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[LC0112G]

Any experts here? I have a Q?

Pension advice is a regulated area, and legally advice can only be given by those qualified to give it. No professional advisor is going to stick their neck out and give you (or anyone) advice on t'interweb without reviewing your current situation, future ambitions, appetite for risk yada yada, because they would end up being be fined millions by the FCA. That's why I keep saying that if you're asking these sort of questions then you really should go and see a good IFA - you get regulated advice with the backup that if the advisor screws up you can sue for mis-advice.

That said, what I would do is....

I would leave any defined benefit pensions be, and take them how they were supposed to be taken - are you saying £10K p/a or the transfer value/'cash in' value is £10K? If it's 10K p/a then this is basically 'gold plated' and guaranteed for life (or whatever terms the pension has). Even if the pension fund goes bust the Pension Protection fund will step in and continue paying most of it.

I would take every last penny of the 25% TFLS from the defined contribution pots. It's all tax free (up to £260K or there abouts), and you don't want Rachel from accounts to screw you over. Put as much as you can each year (currently £20K p/a) into ISA investments, again before Rachel from accounts moves those goal posts..

Draw down the remaining 75% of the DC pension pots to meet your income requirements, remembering that your DB is paying £10K p/a and the state pension will be £12.5K p/a. So you have about £23K p/a drawdown available before you hit the £50K 40% tax band.

The other 'trick' if you want to retire before your State pension age is to start taking £12.5K ish from your DB pots between ages 57 and 67. Then at 67 stop taking money from the DC because your SP will replace it.

There are other things you can do (TFLS recycling , deferring your SP, etc), but these are quite advanced things that again an IFA can advise you about.

[LC0112G]

From my research it's actually be advisable not to take the 25% - I'm in a simple world with just a single pension pot.

Huh? Why? It makes no difference when you take the 25% tax free. It's always tax free (well unless/until the chancellor changes the rules). I'm yet to hear a convincing reason NOT to take the full 25% TFLS from defined contribution pots.

The argument is different for defined benefit (aka DB/Final Salary) pots, because you usually have to commute some of the annual income in exchange for a lump sum. In those instances you have to work out the commutation rate. Would you prefer £10K p/a for life or £8K p/a for life and a £25K lump sum?

[LC0112G]

This 25%, which comes to £10k in this example, could I take that all from 1 pension pot, leaving the others untouched? Or does it have to be 25% from each pot?  I ask, because its very beneficial to not take 25% from my DB one.

Sorry, missed this bit.

I think legally you could take the combined TFLS from one pension pot, but practically, it's highly unlikely the 4 different pension providers will support/allow it. What you can do is transfer the 3 separate DC pots into one (making a single £30K pot) and then take any amount (0%-25%) of that pot as TFLS. Not sure what is gained by doing this though. Transferring the DB pot is trickier and riskier.

You need to be careful with the DB pot in particular, because there are different rules for DB pots. I'm assuming you're referring to the commutation rate on the DB pot not being particularly good? I don't have any DB pots, and it's a while since I've been in forums where such things are discussed. But, IIRC, 'good' commutation rates were generally considered to be 15 or greater - so £15K lump sum for every £1K of annual income given up. Anything less than 10 was usually considered a bad deal, and you were better off taking the annual income rather than the TFLS. However, it does all depend on your personal position, how long you expect to live, etc.

[Kevin Wood]

I'm now at an age where mine is moving away from risk into lower returns.  I guess a sensible move, as a big hit now might not have time to recover before I want to retire.

One thing worth adding is that workplace pensions do this on the assumption that you will want to be drawing from your pot on day 1 of your retirement, whenever that's defined to start. Depending on your appetite for risk, what other schemes you have, whether you'll be retiring in a big bang or dropping a few days a week for a while and so on, you might want to keep some of your investment at a higher risk until later or spread it around in other ways.

I'd certainly second the advice to get a good IFA, especially if you're putting away a big chunk of income. I should have done it earlier in life rather than leave funds to the default investment strategies of various workplace pensions.

