Advice please - company pension scheme to be wound up

joe13

Advice please
My OH was made redundant last year, left his pension pot with old company.
Now received a letter saying
That .... co. are writing to advise that the retirements benefits sheme will commence to be wound up with effect from 10th march 2006.

OH has been give 6 weeks to advise what he wants to do. 4 options are given
1. Transfer to a personal pension or stakeholder pension

2. Transfer to a new employer's pension scheme.

3. Transfer to an alternative buy-out policy.

4. Transfer to Friends Provident (Activ Consensus Enhanced)

For some background info:
OH is 58 years, and normal retirement age on scheme is 65 years.
We have paid off our mortgage. But had children later in life , so 2 lots of university costs still to pay.

Although he has found a new job, it may not last and he does not want to take option 2 for that reason. Not expecting a great pension from new employment as employer only pays in 4% of salary, OH is paying max in that he can.

Other big concern is how small the pension pot is, over many years OH has been paying in 15% to his pension fund, guess it was started too late.
Transfer payment figure given is only £58,800

I guess we will have to go and get some professional advice, but any advice you could give or any questions that we should be asking an advisor would be a big help.

Thank you in advance

Pal

Do you know what type of pension scheme it was? Final Salary? Has the company become insolvent or is it still trading?

I strongly suggest you get proper advice. If it is a final salary scheme option 3 should be a deferred annuity that will give your husband exactly the same benefit that the scheme would have given him. All of the other options might result in a lower benefit being payable as I doubt that the transfer value is the full annuity buy-out amount.

Have they told you what will happen if you don't agree to a transfer?

Do not sign anything until you have spoken to an adviser.

joe13

Thank you Pal for your advice,

OH is away, so not sure if it was Final Salary or Money Purchase scheme.

Letter said if he did not reply within 6 weeks then they would proceed with option 4.

Company is still trading, but company quote changes to pension rules due to commence April 06 for changes, trustees have agreed to transfer all to option 4 unless they choose other option.

Pal

That suggests to me that it is a money purchase plan, but double check before you make a decision. If so, it means that transferring it is not such a big decision, but you do need to be careful about where you invest it going forward.

Personally I would speak to an IFA before I did anything. There are a couple that post on this board who might be a good starting point.

EdInvestor

If this is an occupational money purchase (defined contribution) scheme, then the move to what appears to be a group personal pension (GPP) with Friends Provident probably won't make a lot of difference.

These types of pensions need monitoring by the employee, something which is often not made clear Particularly in the run up to retirement, if the plan is to buy an annuity for a pension income, it is important to move the money into safe funds such as bonds, gilts and cash, so they are not subject to the risk of stockmarket crashes at the last minute.

Clearly this wasn't done in this case.

Other big concern is how small the pension pot is, over many years OH has been paying in 15% to his pension fund, guess it was started too late.
Transfer payment figure given is only £58,800

And now we see the result.

joe13

Enquired today in our local High Street at the Insurance Brokers who advertise as IFA's.

They quoted minimum of £500 to even look at the paperwork and quote on our best option.

Of course I expected to have to pay but £500 minimum - are they trying to rip us off, knowing we have to have advice?

Will wait until OH returns this weekend and see how he wants to progress.

Pal

£500 sounds about right to me, but perhaps Dunston or Whiteflag could comment?


Ed - so you think that a 58 year old with seven years to go to retirement should be invested in bonds and cash?

EdInvestor

Pal wrote:

Ed - so you think that a 58 year old with seven years to go to retirement should be invested in bonds and cash?

Typically until very recently most pension savers were put into With profits and balanced managed funds, which were 70-80% invested in equities.That is a major reason why so many people have come to grief now

I would not regard that level of equities as suitable for people in their 50s unless they had considerable other assets (eg letting property, other portfolios, equity in home etc)

This is because the idea that you can retire at the date you elected on your pension policy document 20 or 30 years ago is quite likely to prove to be in fantasyland. "Seven years to go" may turn into enforced early retirement in 18 months.

Thus it's important for anyone over 50 to keep a close watch on their assets and investments with an eye to both safety and growth IMHO.

This calculator gives an idea of how money should be invested by age:

Asset allocation

Being American it tends to focus on bonds for the safety area - here we would use lower risk commercial property funds as well.But the principle is the same.

dunstonh

This calculator gives an idea of how money should be invested by age:

Asset allocation

Being American it tends to focus on bonds for the safety area - here we would use lower risk commercial property funds as well.But the principle is the same.

That is an awful asset allocation tool. It takes no consideration of individual attitude to risk into account. Asset allocation is the best way to invest but the sector spreads should be calculated with the individuals attitude to risk taken into account.

oh, btw, I answered the fee question on the other thread but £500 fixed seems fair.

EdInvestor

dunstonh wrote:

That is an awful asset allocation tool. It takes no consideration of individual attitude to risk into account.

Sure it does.Have another look.

dunstonh

So it does. Weird, I obviously missed that before. Perhaps as it took so long to load on firefox first time round.