final salary pension being closed and deferred- what are my rights?

stevet_2

hi all

this week i have been informed by my employer that the final salary pension fund i have been paying in for 24 years is to close, and that i will lose all my final salary payment and be left with a deffered payment of the amount due after the end of march next year which will be payable at my 65th birthday, which will be roughly half of what i would have expected from my final salary

we have regular updates from the fund and trustees and there has been no indication of any problem with the fund infact still in surplus and no consultation period prior to the announcement

my union and legal team have arranged meeting with the company to commence next week

from next april we will automatically opted into the new pension as implemented by the goverment but the returns on this are greatly reduced so much so that i would have to contibute nearly half my salary to make up the shortfall in my pension

i think i will be opting out not worth paying in

as you can imagine myself and my friends at work who are involved in this are gutted

and none of us are exactly sure what we can do or what our rights are some have said we should be due a compensational payment based on length of payment into the scheme

myself all my plans of early retirement at 60 and decent standard of living in my old age have ended gutted is not the word

thanks in advance

mania112

The trouble is companies have run out of money to finance these pensions. It's not entirely their fault and obviously it's not yours - just an unfortunate situation.

However, any benefits you have accrued so far are not going to be 'removed/reduced', that's not allowable.

You should still leave that pension where it is, it will still be better than transferring it somewhere else - the benefits you've got are preserved (you just can't contribute any more money in to it).

How many years have you got until 60?

Is the loss of funds going into a Final salary really as bad as you think? Worth checking the figures before expecting the worst.

molerat

What is the normal retirement age of the old scheme, is it changing ?

You will still have 24 years of contributions accrued in the old scheme that will be paid, usually increased by inflation, at that retirement age.

What terms is the new pension on, what percentage of your wages will you pay and what percentage is the employer going to pay ?

If the union is involved there is probably a fair bit of misinformation and tea room rumour about.

stevet_2

hi thanks for the reply

i will be leaving my deffered pension in the fund it's a no brainer i would say, and it will not go down and will go up slightly i would imagine.

the deffered pension on my last statement is almost half what my final salary would have been at 65 the normal retirement age for the scheme

my plan was to take a lump sum and reduced pension either at 65 or at 60 knowing i would lose some due to early retirement at 60

we have been told we have to pay combined with the company 100k into the new fund to get 4k a year pension only paid at the new age of 68

if i pay the same amount i pay now into the new pot it will get me approx 30-40 pound aweek on top of my deffered pension

in the new pot i can pay up to 9% the max the company will pay is 8%

i have 12 years left until i am 60

the main loss regards the plan is death in service and the widows pension for my partner and also on my death after 65 the ammount due to my partner being greatly reduced

stevet_2

the feeling on the shop floor is that the company have seen a window of opertunity to end the plan now they are being forced to enter all empioyees into the new pension by the goverment( even though you can still opt out yourself) at the expense of those like me who have done long service and paid into a pension voluntary for many years our pension fund has always been well run the company had a payment holiday for many years has used surplus funds to pay for major investment at the plant etc

it stinks if you ask me but i am very bitter at the moment

sandsy

stevet wrote: »

i think i will be opting out not worth paying in

Can understand how upset you are at losing such a great benefit. Unfortunately, the economics and demographics have made it such that it costs a huge deal of money for defined benefit pension schemes to keep going without paying in absolutely massive % of each employee's salary. You reckoned it would cost half your salary to provide the same benefits - most employers simply can't afford to pay that.

Having said that, opting out of the new arrangement isn't great unless you have alternative investment plans for your retirement. It's better for you to pay in and get something than do nothing. Effectively you're turning down up to 8% of your remuneration package (the employer contribution) if you don't join in. You'd never dream of turning down an 8% increase any other time so why do it now? Not to mention the governement's contribution through tax reilef.

Don't let your bitterness over the loss of the DB scheme cloud your judgement over the best course of action now.

somethingcorporate

If it takes 50% of your salary to bring up your plan to match your DB scheme you can see why they want to close it, ridiculously expensive for the company to maintain although unfortunately for you (and even more so for your newer colleagues) some will be impacted by the change over.

The DC is still very generous, do not cut off your nose to spite your face - you will still be getting significantly better than the vast vast majority of workers out there. Comparatively it is worse but that does not mean you should commit financial suicide by opting out completely and just be thankful you had such an amazingly generous scheme for so long. Your new colleagues are likely to be in the best pension they will ever get!

stevet_2

i feel cheated of my future, ok i pay in 7% as i do now and get a measley 40 quid instead off 200 quid a week it stinks

has anyone ever heard of compensation being paid in these cases

xylophone

You need to keep calm and remember that there are rules relating to your deferred FS pension and how it increases. Were you contracted out?

http://www.pensionsadvisoryservice.org.uk/workplace-pension-schemes/final-salary-schemes/revaluation

http://www.pensionsadvisoryservice.org.uk/occupational_pensions/death_benefits

You will not lose those benefits.

Your employer will still be contributing to your pension - it would be foolish to lose that benefit?
http://www.moneywise.co.uk/work-wages/tax/reduce-your-tax-bill-salary-sacrifice
Might your union be exploring salary sacrifice?

stevet_2

yes we were contracted out of serps but now will be opted back in and paying the extra NI on top of the new pension

i don't disagree that the deffered part of my pension will still be ok it will be still worth a reasonable amount when 65 but it was always mine and alot of those who have done long service plan to retire early unfortunatly now it will lose to much if taken early ie 60 in my case plus now the new pension if i opt in is not payable until 68

as far as we are aware the company will cease to contribute to the old pension as from next april
and will only contribute if we opt into the new pension

thanks for the links at least more info than the 12 page twaddle the company issued us with

somethingcorporate

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