A decision concerning my pension – please help

scorpion1_3

I recently took voluntary redundancy after 15 years of working for the same company since I was 19. I’ve been sent a letter asking me to make one of the following choices concerning my pension:

(a) The accrued benefits to remain in the Retirement Plan until you reach retirement age.

(b) Transfer the value of your benefits to your current employer’s pension scheme.

(c) Transfer the value of your benefits to a registered pension arrangement of your benefits and options.

Option (b) isn’t an option as I don’t have a current employer. So the question is, am I better off leaving it in my current plan (a) and starting another pension sometime when I’m sorted and thus spreading the risk/benefits, or will I be better off arranging another pension now and transferring it to that (b)?

Thanks in advance for your replies.

Mike.

dunstonh

So the question is, am I better off leaving it in my current plan (a) and starting another pension sometime when I’m sorted and thus spreading the risk/benefits, or will I be better off arranging another pension now and transferring it to that (b)?

Impossible to answer without knowing what figures and benefits are, what type of scheme you are in and what type of scheme you are looking at for option C.

scorpion1_3

Statement of Benefits at 6 April 2007 (can’t find 2008)

Current Pensionable Salary £26,078
Current Salary for Life Assurance Benefits £30,524
Plan pension accrued to 6 April 2007 £ 6,198

I hope these are the figures of interest?

I was in a final salary scheme.

As far as what I’m looking at for option (c), I’ve no idea – any suggestions?

Thanks again J

EdInvestor

It is probably best to leave it where it is as it will be increased by inflation or 5% until you retire and will keep its value with no risk to yourself.

MikeJones_2

Hi Mike (alias scorpion1),

EdInvestor wrote: »

It is probably best to leave it where it is as it will be increased by inflation or 5% until you retire and will keep its value with no risk to yourself.

There is no such thing as 'no risk', but you can minimise whatever risk there is to your pension benefits by taking a few simple steps:

1. Learn about what your pension promises you.
This includes your pension, lump sum, benefits payable on your death, early payment, ill health and pension increases (before and during retirement) to name a few of the key areas that you should know about.

2. Find out what happens if the scheme's sponsoring employer fails.
Visit the Pension Protection Fund's website and read up on what happens to your scheme if your employer fails. The PPF does not provide the same level of benefits if your scheme fails and it is not without its critics, so learning what it provides (and as importantly what it does not) would make good sense. Try the FAQs for a start.

3. Keep appraised of pension and retirement issues.
Take an active interest in your retirement planning. Read the money sections of websites and newspapers.

4. Regularly review your pension benefits.
Legislation changes and financial and economic situations vary from time to time so it is wise to regularly review each of your retirement benefits at least at regular periodic intervals and at worst whenever your personal circumstances change (marriage, divorce, changing jobs, having children, deteriorating health, etc). For example, when you started work, your State Pension Age was 65 (I'm assuming becuase of your name that like me, you're a male) - but is now 67 (or will be when the current Pension Bill is passed soon).

5. Consider using an IFA.
If you don't already, consider using an IFA. A good one will help you with each of the above. You might also ask your IFA to do a Transfer Value Analysis (TVAS) on your preserved pension. This will encompass points 1 and 2 above, as well as whether there would be any merit in transferring to an alternative pension arrangement.

6. Don't fail to plan.
Don't bury your head in the sand. Your pension benefits are your own 'wages in retirement'. If you don't take an interest in them, you'll probably suffer the consequences when you retire.

Here's a factsheet on Security and Risk which looks at 8 different types of risk for a preserved member of a defined benefits scheme member like you.

Hope this helps.

Mike

I work in the field of Pension Education and Pension Guidance in the UK. I am a current member of the Specialist Pensions Forum as well as being a Voluntary Adviser for The Pensions Advisory Service. I work with scheme members, employers, trustees, scheme administrators and advisers on most things to do with employer sponsored pension schemes. The views expressed by me in this thread are my personal opinions. You should seek professional advice from an appropriately experienced and qualified adviser. I am not an IFA.

scorpion1_3

Thanks for the great reply/advice Mike Jones – much appreciated.