Defined Benefit Pension

[xoana]

In my previous job we were signed up to a defined benefit pension, as well a separate defined contribution pension.

I got a letter in the post today with the closing statement of the DB pension. I was with the company for 4 years, and looking at my annual statements I couldn’t figure out what the current value of it was, it looked like it was about €2000.

Anyhow, the letter today states I can transfer it at a value of €16,822 (which isn’t guaranteed)

Or keep it and have a projected payable rate of €2,246 p.a. from normal retirement date.

Am I right in guessing that I would be getting €2,246 p.a from age 65 to ~95? If I live that long!
That’s looking like a value of €67380 total.

I currently have 3 other DC pensions from different companies that I’m happy to keep separate so I have the option of cashing in before retirement if needed, and my current and 4th DC pension with the company I’m in now and hopefully will stay with.

If I was to transfer it would be into the current Aon high risk passive equities, one which I plan on investing my max allowable and company contributions which is ~€15,000 p.a so I’m expecting this to be the main pot. Projected growth is over 6% a year, and I’m 37 which gives me about 30 years of investing, all going well.

Would my DB pension have a better chance of growth if it was merged into my current pension or does it even work that way?

Any advice appreciated

 

[jpete]

@xoana You'd need about €45,000 of a fund to buy an annuity of €2,300 pa at the moment.

So the risk you take is that the €16,822 grows to more than €45,000 @ age 65.

Very rough calculations above but you'll get the picture.

I'd probably just let it be and focus on your DCs.

 

[captainfarkus]

@jpete You also need to consider inflation. Typically, the DB scheme value will be adjusted for inflation (within certain rules*). Thus, the question is - "are you confident of growing the €16,822 to the equivalent of €45,000 in today's money by the time you retire?"

^(\Op needs to read up on the scheme rules regarding inflation adjustments)*

 

[clicks]

@xoana I don't have the knowledge, but my company recently had a meeting with a pension advisor and one of the things he mentioned is that even though you cab move a DB pension to a BC one, it's advised in most cases not to do so.

Never had one so I have absolutely no clue what the deal with DB is, just thought to mention this advice.

Of course there are exception and if not completely sure better to advise a professional

 

[xoana]

@clicks Cheers! I have one and still have no clue what the deal with it is, most confusing concept I’ve ever tried to figure out. I said I’d ask the fine folk here and I’m happy to go with the advice and leave it as is