Danske Pension DB Enhanced offer

I have recently been made an offer to transfer my Danske DB pension pot of estimated at €62k transfer value which at moment would project 5,887 p.a. / projected lump sum 14,714 and projected pension after lump sum of 4,925 or take the pension pot plus enhancement of 43K and transfer it out of scheme into a bond. Projections show outweigh keeping it of course but the DB is for life on retirement... Help??

Ask yourself this question.

Why are they so keen to entice you to leave a guaranteed, gold-plated pension scheme which imposes significant risks and liabilities on them in return for you assuming those risks?

Isn't this one if those DB pensions that went through a 'buy-in' and all the liabilities were transferred to Irish Life, rather than remaining with Danske, allowing them to draw a line under their costs?

Thanks guys - it is indeed true that if it is too good to be true then it must be.....!

The Irish Life article is interesting - if Danske Bank have indeed de-risked their liabilities which must be true as per article - then there is no mention of that in the documentation- it suggests Mercer acting on behalf of the Danske Fund - surely misleading. All ex-employees I think have been approached at this stage from my understanding and the sense I get is that many are taking the offer. What I dislike is the haste and short timelines offered to make a decision - it creates a sense of urgency and almost the impression that you are missing out - somewhat very unprofessional.

Re-reading it again - with the enhanced option you take €43k lump sum and €131k for an annuity to match and exceed the €4,925 under the present scheme - must check the underlying invest percentages.

Of course there is always the risk that Danske will wind up the scheme if they were no longer able to fund it or underfunded?.

Have I got this right? Currently you have the following at retirement:

5,887 per annum for life or a lump sum of 14,714 and a reduced pension of 4,925 for life?

In exchange for the above you have been offered 174k or 30X your pension. Is this right?

Either way its worth paying an actuary/advisor a couple of grand to weigh up the pros and cons of the decision to your given circumstances. Please note its still worth getting advise if the answer is to remain in the scheme.

You also will have to engage someone to complete the transfer if you wish to take it so may as well pay for good advise now to ensure that you get this part right. Just because others are taking the offer doesn't mean it will be the best for you to take it.

You really need to look into detail of what you have. Is the Danske pension indexed linked or level for instance? Are increases mandatory or discretionary? What does the deal offloading their liabilities to Irish Life look like for your pension?

As Marc said in his post, you have to be very careful in leaving a guaranteed pension where the employer is taking all the risk and be aware of all the risks that you are assuming e.g. running out of money.

You also need to consider lifestyle aspects such as when do you want to retire? If the scheme retirement age is 65 and you want to retire at 60, do you have other sources of income to fund retirement in those years? Are there any big expenditures planned for early retirement? Do you have other pensions?

There's lots of factors to be considered besides the value.


Steven
http://www.bluewaterfp.ie (www.bluewaterfp.ie)

To Fergal’s point.. the projected benefits at NRA with Danske Pension is 5,887p.a and assuming lump sum of 14,714 then the projected pension is 4,925 after lump sum. If I take the enhanced value of 43k it brings the transfer value to 105,520. they assume growth of 3.6% per annum net of charges delivering projected value at NRA of 175,234 with projected lump sum of 43,808 and projected net lump sum of 131,425.

I suppose in essence I would be giving up the 4,925 p.a for life on retirement assuming that I’m better off with a higher lump sum and a fund of 131,425 to deliver same or better income p.a thereafter.

Of course always a risk that Danske will discontinue the fund at some stage or if it is with Irish life perhaps not, but there is no mention of Irish Life.

Of course transferring it means prob I have more control, although early retirement is not an option, I’m shy alas in funds in that regard.

Than

SBarrett said:

You really need to look into detail of what you have. Is the Danske pension indexed linked or level for instance? Are increases mandatory or discretionary? What does the deal offloading their liabilities to Irish Life look like for your pension?

As Marc said in his post, you have to be very careful in leaving a guaranteed pension where the employer is taking all the risk and be aware of all the risks that you are assuming e.g. running out of money.

You also need to consider lifestyle aspects such as when do you want to retire? If the scheme retirement age is 65 and you want to retire at 60, do you have other sources of income to fund retirement in those years? Are there any big expenditures planned for early retirement? Do you have other pensions?

There's lots of factors to be considered besides the value.


Steven
http://www.bluewaterfp.ie (www.bluewaterfp.ie)

Click to expand...

Thanks Marc

SBarrett said:

You really need to look into detail of what you have. Is the Danske pension indexed linked or level for instance? Are increases mandatory or discretionary? What does the deal offloading their liabilities to Irish Life look like for your pension?

As Marc said in his post, you have to be very careful in leaving a guaranteed pension where the employer is taking all the risk and be aware of all the risks that you are assuming e.g. running out of money.

You also need to consider lifestyle aspects such as when do you want to retire? If the scheme retirement age is 65 and you want to retire at 60, do you have other sources of income to fund retirement in those years? Are there any big expenditures planned for early retirement? Do you have other pensions?

There's lots of factors to be considered besides the value.


Steven
http://www.bluewaterfp.ie (www.bluewaterfp.ie)

Click to expand...

Thanks Marc - there is no mention of Irish Life and they have given little details on the fund. Good questions I must ask...

They do base their assumptions on exiting fund being revalued at an assumed rate of 1.5% p.a from 2019 to NRA but that is assuming broadly in line with assumption of future inflation.

Must check with them is there is a guaranteed minimum ..

More complicated that I initially thought.

Thanks for all they help...

I can see there is a lot more to ponder before I have to make the final decision tomorrow.

They don’t leave much time for dwelling too long on decisions!!

a cynic would say that they want you to rush into a decision. The "enhancement" is designed to make you feel that you are missing out on something. You should contact one of the life companies say Irish Life and ask them how much would it cost to buy a pension of 5,887 per annum from retirement age. Id hazard a guess that it would cost a lot more than the TV you have been offered.

Any projections should be ignored as you have to achieve that return. How is your understanding of the investment markets and the thousands of investment products on the market?

At the end of the day this is a cost cutting exercise by DB. This is why you have to be very critical of everything in the offer and should pay for advise.

Stayed where I am. Just a note of thanks to the forum and the thread - it was a great help. Cheers.