dundas666 wrote:Another thing I discovered in my recent Benefit Statement is that if I take the 25% tax free lump sum then my income will fall 35%. The lump sum would have to yield 7.5% to make up the fall in income. I'd love to move this DB pension - or at least part of it - into my SIPP so my kids can inherit it, but I feel I'm being blocked at every turn.
Yeah, transferring out is pretty difficult nowadays. As the transfer value is over £30K you'll have to get regulated independent advice on it and the default for IFAs is to recommend against a transfer and most IFAs will do that in most cases. That didn't used to be a show stopper in itself but nowadays there are a decreasing number of SIPP providers (indeed, if any?) that will accept "
insistent clients", i.e. ones that want to transfer against IFA advice.
And the sting is that the IFA will charge you for the advice regardless of what it is, and 2-3% of the transfer value is typical and often with a minimum, so good chance you will end up paying several thousand £ and the IFA will say "no". The days of no-transfer-no-fee are long gone.
To get back to your pension itself: do your statements give you a breakdown? I'd hope to see at least pre-88 GMP at date of leaving, post-88 GMP at d.o.l. and pre- and post-85 excess over GMP at d.o.l., and then to see each of those revalued either to-date (or, at least, to most recent revaluation date) or to the projected date of taking the pension.
As you left the scheme in 1989 (ish) the GMP components will either be revalued by a fixed 7.5%pa or by national average earnings (
Section 148 orders), depending on the scheme rules, although for the last year it doesn't make much difference as the latter was 7.6%, so they're much of a muchness (
https://www.legislation.gov.uk/uksi/2024/284/made).
The pre-85 excess won't be revalued at all and the post-85 will be revalued by
The Occupational Pensions (Revaluation) Orders, which gave an increase of around 5% over the last year. (
https://www.legislation.gov.uk/uksi/2023/1265/made)
None of that is going to account for the 22% increase, although note that what I'm referring to are the
statutory increases; schemes can choose to be more generous (although not many do!). However, it's unlikely they'll be that generous, which is why I reckon that you've crossed some age and/or date threshold.
In regards to your questions, other than (1).
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2) Could it go back down again?"
Unlikely I'd have thought, but do get and check the scheme rules.
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3) If I put my pension into drawdown, could it then go down again, or is it then more-or-less fixed (apart from inflation linking)?"
Once in payment the pre-88 GMP component will receive no increases, the post-88 GMP component will receive increases of CPI capped at 3% and the excess over GMP component will receive no increases (there is no legal requirement for schemes to provide indexation of pension rights accrued before 1997). Again, these are the
statutory minimums, your scheme may be more generous. If it is it's most likely to be around the excess over GMP component.
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4) If I continued to defer would I get similar increases, or is it because of something else?"
Again, get and check the scheme rules.
