I’ve currently got a collection of 6 pensions, 4 from previous employers, 1 closed from current employer and 1 active from current employer.

I’m looking to reduce the complication of this by transferring them all into my active pension.

I know very little about pensions, but believe that 3 of the closed ones are ‘normal’ stakeholder type pensions, so the only real difference other than fund is the management charge. The current pension has a low management charge so I don’t think there’s a problem transferring in.

Two of the closed ones are defined benefits, and the documentation I’ve received make it clear that I should seek financial advice before committing to the transfer. Unfortunately, the transfer value of these pensions are only worth around £9k and £7k so I’m not sure whether its worth paying an IFA if it’s going to cost more for the advice than what I’d loose by transferring them.
To complicate matters, one of them (the £9k one) is a British Steel pension which is currently in a lot of trouble due to the situation with Tata, so I’m not sure what the future holds for this one.

So, I know the easy answer is speak to an IFA, but is it really worth it for such small pension values?

What would STW do?

defined benefit – keep them is my simplistic answer. I have one that only has 18 month contributions in it. the benefits from it are far greater than its transfer value

Don’t transfer out of a defined benefits pension into a money purchase scheme.

There is a reason why defined benefits schemes have been reduced and closed to new members over the years in favour of money purchase schemes and that is because it transfers the investment risk away from the employer to the employee.

wot they say. Keep defined benefits scheme. They are the best hence why they are being/have been removed.

I am not a qualified financial advisor, the value of your investment may go down as well as up etc.

I know very little about pensions

Yes, we can see that 🙂

What’s the complication, you’ll have 6 folk sending you money when you retire.

tbh I’ve about a dozen (mix of both benefit and contribution) and am leaving them all separate as you never know which will ‘survive’.

Leave the DB stuff where it is.

Good call b r, I’ve never been concerned that six people will be sending me money once a month rather than just one…

Seems pretty unanimous then, I’ll leave the DB ones.
🙂

Can depend on your circumstances IIRC. Guy here who has a long service is for transferring out of the DB scheme as he has no spouse to leave a pension to, and can only access so much up front on a DB. He lives very frugally and is bloody loaded, so doesn’t really need to worry about losing a wee bit of cash up front compared to say 20 years of pension payments.

I’d never heard of anyone even considering this, until he spoke about it, seems to have done his homework on it too.

God knows what he would actually spend it on, as he is tighter than a nats chuff as it is.

DB is currently valued at 20:1 for value to income for the lifetime pension pot fund. DC currently requires 33:1 to buy income from that pot. That is huge difference in favour of DB.

IANAFC, but you don’t need one to know that those numbers speak volumes.

Another repeat of advice above. Keep the defined benefit ones. As for combining the others be aware there are fees involved and the transfer values can be adjusted down too. As a first step you could ask for transfer values and the fees involved if you did consolidate them. I was in a somewhat similar position and kept the DB and combined the 3 others. Note thesedays you can chose to combine the contributoary pots at retirement to buy one annuity (pension) from who you like. The DB pensions you will take from those 2 providers. The government now has a scheme where if British Steel goes bust they will pay.

Ft money did a podcast on this 2 weeks ago. The transfer value on dB are about 35x the dB. Conclusion was the only situation where it pays to take the money is if you are not married as usually the dB carries some element of widows pension.

I have 2 dbs and even at 35x the dB would not take the money, maybe at 40x I would start thinking about it. For me its all about Diversification and I want a few sources of income in retirement.

Keep the DB scheme where it is. There’s a reason employers don’t offer them any more!

Depends on who the DB scheme is with, if they no longer exist or are likely to go under and not contribute to the pot it might be worth getting some money out rather than none. Also if they have closed the scheme and you are going to be the last to claim make sure it is fully fund d

If the DB scheme looks robust keep it. Guaranteed money.

Guy here who has a long service is for transferring out of the DB scheme as he has no spouse to leave a pension to, and can only access so much up front on a DB. He lives very frugally and is bloody loaded, so doesn’t really need to worry about losing a wee bit of cash up front compared to say 20 years of pension payments.

So if you are OK for money, you can justify weeing away a huge amount of cash.

If you aren’t, hang on to the DB’s

I recently changed from a job with DB to one with DC, and am thinking about switching as well. I’ve run some numbers, but am happy to be challenged on my assumptions and understanding.

Current annual value: about 2K
Age 37, Retirement 67, wife same age, 2 kids
Transfer value 35X, or 70K
Rate of return, net of fees 4.5%
Inflation 1.5%

If I transfer, at 4.5% for 30 years, the pot will be worth 209K. If I leave it, the DB will grow with inflation to 2.5K/yr, or about 210 quid a month. If I draw down my 209K at 2.5K, even assuming no growth in value past retirement, it will last 83 years. If I want to draw down over 30 years, again assuming no growth, I can take 7K a year.

I understand there’s still a bit of risk with with DC over DC, but the investment would have to lose a LOT of value to erase the potential gains. I no longer have the in-work benefits from the DB plan. I do have both private and workplace life insurance.

Why should I remain in the DB plan? I understand that advisers are very risk-aversive, likely due to litigation.

Yankee – assuming inflation at 1.5% for the next 30 years?

Why should I remain in the DB plan?

Risk management.

Leave it there and now you can start a DC scheme – just be aware that while one of my DC’s added 20% in a year, the previous year it added £0… At least your DB has guarantees.

I have a DB pension (7 years worth from my first job). It’s index linked at RPI, which is very generous, hence I’ll just leave it to pay out in another 20 years or so as there’s no way I could buy any investments with such a generous guarantee.

Rate of return, net of fees 4.5%
Inflation 1.5%

Is that a projected return or a guaranteed return?

The rate of return is projected by me, as it’s a middle level of return used by investment calculators (e.g. Aviva’s), and is below the 30 year average return on the FTSE 100, which is a bit over 5%. S&P500 rate is over 8% without dividends, and 11% with dividends.

I don’t know what a safe inflation/CPI rate should be. Maybe I’m low in my estimates.

I am paying into my new DC scheme. I understand that my DB has some guarantees, one them being a poor rate of return. Any investment that will beat inflation in the long term should beat what I get back from the DB payout.

Any investment that will beat inflation in the long term should beat what I get back from the DB payout.

Well this is the crux of it isn’t it…. You can’t always guarantee your investments are making money above inflation so you have to determine the level of risk you are willing to accept… Especially if you consolidate everything into one pot…

Might be worth getting in touch with a pension specialist. Maybe a company like [/url] who specialise in mis sold claims