£220 million in defecit. Deferred pensioner, should I take cash to leave?

EdInvestor

http://www.hmrc.gov.uk/pensionschemes/newsletter24.htm#2

Spendless

I asked for my pension to be transferred into the section 32 Buy Out suggested by my current pension provider.

Today I have had a letter, saying that when they wrote previously they had indicated that selecting this option may result the the product provider refusing to accept the transfer into this type of arrangement, if they deem the GMP part of the pension to be too high a proportion of your overall transfer value then they will not take on this level of guarantee and this is what has happened. They have declined to accept the transfer into a section 32 plan.

The new company will accept the transfer into a Personal Pension Plan though. My other options are a personal pension/stakeholder with my own choice of provider, stakeholder pension with another company suggested by my present pension provider or a section 32 with my own choice of provider.

Bit lost as to what to do.

EdInvestor

What sort of amounts are we talking about here? If you go to a PP/stakeholder you will lose the GMP guarantee : you can't I think lose the whole pension because it will come under the PPF if you stay at the old scheme.

On the other hand if your investments in a new pension do well, you could exceed the GMP. You need to estimate if that's possible. How much is the transfer value and what is the GMP?

Spendless

Total transfer value in scheme 16,116.48
less 13% reduction cos scheme - 2095.14
currently underfunded

Total transfer value 14,021.34


amounts payable under offer 14,021.34
cash amount payable to you 2095.14
total amount payable under offer 16,116.48



projected benefits under current scheme at normal retirement age

estiamted annual pension of 1,832.41 pa
PLUS tax free cash sum 12,215.98
The info I can find on GMP says the following. Tell me if I have not put the right/enough info

members benefit (at date I left pension
scheme) 120.68

annual GMP in respect of service after 6/4/88 increasing by 6.25%pa from 27/12/1997 to State Pension age.

Pension increased 3.00% will apply to each part of pension once I have retired and my pension commences.

spouse's pension 75.84% proportion of each benefit that is payable to spouse on my death after retirement. Annual pension is guaranteed to be paid for 5 years following retirement, which means if I die within first 5 years of receiving pension, my spouse/dependants would receive the balance of 1st 5 years as a lump sum.

(I started there march 91, could and did join pension from oct 92 and was made redundant 26/12/97).

EdInvestor

If you took that transfer value and put it in a personal pension where it grew @ 7% after charges over the next 25 years, you would end up with a fund of 87,469. Setting aside 12,469 as tax free cash, the remaining 75k would buy a pension increasing @3%, with a five year guarantee and a 2/3rd spouse's pension of 3,348 p.a.

The risk is all yours of course.

It might be worth calling these people for some impartial advice:

https://www.pensionsadvisoryservice.org.uk