Employer stopped final salary scheme can I get contributions refunded?

atush

UA1 wrote: »

Hi, thanks for the quick response Pete, your right the contributions so far into the final salary are frozen but the problem is the contributions thus far dont add up to anything like a final salary.

i don't understand why you think you should get a full FS pension for a few years contribs? Why sould you get what you have NOT worked for?

You will get what you worked for (and it will be a good sum in comparison to your time and contribs) . the fact of having been on a FS scheme does not ever mean you should be paid what you havent worked for (ie all the other years you should have worked to get a full pension)

redpete

UA1 wrote: »

Hi, thanks for the quick response Pete, your right the contributions so far into the final salary are frozen but the problem is the contributions thus far dont add up to anything like a final salary.

A Final Salary scheme doesn't mean that you will earn a pension equal to your final salary regardless of how much you have paid into it.

Your contributions to date will get you something like a deferred pension based on salary and how many years you have contributed. This is likely to be more than you would get if you withdrew those contributions and invested them in a contribution-based pension.

opinions4u

UA1 wrote: »

Hi, my employer has recently decided to stop its final salary pension scheme. I have been contributing to this scheme for several years, my employer has offered me the option to stop my pension or join their standard money purchase scheme which is greatly inferior to the final salary scheme.

Unfortunately that is the way of the world. Employers don't want to pay for the good pension anymore.

My question is wether it is possible to get a refund of my contributions to date, as I feel I have been mis - sold a product.

If you've paid in for more than two years, no.

But the value of the benefits you have accrued with those contributions (and those of your employer) is almost certainly MASSIVELY more than it would be if you just got your contributions back.

So while you're mindset is currently that of a child throwing the toys out of the pram you really need to sit down and think about:

1) What pension potential you've already accrued.
2) What you're going to do to improve it between now and retirement (look at employer contributions in to the new inferior scheme and see what "free" money that offers you and consider tax relief benefits on bigger contributions).

I certainly would never have joined in the first place if I thought that the pension scheme would not have come to fruition.

The period of time you have contribtued for will come to fruition. It's the next XX years that won't. That's what you need to be thinking about. Not undoing the significant benefits you've already accrued.

My employer states they will not refund any contributions as I have been in the scheme for over two years and this is a government law.

They are right. But you're still mad to want the money back today. You'll need it a hell of a lot more later in life.

The whole thing just feels wrong. Any advice would be gratefully appreciated.

The whole thing is wrong. But there's nothing you can do to change it (unless there was some sort of contractual entitlement). All you can do is focus on funding your future pension. You won't do that if you destroy what's already built up to pay for your old age.

Thank Gordon Brown. The hairs stood up on the back of my neck when I heard this change announced in his 1997 Budget. Yes failed to build up a "rainy day" contingency for when the ploppy hit the fan in 2007/8. What did he waste the money on? He stole from all our tomorrows to pay for all sorts of nice stuff that I can't even recall benefiting from. Must have been good though, the electorate kept throwing Blair and Brown back in to power.

Thank a cultural change in the global economy where employers no longer feel responsible for supporting employees over and above paying them as little as they can get away with.

Despite our lifestyles being apparently unhealthy, we are all living three times as long in retirement. So our meagre pensions need to go further.

And to think, Lib-Dems want to restrict tax relief on pension contrbutions. Let's make a massive problem a whole lot worse!

MoneySaverLog

I think freezing it and having a defered pension is probably the better option anyway. I had a Final Salary Pension some time back and had been paying into it for 4 years before they made me redundant back in 1994. I believe it grows every year by RPI. It's not going to be a lot though, something like £1,000 a year in 20 years or so at current valuation. Since then my salary has more than trebbled.

It took me a further 6 years though before I could join another Final Salary, and that one is under threat at the moment due to a possible future ownership change in a few years time. Hopefully with a bit of luck that won't happen though it is uncertain at the moment.

Neverland

opinions4u wrote: »

Thank Gordon Brown. The hairs stood up on the back of my neck when I heard this change announced in his 1997 Budget. Yes failed to build up a "rainy day" contingency for when the ploppy hit the fan in 2007/8. What did he waste the money on? He stole from all our tomorrows to pay for all sorts of nice stuff that I can't even recall benefiting from. Must have been good though, the electorate kept throwing Blair and Brown back in to power.

Thank a cultural change in the global economy where employers no longer feel responsible for supporting employees over and above paying them as little as they can get away with.

I think you are just banging your own political drum here

It was Nigel Lawson taxing pension fund surpluses in 1988 (tax pension fund surpluses) and Norman Lamont in 1993 partially removing pension fund dividend tax credits that helped us along this road

Then also don't forget that originally the pension promises that companies made to their workers were not inflation proofed

Quite simply successive government of both parties reduced tax breaks and increased requirements on companies until final salary pension schemes became too expensive for most businesses to afford...

...so they stopped offering them

As proof I offer Peter999, above:

"However, I did calculate how much my pension "pot" would have to be to provide the £14,000 and it was £395,630 which is nowhere near how much I'd paid in (about £2,000)."

Peter999_2

I only paid that amount because originally the pension was not contributory and then became part contributory.

About £16000 a year was paid in by my company and I was in the pension for over 20 years. I treated it as part of my salary, I would have been paid a lot more if I'd moved to another company but it was worth it to stay for the pension (I knew that it was well worth it).

opinions4u

Neverland wrote: »

I think you are just banging your own political drum here

Absolutely not.

It was Nigel Lawson taxing pension fund surpluses in 1988 (tax pension fund surpluses) and Norman Lamont in 1993 partially removing pension fund dividend tax credits that helped us along this road

Perfectly good examples. You've just gone back further in time than I did.

Neverland

Peter999 wrote: »

I only paid that amount because originally the pension was not contributory and then became part contributory.

About £16000 a year was paid in by my company and I was in the pension for over 20 years. I treated it as part of my salary, I would have been paid a lot more if I'd moved to another company but it was worth it to stay for the pension (I knew that it was well worth it).

And under the new scheme the company puts in maybe £5000 a year, if that?

They've probably just cut the total cost of their employees who were in the final salary scheme by 10-20% per annum I assume?

I bet the final salary scheme hasn't been open to new joiners for sever;a years either

MoneySaverLog

opinions4u wrote: »

Absolutely not.

Perfectly good examples. You've just gone back further in time than I did.

Indeed they're all as bad as one another, out for what they can get. Now it's payback time :mad:

JCB20

They dont stop with the closure of the FS scheme. My employer is currently going thru an exercise of offering all those with deferred rights a buy out. Based on the size of the pension pot they are proposing an Enhanced Transfer Value to the money purchased scheme which replaced the FS scheme. I'm sure that some people will take them up as the increased transfer value looks a large sum. However the number doesnt stack up when you consider all the risks!
As far as I can see you need to be single and in poor health for it to come anywhere near the FS benefits. From the company perspective you can see it will reduce the future liabilities. The scheme is currently in deficit like may others.