Enhanced Transfer Value versus keeping DB entitlements

B

Bluefin

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Hi all,

I'm seeking your advice in relation to accepting an ETV offer for my deferred DB pension that is payable from 2036.

The DB was closed to new employees since 2011 and is fully funded. It can be adjusted up to 4% p. a based on CPI and spouse will get 50% benefit upon my death.

The ETV offer is standard STV + 135% of standard transfer value.

I was employed by this FDI company for 7 years only and I'm member on another DB and DC pension schemes.

The ETV has to be transferred to a Personal Retirement Bond... Management charges 0.3%

Any thoughts?
 
Are they offering a free advice session with a financial advisor as part of the scheme. I think most companies do. They will be able to take your personal circumstances into account and advise you further. When my company did this the advisory recommended I stick with the DB scheme. And that is what I did in the end. But others took the ETV, so even in the same company people behaved differently.
 
Hi Clamball

Correct in relation to advice... You cannot accept the offer if you haven't avail of the free financial service on offer... Mercer providing this.
 
Very, very difficult decision. And it all depends on the assumptions you make.

1) How much is the ETV? I can't imagine that it's that much if you worked there for only 7 years. If it is a large amount, you need to think carefully and maybe get independent actuarial advice. On the other hand, if it's only a small part of your portfolio, it's less important to get right.
2) Are you married? A DB scheme which pays 50% to the spouse is more valuable to a married person than to a single person.
3) Do you have any health issues? On the one hand, the DC would stay in your estate. On the other, your spouse would get half you pension.

4) Do you have to make the decision now? Or can you defer it?
If you put it into a retirement bond, you will presumably invest it 100% in equities. The world is in a very strange place at the moment and having a well funded defined benefit scheme gives a lot of comfort.

5) How does it fit in with the rest of your wealth?
If most of it is in property (your home) and shares (your DC scheme) a DB scheme seems to be a good diversification.
If the other DB scheme, of which you are a member, is the major part of your wealth, then maybe a DC/Retirement Bond is good diversification.
 
You are 15 years away from NRA so the standard transfer value is heavily discounted.

With an ETV its compulsory to provide advice. no harm to go through the process
 
Thanks for your replies :

Additional data:

Married.
NRA = 65
DB =3500 p. a
TV = 34K, ETV = 75K
Once off offer, closure date Apr 2022
Mortgage free early next year
Value of home = 450k
Agri land = 200k
Site land = 75k
Savings = 10K
Loan's = zero

Pensions:

Current DB projection 20k
DC scheme with current employer - max avc being contributed.
Pension A = 11k (drawing down, tax paid)
Pension B = 12k (drawing down, tax paid)
Pension C = 12k (No tax payable)

Working part-time - 3 days per week = 40k

Investment - fully invested in equities in individual companies US and Euro =900k
 
So you have €1.7m in assets.
You have three pensions paying you 35k at the moment?
You don't tell us what the DC scheme is worth.
You have a DB scheme expected to pay you €20k.

Bluefin said:
DB =3500 p. a
TV = 34K, ETV = 75K
Click to expand...

So, while you should make the correct decision, it won't impact you either way.
It's too small relative to the rest of your wealth for diversification to be a factor.

Get advice from Mercers and then make a decision before the deadline.
I would be tempted to leave it where it is until at least the deadline.

Brendan
 
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