Changes to Final Salary Pension Scheme

Sand_castle

I am currently in a Final Salary Penion Scheme (FSPS)

If the company decided to change this, to say, an Average Salary Pension Scheme, could this have any effect on my current accrued rights or can the company only apply this to the contributions going forward?

Would it make a difference if I had left the company and had a deferred pension?

Andy_L

Changes cannot apply to accrued rights except, depending on the wording of the pension scheme, the use of CPI instead of RPI for inflation indexation.

It makes no difference if you are an active or deferred member

oldgirl1954

Sorry to post this question here, but I cannot figure out how to start a new thread on the Final Salary issue.
I have been in a final salary pension scheme which was wound up in January of this year (contributed to this for 19 years). The company started a new money purchase scheme which I have been paying into since the closure of the final salary pension scheme. Unfortunately to complicate this situation our large corporate company sold us onto a smaller organisation who will be taking us all on under Tupe rules, this became official at end of August.

I have today received a letter from my old employer's pension administrators to advise as follows: Are you are over the age of 55 you have the option of commencing the payment of your benefits with effect from 31st August 2012. The trustees have agreed that all transitioned members who are age 55 or over at their date of leaving employment can commence the payment of their benefits from this date and the early retirement factor will be applied from age 60 and not age 65. If you elect not to take your benefits with effect from 31 August 2012 but take them before your Normal Retirement Date then the early retirement factor will be applied from age 65.
What I would like to know is what are the implications of taking an earlier pension? do you think it would be less than if I left it where it was until my Normal Retirement Date. It seems tempting to accept the offer, but I am dubious of making a big mistake here. The other factor I am not happy with is that none of us has had a pension statement since 2009, even though they are meant to be sent out once a year, so I have no idea at the moment what I could expect to receive.
Any advice would be appreciated.

taktikback

It's a tricky calculation, and will depend very much on your savings and income position because it's taxable, but I'm assuming from your call sign that you are 58 ish, which would mean they are offering you an unreduced pension from 60 instead of 65. Personally -I would have some of that...

oldgirl1954

Thank you for replying taktikback. Maybe I have read this letter wrong, but it seems that they are offering to pay me a pension as of 31st August 2012 and yes I am 58 years old. I am thinking that maybe there may be penalties for taking it early as opposed to 60 or 65. I will have to pay tax as I am still working full time, but I am thinking I could invest this money towards my eventual retirement. I am loath to commit just yet because they have failed to send any statements to me since 2009, so I have no idea what my current position is with regards proposed final pension amount.

Bigmoney2

oldgirl1954 wrote: »

Sorry to post this question here, but I cannot figure out how to start a new thread on the Final Salary issue.
I have been in a final salary pension scheme which was wound up in January of this year (contributed to this for 19 years). The company started a new money purchase scheme which I have been paying into since the closure of the final salary pension scheme. Unfortunately to complicate this situation our large corporate company sold us onto a smaller organisation who will be taking us all on under Tupe rules, this became official at end of August.

I have today received a letter from my old employer's pension administrators to advise as follows: Are you are over the age of 55 you have the option of commencing the payment of your benefits with effect from 31st August 2012. The trustees have agreed that all transitioned members who are age 55 or over at their date of leaving employment can commence the payment of their benefits from this date and the early retirement factor will be applied from age 60 and not age 65. If you elect not to take your benefits with effect from 31 August 2012 but take them before your Normal Retirement Date then the early retirement factor will be applied from age 65.
What I would like to know is what are the implications of taking an earlier pension? do you think it would be less than if I left it where it was until my Normal Retirement Date. It seems tempting to accept the offer, but I am dubious of making a big mistake here. The other factor I am not happy with is that none of us has had a pension statement since 2009, even though they are meant to be sent out once a year, so I have no idea at the moment what I could expect to receive.
Any advice would be appreciated.

A couple of things to consider

Will the additional pension income push you into a higher (40%) tax bracket?

Your pension will be reduced for taking it early. Typically this can be about 5% for each year you go early (your scheme reduction may not be 5%) so if you go 5yrs early the reduction will be 25%.

So if you leave it till normal retirement age (65) there will be no reduction, if you took it 55 there would be a reduction BUT you will receive the pension income 10yrs earlier (so 10yrs more money in your pocket).

taktikback

and as you are 58, you will be looking at a modest 5-8% reduction in exchange for a pension payable 6 years early. Agreed you might want to look at it more closely if you are pushed into 40% tax, but that could probably be avoided by additional pension contributions (in your new scheme)from now on in. As you say, that's six years of additional pension you could be investing -I would look closely at doing that.