[LC0112G]

I'm now at an age where mine is moving away from risk into lower returns.  I guess a sensible move, as a big hit now might not have time to recover before I want to retire.

One thing worth adding is that workplace pensions do this on the assumption that you will want to be drawing from your pot on day 1 of your retirement, whenever that's defined to start. Depending on your appetite for risk, what other schemes you have, whether you'll be retiring in a big bang or dropping a few days a week for a while and so on, you might want to keep some of your investment at a higher risk until later or spread it around in other ways.

Yes, I agree with that. You might be retired for 30+ years, and you probably shouldn't have everything in low risk/low return investments (or worse cash) for 30+ years.

One strategy is to keep (about) 5 years worth of income in low risk/low return investments, and the remainder in your normal higher risk portfolio. Then 'on average' once per year transfer one years worth of normal-risk into low-risk stuff. That way if there is a big drop in your normal-risk portfolio (due for instance to a stock market crash, or Trump/Truss going on another bender), you can wait a year or three for your portfolio to recover, and then transfer a year or threes worth of normal-risk to low-risk. This way you've got  5 year buffer, and aren't forced to cash-in when the stock market is low, and you can keep a large proportion of your pension invested in stuff that can/might return 5-10% p/a.

[TheBoy]

Tbh, I can see quite a few ordinary working people reaching the point where they think " If you cant beat them join them".
If I was a lot younger I might be tempted myself.
Why work hard all your life to have half your money taken away and given to those who dont want to bother ?
We can only hope that the pendulum will swing back the other way, and theres signs of it happening.
The frightening thing is that it has swung so far off the scale in one direction that you have to wonder how far it might swing back in the opposite direction.
But if it doesnt swing back, the country is finished.

Those who disagree with the way the current government are going are labelled as right wing thugs, I believe.

[TheBoy]

Any experts here? I have a Q?

Pension advice is a regulated area, and legally advice can only be given by those qualified to give it. No professional advisor is going to stick their neck out and give you (or anyone) advice on t'interweb without reviewing your current situation, future ambitions, appetite for risk yada yada, because they would end up being be fined millions by the FCA. That's why I keep saying that if you're asking these sort of questions then you really should go and see a good IFA - you get regulated advice with the backup that if the advisor screws up you can sue for mis-advice.

That said, what I would do is....

I would leave any defined benefit pensions be, and take them how they were supposed to be taken - are you saying £10K p/a or the transfer value/'cash in' value is £10K? If it's 10K p/a then this is basically 'gold plated' and guaranteed for life (or whatever terms the pension has). Even if the pension fund goes bust the Pension Protection fund will step in and continue paying most of it.

I would take every last penny of the 25% TFLS from the defined contribution pots. It's all tax free (up to £260K or there abouts), and you don't want Rachel from accounts to screw you over. Put as much as you can each year (currently £20K p/a) into ISA investments, again before Rachel from accounts moves those goal posts..

Draw down the remaining 75% of the DC pension pots to meet your income requirements, remembering that your DB is paying £10K p/a and the state pension will be £12.5K p/a. So you have about £23K p/a drawdown available before you hit the £50K 40% tax band.

The other 'trick' if you want to retire before your State pension age is to start taking £12.5K ish from your DB pots between ages 57 and 67. Then at 67 stop taking money from the DC because your SP will replace it.

There are other things you can do (TFLS recycling , deferring your SP, etc), but these are quite advanced things that again an IFA can advise you about.

The figures were totally made up as were the number of pots, but yes, that is more or less what I'm doing.

I probably will retire long before SP age.  I'm sick of working in this place

[TheBoy]

I think legally you could take the combined TFLS from one pension pot, but practically, it's highly unlikely the 4 different pension providers will support/allow it. What you can do is transfer the 3 separate DC pots into one (making a single £30K pot) and then take any amount (0%-25%) of that pot as TFLS. Not sure what is gained by doing this though. Transferring the DB pot is trickier and riskier.

The DB pot can't really move.  Well, it can, obviously, but would be dumb to do so.  Also were it is has additional protections beyond the standard protection should the company go tits up.

