Offered the opportunity to leave a pension scheme

worried_jim

I worked for Arcadia and paid into its pension scheme from 1992 to leaving in 1999. I have recently been contacted by them to say that they can't afford to run the scheme and that if I transfer the value of my fund to another provider they will give me 5% enhancement for doing so.
I can if I choose to take the enhancement in cash subject to tax and N.I deductions.
The scheme value is £22,320
The enhancement is £1,116
Total enhancement transfer value £23,436

Now I have two other pensions-
A private plan with Winterthur Life which I started mid 90's but haven't paid into (can't afford to) since 2003. It's value is £12,416 but I don't think it is doing very well.
I also have my current employee scheme (have paid into since joining in 2005), which I contribute, to monthly and the company pays into. This is currently valued at £12,439 and is doing well; I doubled the fund last year by moving it into a high-risk investment.
So at present I have saved in various pension instruments at total of £47,175 (this does not include the enhancement of £1,116).
Arcadia have appointed a financial adviser for me for which they will pick up the cost, they are JLT Wealth Management, I haven’t spoken to them yet but they are in the process of sending me some information.

I plan to take the enhancement of £1,116 as cash as I have been living here for nearly ten years and would love to carpet the place. I was planning on moving the £22,320 into my current employee fund (I have checked with them and I am able to do this).

Before I speak to JLT Wealth Management I wanted to be armed with some questions as this is pretty important.

-Do I need to ask about tax implications (If there are any)
-Would I be able to (or advised) to transfer my Winterthur fund into my current employee fund.

Can anyone else think of anything else I should do/alternatives?
I am 37 years old, in a reasonably safe job (as safe as anyone else) that I really enjoy and I am not presently looking to leave the company. I have no desire to retire early. How am I doing overall?

atush

Is all your money in your current scheme still in that high risk fund? Or have you diversified?

I ask this as if it is, I would not invest the 'new' money in the same but differnet funds/areas as you don't want all of it in the same fund or at the same risk level.

About the pension you are thinking of transferring- do they have any Guaranteed anuity rates or minimum pensions? What will the charges be to transfer out of Winterthur?

vax2002

Ask them to just give you the money back....

Linton

I couldnt see in the info you supplied - is it a final salary scheme or defined contribution? Presumably the former as the latter would not cost them anything.

If it is a final salary - what is the benefit?

worried_jim

Thanks for your prompt replies. The £12,439 I have in my current employee plan is all in the same "growth" fund. I would look to diversify my holding if I where to transfer in the Arcadia £22,320 so I am not exposed all to the same risk.
I am going to have to contact Winterthur to find out about charges etc, I need to dig out some of my old statements to be sure of its progress, it just seems off the top of my head every statement I get seems to show the same balance of about £12k, I know that I no longer contribute but I believe the government does and I would have expected it to increase with value- I will look into this.
Re- final salary. I can't remember. I started it back in the early 90's and I know a lot were final salary (I suspect that this is) but being honest I don't know how much of a difference this will make (my current scheme isn't final salary, I joined to late unfortunately). When I left in 1999 I was on about £18,300 pa.

hugheskevi

-Do I need to ask about tax implications (If there are any)

The incentive payment will be added to your annual taxable income and taxed at the normal rate. If that is basic rate, £223 would be taken as income tax.

The national insurance taken should be about £87, as it should be processed as a weekly payment.

-Would I be able to (or advised) to transfer my Winterthur fund into my current employee fund.

I'd expect that to be beyond the remit of the advisor, who can probably only advise on this transfer. You could arrange your own advice though.

if I transfer the value of my fund to another provider they will give me 5% enhancement for doing so.

That is a low enhancement. Whilst each exercise differs, most incentives would be quite a lot higher based on my understanding of them.

Given the amount and your age, I wonder if the advisor will be able to recommend the transfer is appropriate for you.

The scheme value is £22,320

You might want to ask on what basis this is calculated. It is almost certainly the Cash Equivalent Transfer Value.

If so, you will struggle to replicate the scheme benefits in your personal pension.

Don't believe that just because it is labelled a transfer value that this is a definitive fair value. You should read this statement from the Pension Regulator and the FSA.

I am 37 years old, in a reasonably safe job (as safe as anyone else) that I really enjoy and I am not presently looking to leave the company. I have no desire to retire early. How am I doing overall?

Depends on your target, which is likely to be dependent on your salary.

If your aspirations are normal and your salary average, you are doing okay. Play with calculators such as this.

worried_jim

I have just had a dig around for for my old Winterthur statements-
year fund value
2005 £10376
2006 £11551
2007 -
2008 £10904
2009 £11666
2010 £13014
2011 £12416

This years statement gives me £923 a year (projected).

Linton

worried_jim wrote: »

Re- final salary. I can't remember. I started it back in the early 90's and I know a lot were final salary (I suspect that this is) but being honest I don't know how much of a difference this will make (my current scheme isn't final salary, I joined to late unfortunately). When I left in 1999 I was on about £18,300 pa.

Whether your old scheme is final salary or not could be very significant. On this forum we frequently have queries such as that from yourself where people with final salary schemes are offered cash inducements to reduce their pension or leave the scheme completely. In the majority of cases we find that these inducements arent sufficient compensation for the lost pension.

worried_jim

Linton wrote: »

Whether your old scheme is final salary or not could be very significant. On this forum we frequently have queries such as that from yourself where people with final salary schemes are offered cash inducements to reduce their pension or leave the scheme completely. In the majority of cases we find that these inducements arent sufficient compensation for the lost pension.

Thanks for that info. I feel that I am already a bit more informed.

catloverbex

I'm in the exact same boat as you. The Arcadia offer is to buy out ex-employees from a final salary scheme so I'm assuming that your pension must be a final salary scheme.

IMHO, the Arcadia ETV offer is pretty poor - the cash lump sum seems pretty low in comparison to my overall scheme value and the transfer value isnt great compared to the pension i'll receive when i retire. (i've still requested the advice from JLT so am waiting to hear what they say!!).

However, I also spoke to some friends who are pensions experts in a big 4 acountancy firm just to get an overall feel for what they thought (not mentioning any numbers or my exact pension values etc). They reminded me that ETV offers are designed to save the pension scheme money by reducing their liabilities, and therefore the employee is unlikely to ever be overall financially better off by accepting the offer. They also said i would have to find somewhere to transfer the value of my pension scheme to (which sounds like a hassle).

If you fill out the JLT forms with as much detail as you have, then they should be able to advise whether the deal is financially a good one for you or not.

Good luck with your decision! So confusing!

worried_jim

catloverbex wrote: »

I'm in the exact same boat as you. The Arcadia offer is to buy out ex-employees from a final salary scheme so I'm assuming that your pension must be a final salary scheme.

IMHO, the Arcadia ETV offer is pretty poor - the cash lump sum seems pretty low in comparison to my overall scheme value and the transfer value isnt great compared to the pension i'll receive when i retire. (i've still requested the advice from JLT so am waiting to hear what they say!!).

However, I also spoke to some friends who are pensions experts in a big 4 acountancy firm just to get an overall feel for what they thought (not mentioning any numbers or my exact pension values etc). They reminded me that ETV offers are designed to save the pension scheme money by reducing their liabilities, and therefore the employee is unlikely to ever be overall financially better off by accepting the offer. They also said i would have to find somewhere to transfer the value of my pension scheme to (which sounds like a hassle).

If you fill out the JLT forms with as much detail as you have, then they should be able to advise whether the deal is financially a good one for you or not.

Good luck with your decision! So confusing!

That is very helpful advice -Thank you.