk is a raid on pensions if Labour ever get in (or moving goalposts/changing rues etc) hence at least in part why I don't really pay anything into my own anymore.
    7 years ago I got about 25x, if I had got 48x I would probably retire now.
  • Rob7Lee said:

    Defined benefit schemes are pretty rare nowadays. If you have one value it massively. I certainly wouldn't get rid of it. People very much underestimate how good a DB scheme is, in most cases it's worth far more than the cash pot actually held. These schemes are hugely underfunded in an aggregate level.

    Anything that's defined contribution or a personal pension the I agree I would be wanting to go into drawdown.

    All a long way off for me anyway and I'm sure by the time I get there I will have been mugged off by a combination of govt greed, brexit and the collapse of the UK economy.

    I don't think it's as black and white as that at all.

    Once upon a time yes, DB schemes were golden and many now drawing them are living very well.

    But these days many companies want it off their books. If you are approaching retirement and they offer you 48x the annual pension amount (not so long ago the average rate was probably 20x) it would be difficult to find reasons why not to do it unless you feel you are going to live to 110 or inflation gets out of control.

    I cashed mine in a few years back for 38x and since then I've roughly doubled it. So in essence I've achieved something like 70x compared to having left it in the DB scheme which would have had a little index linking. Yes I took some risk (as the return was not guaranteed and indeed could have reduced the capital value) but at the time with 20-25 years to go until official retirement I considered it a low and calculated risk.

    So from that DB I now have a far greater pension and flexibility and although yes I've taken on the mortality risk I've more than covered it with the growth (I'd argue at 38x it was all but covered before any growth greater than inflation).

    For me the bigger risk is a raid on pensions if Labour ever get in (or moving goalposts/changing rues etc) hence at least in part why I don't really pay anything into my own anymore.
    7 years ago I got about 25x, if I had got 48x I would probably retire now.
    Assuming you re-invested the proceeds on the markets, that 25x even in average performing funds must have doubled giving you that magic 48x :wink: ?
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Roland Out!