Transfer to new pension scheme or not?

jem16

My friend has just changed jobs and was wondering whether to transfer her pension to the new scheme or leave it where it is.

She is 52 years old and for the last 9 years worked at Strathckyde University as a secretary - paid into the Strathclyde Pension Fund, a final salary scheme. She has moved to a similar job in Glasgow University but they do their own final salary scheme.

Any help would be appreciated.

dunstonh

The final salary scheme will get increased annually by around inflation until retirement. So, in real terms she will get what she is entitled to in real terms.

A transfer to a money purchase scheme (either occupational or personal) is highly unlikely to ever match those benefits. There is only one way to know for sure and that is to obtain a transfer value from the old scheme. That value can then be projected at 5 - 7% p.a. and then compared with the benefits that would give with the benefits on the old scheme. I wouldn't think it would be anywhere near the final salary scheme.

jem16

You've lost me a bit there.

BOTH schemes are final salary schemes.

EdInvestor

She really needs to get some figures from both schemes to see how many years the new one will credit her with if she transfers in.

Tell her to talk to her pension department about what's needed.

Sometimes similar institutions like universities have an arrangment where there are direct transfers which makes it very easy

I assume she is not in the USS scheme (which IIRC is for academics) and is one of the best schemes in the country.

jem16

EdInvestor wrote:

She really needs to get some figures from both schemes to see how many years the new one will credit her with if she transfers in.

Tell her to talk to her pension department about what's needed.

So far she's been to a meeting and they mention it would be better to transfer in as her final salary should increase with her new job but it won't with her previous one. I'll mention to her about asking for exact figures.

Sometimes similar institutions like universities have an arrangment where there are direct transfers which makes it very easy

I assume she is not in the USS scheme (which IIRC is for academics) and is one of the best schemes in the country.

The previous scheme was called the Strathclyde Pension Scheme which was not just for universities. The new scheme is called Glasgow University non-academic pension scheme.

dunstonh

Ahh. I misread that as dont do a final salary scheme. Ignoring my comments on money purchase, the rest of it is valid.

A comparison of benefits on the old scheme need to be compared with the new scheme. For example, if there was 20 years service on the old scheme, would she get 20 years service on the new one or would they only offer 15 years?

The final salary on the old scheme is increased annually with a rate around inflation. It doesn't remain static and erode with inflation. If she is on for pay rises above inflation in the future, it could make sense to move it. However, that again depends on the number of years she would get compared with the old one.

LittleWoman_3

She needs to also consider what the "final salary" conditions mean in real terms if she transfers the money, or keeps it where it is.

- this actually happened to someone I know in the University USS scheme.

They were told that they could go part time 2 years before retirement and it would not effect their pension, so they did. When she told me I suggested she get it in writing as I did not think this information was correct. When she did, she discovered that the pension was based on her salary level for the last 3 years before retirement, which now one year included part time instead of full-time income. They arranged to go back full-time, but lost part of the pension they thought they were going to get from working full-time previously.

If there is a chance she will go part-time in any of the "final salary" qualifying years, she is better off leaving the money were it is, as this will always be based on the final salary when she left.

jem16

I've just spoken to her and passed on all the comments. She's going to ask for a benefits quotation and see what they are offering.

She may have more questions later.

Pal

LittleWoman wrote:

They were told that they could go part time 2 years before retirement and it would not effect their pension, so they did. When she told me I suggested she get it in writing as I did not think this information was correct. When she did, she discovered that the pension was based on her salary level for the last 3 years before retirement, which now one year included part time instead of full-time income. They arranged to go back full-time, but lost part of the pension they thought they were going to get from working full-time previously.

This isn't correct. Obviously someone who is working part time only gets the part time equivalent pension, so it will be slightly lower, but the reduction only applies for the period of service that they are actually working part-time (the two years before retirement). The service before then is all calculated on full time equivalent earnings and full service at retirement.

jem16

I think LittleWoman may have been referring to Pensionable Salary as opposed to Reckonable Service ( I may be wrong ) which is determined during the last 3 years in the Scottish Teachers' Scheme so it may be similar in USS.

e.g from STSS
When you retire, you will be entitled to an annual pension and a tax-free lump
sum which are calculated on the basis of your pensionable salary and the length of your reckonable service.
Pensionable salary is essentially your best salary for any 365 consecutive days in the last 3 years of teaching.
Reckonable service is essentially the amount of service you have accrued in the scheme. There are slightly different arrangements for part-time teachers;