National Marriage Week: Hollywood Marriages
In Old Hollywood, the films often ended with marriage and sometimes this is repeated in real life. One of the longest Hollywood marriages is the 50 year marriage of Paul Newman and Joanne Woodward. In 1953, when Paul set eyes on Joanne, Newman said he fell in love. As for Woodward, she just didn’t think much of him! When Paul was asked why he remained faithful to his wife when he could have any woman, he stated, “Why go out for hamburger when I have steak at home?” Joanne, when asked about their successful relationship said “Sexiness wears thin after a while and beauty fades, but to be married to a man who makes you laugh every day?”
These two statements should be reflected on within the current hiatus of transfers from defined benefit schemes, that offer guarantees and certainty to the defined contribution pension pots. The freedoms and opportunities now available with your defined contribution pension pot may appear attractive and sexy, especially when you have been offered an eye watering transfer value and markets are going up, but in the long term it could wear thin when you realise that you’re responsible for ensuring that you have enough money to provide you with an income for the rest of your life.
Before transferring, think long and hard about these questions:
- What other income will I definitely have coming in, in retirement? – State pension is certain but buy-to let rental income is not.
- How much do I understand about investments? – If the market goes down, drawing an income out of your pension fund can have a very detrimental impact on the size of your pot.
- Will you be able to ride out the peaks and troughs of the investment market – People often react to stock market falls by cashing in their investments at the worst possible time so that their pension pot never recovers.
- Do you know all the charges that you will be paying on transfer, while invested and on exiting? – Your defined contribution pension pot will have administration charges, investment costs, transaction costs and possibly advice costs which all need to be factored into how much the money needs to grow in order to provide the same income as a defined benefit scheme.
- What will happen when I die? – On your death, your partner will have to make decisions about the pension.
The reason why transfer values from defined benefit schemes have increased is because a good retirement can be expensive. Like a good marriage, you should always make sure that your pension/partner will stand the test of time.