Real life retirement decisions

The Chat

Mrs C wanted to retire in 7 years, but wanted to take her defined benefit pension from her Scheme immediately, as she wanted to take advantage of what she believed to be a high transfer value being offered by the scheme.

Gathering information and researching

Mrs C aged 54, married and living in rented accommodation, sold her home to go travelling and ‘enjoy good times’. She wanted to invest the money from her defined benefit Scheme immediately in readiness for retiring fully at age 61.

Recommendation

The recommendation her LV= Pension Transfer Specialist gave her was to not transfer out at this stage in her life. She had a need for guaranteed income in her later life and had no tolerance for the value of her pension falling, so by remaining a member of the defined benefit Scheme she could address both of these issues.

Mrs C agreed with the advice and remained a member of the defined benefit Scheme.

The Chat

Mrs P aged 58 approached LV= as she was surprised at how much the Scheme from her defined benefit pension was offering her as a Cash Equivalent Transfer Value (CETV) if she transferred her pension away. It was very tempting and she had considered it because she felt she could make a better financial return by investing the money herself.

Gathering information and researching

Mrs P was out of work due her contract work coming to an end. She was married and her husband stayed at home to raise the children when they were younger, so he had a limited pension provision of his own.

They had three grown up children together and were financially secure with a large amount of savings. They also owned a holiday home in Tenerife which she inherited, and they rented out. Mrs P had a large amount of pensions invested in equities, another smaller defined benefit scheme which was paying an income, and will have been in receipt of her state pension income at age 67.

Recommendation

Mrs P’s LV= Pension Transfer Specialist recommended that she remain a member of the defined benefit Scheme. Throughout her life, she’d had times when there was no guaranteed income coming in, and she didn’t wish to experience that again. In addition, Mrs P can use her already invested pension funds flexibly. Also, in the event of Mrs P dying first, her husband would need the secure income from the defined benefit Scheme to meet his retirement expenditure.

This means that Mrs P will have a comfortable, secure retirement without the worry of experiencing financial uncertainty due to market volatility affecting her income. They felt secure in the knowledge that in the event of Mrs P’s death, her husband will continue to have guaranteed income from the her defined benefit Scheme to support his retirement expenditure.

The Chat

Retired Miss S wanted to go on holiday to Australia and New Zealand and enjoy herself without having to worry about money – she estimated that this ‘holiday of a lifetime’ would cost around £30,000. She also wanted money set aside for general holidays and leisure costs over the next 10 years, at a maximum cost of £25,000. Finally, Miss S wanted to pay off the remainder of her mortgage (£10,000) and then make some home and lifestyle improvements at a total cost of £12,000.

Gathering information and research

Miss S was 58 had worked in retail and saved all her working life for her retirement, she didn’t want to be a ‘poor pensioner’.

Miss S is receiving a pension from one of her company schemes and she hadn’t taken benefits from her defined benefit Scheme.

Miss S was single and didn’t have any children or dependants. She had nieces and nephews who would inherit from her estate, but they had jobs and their own home.

Miss S needs some additional guaranteed income to support her retirement expenditure to take her up to state pension age. Once her state pension income commences she will have sufficient secure income in place to support her retirement expenditure.

Recommendation

The Pension Transfer Specialist at LV= recommended Miss S transfer her defined benefit Scheme and then, use the transfer value to purchase a fixed term annuity to take her to age 67 - her state pension age - to provide the remainder of the income during this period  and with the tax-free cash lump sum being used to fund her holidays, mortgage repayment, home and lifestyle improvements. 

This means that Miss S could meet her objective to go travelling safe in the knowledge she has sufficient secure income in place to support her retirement.

The Chat

Mr W is 61 and wanted to retire at age 63. He had been monitoring his Cash Equivalent Transfer Value (CETV) from the Scheme for his defined benefit pension for the previous two years. He decided to speak with the Pension Transfer Specialist at LV= when his CETV reached this highest amount he’d seen.

Mr W wanted to clear the mortgage, buy a new car, pay for their three children’s university fees and undertake some building work.

When he spoke with the LV= Pension Transfer Specialist he said: ‘I don’t want to keep working for half of my 60’s and have far too much money when my wife and I pick up our state pension at age 67. On the other hand, if I retire early with just my NatWest pension, we won’t have enough money between then and age 67.’

Gathering information and research

Mr W is married to a teacher and they have three children, all of whom are financially dependent on their parents. Mr & Mrs W’s current joint income was more than sufficient for their need and they had a good level of savings. In retirement Mr W has a Self-Invested Personal Pension and Mrs W would receive a defined benefit pension of £3,000 a year in addition to their state pensions.

The Recommendation

The LV= Pension Transfer Specialist recommended that Mr W remains a member of the defined benefit Scheme until he intends to retire rather than transferring his pension out. Without his defined benefit pension, Mr & Mrs W wouldn’t have enough guaranteed income to support their retirement expenditure when they retire. Mr W can use his savings to plug their income gap between his early retirement at age 63 and his Scheme retirement age of 65. If Mr W transferred his pension away from the defined benefit Scheme now, Mrs W would no longer receive a spouse’s pension from the Scheme, and she doesn’t have enough guaranteed income from her own teacher’s pension to support their expenditure in the event of Mr W’s death.

The Chat

Mr F is 58 and wants to retire immediately as he is frugal and values his time and freedom to lead his life as he pleases. He also wants to purchase a property in the area he has recently moved to.

Gathering information and research

Mr F is renting at present. He is single and has no children or financial dependents. He works part-time. 

His defined benefit pension wouldn’t give him the level of income he needed to retire early and the tax- free cash lump sum wouldn’t enable him to purchase his new home in full (£40,000). He received a quotation from the defined benefit Scheme for a CETV of £169,000.

Recommendation

The LV= Pension Transfer Specialist recommended Mr F transfers his defined benefit Scheme into a fixed term annuity. This enabled him to buy his new property outright, reduced his outgoings by £300 per month (rental amount), allowed him to stop working early and maintain his income requirements until her reaches state pension age. At that point, he would receive enough income to maintain his lifestyle. In addition, once the fixed term annuity matures at state pension age, it will provide a guaranteed maturing lump sum of £55,000.

The Chat

Mrs D would like to be able to pass her pension wealth onto her children and grandchildren.

Gathering information and research

Mrs D is age 70 and widowed with two grown up financially independent children and three grandchildren.

Mrs D has more than sufficient guaranteed income in place to support her retirement expenditure. She has cash based savings available and has invested for many years into various investment instruments. She has no liabilities, owns her home and a holiday home.

Mrs D demonstrated sound investment experience, strong tolerance to investment fluctuations and understood the risks involved in transferring a defined benefit pension.

The defined benefit Scheme is the last of her pensions to be taken.

Recommendation

The LV= Pension Transfer Specialist recommended that Mrs D transferred her defined benefit Scheme into an LV= Self Invested Personal Pension investing into funds which match her preferred risk profile. The plan was set up with her children as beneficiaries. This solution means when Mrs D passes away her pension wealth will pass to her children smoothly.