Stay in my DB Scheme or take the Transfer Value and invest??

[Carolibe]

Hi
I am looking for general advice on 2 issues:
1. Whether to stick with my DB pension scheme (18 years) from previous employer or to take what seem to be very attractive transfer value and invest in a managed fund. I have been told that transfer values are high at the moment due to the global financial situation and that if I am going to do it - I should do it now.........I would be able to "ride out" the market if I needed to for a few years if I needed to when I come to retire if the market means returns are poor. I appreciate that I would be trading certainty for some risk but that I could not only benefit financially but also it would mean I could leave money to my children rather than have my pension "die" with me. Another option would be to buy agricultural land or property............Any views?
2. I am 50 yrs old and have my own Ltd company up and running for almost 10 years. I have heard that if I close the business down the line and am over 55 yrs old and it's been up and running for over 10 years can take a sizeable amount out tax free. Is this true? Should I leave any profit in the company and pay the 12.5% corporation tax or use it to set up a company pension for myself??

 

[Marc]

Your default should always be to remain with a DB pension as I set out in the link below

Planning for Retirement - Everlake

Retirement is a life changing event requiring a professional assessment of the life you want to live and a clear strategy of how to get there.

globalwealth.ie

 

[2blacklines]

In my opinion and from my experience working with a few cases, it really depends on what your situation. However, you're 15 years away from retirement so without the headline figures, it would not be prudent to move away from DB unless you have a life limiting health condition.

 

[SGWidow]

I have been told that transfer values are high at the moment due to the global financial situation and that if I am going to do it - I should do it now.........I would be able to "ride out" the market if I needed to for a few years if I needed to when I come to retire if the market means returns are poor. I

Who told you this? It's actually material because if it was your financial adviser, you could do yourself a big favour and get yourself another one.

 

[Carolibe]

Who told you this? It's actually material because if it was your financial adviser, you could do yourself a big favour and get yourself another one.

Thanks for your comment - which bit of my story are you referring to - the bit about being able to take money out tax free if I dissolve the company when I retire......or the bit about transfer values being high at the moment?

 

[Dave Vanian]

I have been told that transfer values are high at the moment due to the global financial situation and that if I am going to do it - I should do it now.........I would be able to "ride out" the market if I needed to for a few years if I needed to when I come to retire if the market means returns are poor.

Was this told to you by someone who was going to be paid a percentage of the transfer value if you moved it into another pension scheme?

Transfer values on DB schemes are largely dictated by the financial health of the specific scheme. Transfer values are not high at the moment due to the "global financial situation", whatever that means. If the transfer value on your scheme is high at the moment it's because the finances of that particular DB scheme are in good health. This could be because of strong investment returns or the employer making adequate contributions or a combination of both.

It's not a terribly difficult calculation to compare what you'll get if you remain in the DB scheme with what you're likely to get (using a number of different growth rate assumptions - conservative, moderate and optimistic, for example) if you take the transfer value. Then you can compare the two properly, also taking into account the risk that the promise of a pension from the DB scheme is only as valuable as the ability of the DB scheme to meet that promise. A competent and unbiased advisor should be able to do this for you, but beware of anyone who seems to be pushing you in a particular direction without giving you verifiable factual reasons.

 

[SparkRite]

Mrs. Sparkrite (retired, aged 60) has just been offered a TV of 29 (not unusual at the moment) times her annual income from it.
Personally I think its a no brainer not to avail of it, shove it into an A(M)RF and if required avail of 25% tax free drawdown
now, plus not have it disappear upon death is another bonus.