Here are some stories from hypothetical members with differing priorities that could help you think about your own.
Meet Sally
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Very active and in good health
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Sufficient income every month for her lifestyle
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Decides to remain in the DB pension
For Sally and her husband Jim, looking forward to a predictable week is their idea of perfection. They are both very active and in good health. There is always time for trips to the cinema, local cafes, and not forgetting their passion for golf.
They are very fortunate to have sufficient income coming in each month that more than matches their lifestyle.
Sally decided to remain in the DB pension, as it will provide a stable long term income for both herself and Jim and her pension payments will not be dependent on investment performance.
Meet Privani
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Set up her own business in her 50’s
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In remission from her illness but life expectancy has shortened
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Decides to accept the enhanced transfer value
Privani had spent her working life with a large multi-national company but at the age of 55, she finally fulfilled her dream of opening her own small business, with her daughter Deep. Everything was going well until she received her diagnosis. She is now in remission but is very aware that her life expectancy has been shortened.
Privani decided to accept the enhanced transfer value on offer. This will allow her to take a higher tax free lump sum and the inheritability of an ARF is also now a priority, given her medical condition.
Meet Harry
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Loves to travel and visit his family abroad
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Savings are getting low due to expensive flights
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Wants to keep travelling while he can
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Decides to accept the enhanced transfer value
Harry likes nothing better than to seize the day. He lost his wife a few years ago, his daughter is now settled in Canada with her children and his son lives in Australia. Harry misses his family and likes to visit as much as he can but flights are expensive and he has been eating into his savings over the past couple of years.
Harry decided to accept the enhanced transfer value. This will allow him to take a higher tax free lump sum, which he can use to travel and support his children abroad. He thinks that in a few years time he might have a bad hip or a dodgy back and the thought of travelling to Australia or Canada would fill him with dread!!
With the balance of the monies, he will buy an annuity (a regular income for life). This is very similar idea to a DB pension but will be just for him as he no longer needs to provide for a partner. This annuity will provide him with the simple, low maintenance income that he can rely on in retirement.
We would see this as being a most unusual case. It is easy to be dazzled by a higher pension lump sum but as a rule, we would recommend that if you will ultimately prefer to purchase an annuity, it would generally be better to remain in the DB scheme. However, Harry carefully reviewed the figures with his financial advisor and this was the most suitable option for him.
