Final salary/money purchase advice

gardnt1

Hi, wondered if anyone could offer any advice!

At present i am in a final salary scheme and have been for the last 18 years.
Over the last few years, the scheme has closed to new entrants and all new employees offered a money purchase.

I presently put in 6-7 % of salary (i think!) and the scheme has been guaranteed until 2012 (unless company is sold!).

Obviously it would proabably be best to stop until the guaranteed time, but the worry is whether or not the company would be sold etc before that....crystal ball scenario.

The fund still has a deficit but has done well over the last year. It only has 500 contributing members and a lot of deferred approx 4000 i believe!


I am 37, so have some way to go.........I know it wont be there when i retire! question is do i cash in and take it into a money purchase or would i lose too much or are there other options?

advice appreciated, thanks, Gardnt1

crossleydd42

You don't mention a couple of items - how much you earn and what are your propects for increased earnings. Also, does yr scheme pay out 50% or 75% of final earnings? Usually a final salary scheme is the best bet and you don't have to transfer the lump sum over if/when you leave - it can probably stay earning the rate of interest every year.

I think you should stick with your scheme until the time comes when you leave. Then you should take independent advice and compare it with whatever yr new company's scheme is, or stakeholder pension you take out.

Incidentally, a deficit is not disastrous - you should get an annual statement from the trustees of the fund with periodical revaluations by actuaries.

gardnt1

Hi,
earnings £36000 pa, 75% scheme.
I dont intend leaving and hope the company stays in business for many a year. Trouble is rumours etc. The worry is that if a takeover ever occurs, the scheme would not be part of that....is the money put in then frozen?

other worry is that i am obviously bottom of pile, i dont want to end up having lost all that i have contributed, thats why i wondered if it was a viable option to jump ship or a stupid one?

crossleydd42

It's a good scheme. Pension funds are not part of a company and cannot be absorbed. NOthing can be done without the trustees sayso. And trustees come for all walks of life worker reps and even union representation, sometimes,too.
I think you would find it useful to go to the site below and get in touch with them - it will hopefully put your mind at rest. Good luck!

http://www.pensionsadvisoryservice.org.uk/

Pal

The pension fund cannot be wound up without the company paying the full cost of securing the benefits that you have built up. If the company collapses the pension protection fund will step in and protect up to 90% of your pension rights (excluding annual pension increases).

Final salary schemes are the safest form of investment there is for the members, as the company takes all of the investment risk. You should stay in it for as long as you can, and if you ever leave that company, take professional advice before you even think about transferring out, as transfers out of final salary schemes are almost always a bad idea these days.