PENSION closing, what now?...

james3333

Hi guys,
iam 31 years old and have been paying into my company pension for 10 years.
i pay £150 per month.
now, the scheme USED TO BE VERY GOOD for every £1 i put in, the company put in £2.
now, however, they are closing this scheme and offering us an option to go into a 'personal stakeholder' pension with legal and general.
i have 2 options
1. totally freeze my 'pot' and receieve 100% of it at retirement age
2. transfer the pot to the legal and general stakeholder pension with a loss of 20% ( due to the companies pension deficit!!!!!!!)

so, what would you people recomend?....freeze it and have 100% at retirement or transfer it and take a 20% loss on what its worth

its also worth noting that, i might be getting made redundant in september, but i MIGHT be lucky and escape it and the company are saying they will match any payment of mine in the future if i do stay with the company ( i.e if i Put in 5% of my wage, they will match it)

!!!!!!!!!!????

HELP!!!!!!!!!!!!!

a7man

Dont transfer it...why would you give up 20% for nothing? Freeze that pot and if you want to continue contributing start a new personal pension with another company.

shaunrc

Hi James

Firstly I am an IFA but please do not take this posting as financial advice as that has a specific meaning for a regulated person like me.

Firstly I need you to tell me what type of scheme this is as your posting has a mixed implication by talking of it being defined by contributions then later talking of a deficit.

Will it give you a guaranteed income at the end or will it give you an invested fund?

Matching contributions are a benefit but not as good as you had. But it is hard to help without you telling me more about the details of your plan.

james3333

well, not totally sure on the type (its salary sacrifice, defined benifits...i think)
i know that if i freeze it i will get 100% of whats in it now when i retire or at 55 i can get 25% lump sum and a reduced pension for my retirement.

the new scheme is being set up by the company too, but its a personal pension plan, stakeholder...they managed to get us it at 0.6% for fees ( aparently they usually chage between 1% -1.5%) and the company are going to match my contributions up to 5%

i suppose the question is, would i be better putting in the 'pot' i have now to the new scheme ( -20%) so it starts me off good from the start OR start again from nothing and let it build up over time?

Debt_Free_Chick

Why is there a deficit? Is this a defined benefit/final salary pension scheme?

If so, then the Company will need to agree a funding plan with the Trustees of the scheme in order to eliminate the deficit. At that point in time, you can get 100% of your transfer value. So just wait and transfer it at that point in time.

If this is not a final salary / defined benefit scheme, then I don't understand why / how the transfer value is reduced

shaunrc

Hi James

Ok thats a little clearer I think!

Various things should be happening to protect you if it is a defined benefits scheme. Have you heard from the trustees or scheme actuary on what plan is being put in place to reduce the deficit?

Do you perhaps have a union rep. who could help or check on things?

There is also government protection under the Pension Protection Fund.

If you have a copy of the letters you received on it it would help if you copy and paste them on here taking off any private details.

james3333

thanks for the info so far guys,
the deficit is being 'filled' by 13m each year, approx 2013 it should be 'plugged'... would i then (even if i dont work for the company anymore) be able to transfer 100% into the new scheme?

chesky369

Why would you want to transfer over a defined benefit scheme (where you know precisely what you will get out the other end) into a stakeholder scheme where YOU take the risk on the money markets, with absolutely no guarantees. By all means start the new scheme BUT keep the current scheme 'frozen' or deferred until your retirement.

shaunrc

Hi James

If I were you I would certainly ask why you can't transfer in 2013. There is no guarantee the fund will then be 100% as the numbers are based on a forecast but the situation should be better.

You should be getting formal information from the trustees about closure of the scheme which highlight all this. Have you received anything? The detail from them should help as certain data is their preserve.

How viable is the company going forward?

james3333

chesky369 wrote: »

Why would you want to transfer over a defined benefit scheme (where you know precisely what you will get out the other end) into a stakeholder scheme where YOU take the risk on the money markets, with absolutely no guarantees. By all means start the new scheme BUT keep the current scheme 'frozen' or deferred until your retirement.

could the money not work 'harder' for me in the stakeholder scheme? ( rather than just being sat dormant)
and, if i start the stakeholder scheme with a big lump ( allbeit 20% down) would it not build that 'hole' back over the time its in there..........
or should i DEFINATELY just freeze it..........which makes most financial sense?

thanks guys.

chesky369

the term 'working harder for you' smacks of the patter used by financial salesmen.