So technically, with the example above with the total value of DB being £10k (not P/A, remember this is a made up figure), and 3 DC's at £10k value each, I can take £10k (25% of all pensions) TFLS from ONE pot, but the logistics of doing so will be a problem?

By the time I retire, rules could well have changed so will need proper advice then, but musing around options at the moment.  It would be nice to stay long enough that my DB starts in a few short years, but I don't think I can bite my lip that long, lol.

[TheBoy]

As an aside, I'm convinced my current calculations are wrong. Every pension planner says I need £xyz p/a income for a comfortable lifestyle.  I consider my current lifestyle to be comfortable - I'm soon off on my 3rd foreign holiday in a villa this year, so can't be grumbling.

So how come my current (heavily played about with via salary sacrifice schemes, so see how little I can live on*) income be very significantly lower than what the pension providers' calculators say, and I still feel comfortable?

I'm convinced I've missed something very fundamental


*Done it this way, as we all know you spend what is left in your account

[Migv6 le Frog Fan]

Im 66 in a couple of months although intend to keep working until Im 70.
I will have to seriously delve into all this stuff in the not too distant future.
Seems there are potential advantages / disadvantages to various options so Im thinking of hedging my bets and picking different options for my two private / workplace pensions and my / swmbos state pensions.

[Sir Tigger KC]

Im 66 in a couple of months although intend to keep working until Im 70.
I will have to seriously delve into all this stuff in the not too distant future.
Seems there are potential advantages / disadvantages to various options so Im thinking of hedging my bets and picking different options for my two private / workplace pensions and my / swmbos state pensions.

Bet it all with an each way bet on the favourite at the 2.30 at Kempton Park? 

[Migv6 le Frog Fan]

Then blow the winnings on hookers, hard liquor  & coke.

[STEMO]

Then blow the winnings on hookers, hard liquor  & coke.

You'd last a fickin day....if that....you stupid old bastard 

[Sir Tigger KC]

Then blow the winnings on hookers, hard liquor  & coke.

You'd last a fickin day....if that....you stupid old bastard 

Yes I was think more along the lines of a Nissan Micra runabout and a week in Clacton every summer! 

[LC0112G]

I think legally you could take the combined TFLS from one pension pot, but practically, it's highly unlikely the 4 different pension providers will support/allow it. What you can do is transfer the 3 separate DC pots into one (making a single £30K pot) and then take any amount (0%-25%) of that pot as TFLS. Not sure what is gained by doing this though. Transferring the DB pot is trickier and riskier.

The DB pot can't really move.  Well, it can, obviously, but would be dumb to do so.  Also were it is has additional protections beyond the standard protection should the company go tits up.

DB pensions, especially those with enhanced features, will almost certainly need an IFA to sign off on any transfer. The receiving scheme will almost certainly refuse to accept the transfer without an IFA's approval. There are (or at least were) only a few schemes that would take it anyway - the risk of being sued by a disgruntled customer who later finds out the transfer was a very bad idea (and it usually is a very bad idea) is too great.

So technically, with the example above with the total value of DB being £10k (not P/A, remember this is a made up figure), and 3 DC's at £10k value each, I can take £10k (25% of all pensions) TFLS from ONE pot, but the logistics of doing so will be a problem?

By the time I retire, rules could well have changed so will need proper advice then, but musing around options at the moment.  It would be nice to stay long enough that my DB starts in a few short years, but I don't think I can bite my lip that long, lol.

I don't think anyone will let you take the TFLS part of the DB from a different DC pot. It's commute some of the DB annual payment for a TFLS, or don't commute and no TFLS. Basically, the DB isn't really a pot of money - it's a promise to pay you £X till you die, so it probably doesn't have a real pot of money allocated to you for anyone to know how much a 25% of it is. Actuaries can work out how much cash a company has to put into the 'pot' to pay your £X forever, but that value can vary massively day to day, week to week. YOu only 'own' the promise to pay £X.

So, I think you could take £7.5K from the 3 DC pots, and legally I think you could take it all from any one of them - assuming the provider allows it which is doubtful. But any extra from the DB would have to come out of the DB by commutation.