Pension transfer from company schem

edited 30 November -1 at 1:00AM in Pensions, Annuities & Retirement Planning
8 replies 1.8K views
barniebarnie Forumite
16 Posts
Hi, my ex company has offered me 2 proposals to come out of their final salary pension scheme. 1. an enhancement of my transfer value by £16k + or stay with them but earn no pension increases apart from statutory ones. What do I do?


:-/ :-/ :-/ :-/ :-/ :-/ :-/ :-/
Treat everyday as your last one on earth! and one day you will be right.

Replies

  • PalPal Forumite
    2.1K Posts
    ✭✭✭✭
    Why have they offered an enhanced transfer value? Did they give you an announcement along with it? What exactly did it say?
  • dunstonhdunstonh Forumite
    106.7K Posts
    Part of the Furniture 10,000 Posts Name Dropper Combo Breaker
    ✭✭✭✭✭✭
    this is without knowing anything...

    you should investigate this but keep the view that:

    "why should I leave a final salary scheme that has far more guarantees in it than a definded contribution scheme and why do they want to sweeten it with 16k"

    chances are 16k now is cheaper than having to pay more later on as the final salary scheme will probably provide more.

    ...as i said,thats without knowing anything but its a trend been going on for a few years now and I have yet to see a defined contribution scheme that is better than the final salary scheme that is trying to replace. No matter how good they try to make the new one.
    I am an Independent Financial Adviser (IFA). The comments I make are just my opinion and are for discussion purposes only. They are not financial advice and you should not treat them as such. If you feel an area discussed may be relevant to you, then please seek advice from an Independent Financial Adviser local to you.
  • Debt_Free_ChickDebt_Free_Chick Forumite
    13.3K Posts
    ✭✭✭✭✭
    stay with them but earn no pension increases apart from statutory ones

    You have to get this whatever - so they're not offering you anything that they're not already obliged to give you.
    an enhancement of my transfer value by £16k

    How do you know you're getting an enhancement? As a benchmark, your entitlement is the transfer value they would have to offer, if you left the company. So ask for this, if they have not already provided it.

    If the TV enhancement is real, then that is the only benefit they're offering. But remember - you are exchanging the pension promise for a cash sum. The amount of pension that the cash sum provides at retirement depends on investment returns between now & then and the cost of buying an annuity when you retire.

    If you take the pension with statutory increases, then you are dependent on the pension scheme surviving and having enough money to pay you what they promise, when you retire (there's some new protection on the way to safeguard against any underfunding)
    Warning ..... I'm a peri-menopausal axe-wielding maniac ;)
  • PalPal Forumite
    2.1K Posts
    ✭✭✭✭
    My concern, as DFC also mentions, is that if he does not transfer the scheme may be wound up, but unless the company is in trouble there are no financial implications for the members of it doing so.

    It is entirely possible that they are trying to pay an enhanced transfer value to get people to transfer out, but whether it will result in a larger pension would need careful professional analysis and a large dose of investment/annuity rate luck.

    I think we need to know more about the communication material that has been provided and what the transfer value and the enhancement actually represent.

    Edited to correct a typo: There are no financial impacts to members of final salary schemes if the scheme winds up while their company is still solvent. It is only if the company goes bust that there is a problem.
  • barniebarnie Forumite
    16 Posts
    Re my final salary pension scheme

    The Company says that interim results show a loss before tax in interim results so deficit in pension scheme has risen to £34.2m so to meet deficit they have to minimise contributions to the scheme and to achieve this they have to reduce the scheme's liabilities. So they have made us 2 proposals 1. my current transfer value will be enhanced by £16k+ if I transfer out or
    2. leave money with the company but no pension increases when I draw my pension except for GMP which will get statutory increases. So if I don't transfer out I dont get the £16k+ and I don't get increases when I draw my pension and if the Company goes bust then I suppose I don't get anything or very little.
    Treat everyday as your last one on earth! and one day you will be right.
  • PalPal Forumite
    2.1K Posts
    ✭✭✭✭
    Can you please double check the details of that. Assuming it is a final salary scheme, any pension accrued after 6 April 1997 must be increased in payment by LPI (RPI up to 5% a year).

    Also, they cannot withdraw any past benefits without your consent so don't sign anything. If the scheme rules (check the booklet) said that you get increases on your pension, then you will still get them unless you agree to them being taken away.

    All sounds very odd to me. I strongly suggest taking all the papers to an IFA and asking them to advise you on what to do.
  • barniebarnie Forumite
    16 Posts
    :-/ :-/ :-/ :-/ :-/ :-/ :-/ :-/

    Thanks for all your comments. The letter says no pension increases on pension earned prior to 6.4.97 in excess of GMP earned after 5.4.88; Increases of 3% on gmp earned between 6.4.88 and 5.4.97 and any pension earned after 5.4.97 in line with cost of living, subject to a max of 5% pa. As I left the Company in October 1994 the last one doesn't apply.

    I suppost my third choice is to stay with company and take a gamble as to whether they survive or not.
    Treat everyday as your last one on earth! and one day you will be right.
  • PalPal Forumite
    2.1K Posts
    ✭✭✭✭
    I think that you should get an IFA to look it over. For £500 quid they should be able to do a reasonable comparison of the options.

    One thought though - dig out a copy of the booklet you were given when you joined and find out whether it promised you any pension increases. If it did, they are not allowed to take them away and you would have a reasonable case to complain to the pensions ombudsman.
This discussion has been closed.
Latest MSE News and Guides

A guide to council tax bands

Lower your band & save £1,000s

MSE Guides

Cinema MoneySaving tips & tricks

Including year's 2for1 movies for £1

MSE Deals