Pension or shares?

andy013

Here's the reply I got from Morrisions:

If you had been a member for over 3 months you may transfer to another Registered Pension Scheme. The transfer value is the value of your retirement pot revalued to the date of transfer, then adjusted to take account of the future revaluation that is being forfeited by transferring out of the scheme before your normal retirement. These assumptions will be determined by the Trustee having regard to the advice of the Actuary.

atush

Sounds to me that the Care scheme might be better.

jamesd

andy013 wrote: »

Here's the reply I got from Morrisions:

If you had been a member for over 3 months you may transfer to another Registered Pension Scheme. The transfer value is the value of your retirement pot revalued to the date of transfer, then adjusted to take account of the future revaluation that is being forfeited by transferring out of the scheme before your normal retirement. These assumptions will be determined by the Trustee having regard to the advice of the Actuary.

And what those words mean is you don't get out the 16%, you get out some tiny percentage of it. Which means that for younger employees it's probably best not to join the scheme but to invest elsewhere instead.

But ask them to tell you what the transfer value will be after you make one year of contributions. That'll tell you how much they are really adding, if anything. And it'll tell us just how good or bad the deal is for younger employees. So far it looks bad.

andy013

Nice jamesd. I'm glad someone on here can translate bulls***. I spent all day trying to wrap my head around exactly what they meant. I have sent off another email and will update this thread when they respond.

quotememiserable

jamesd wrote: »

And what those words mean is you don't get out the 16%, you get out some tiny percentage of it. Which means that for younger employees it's probably best not to join the scheme but to invest elsewhere instead..

You can't deduce anything from those words, certainly not that the value would be a 'tiny percentage'. Since it says its subject to actuarial advice I think its likely to mean a little less than face value (ie, safe from the point of view of their scheme. I'll get advice from my pensions people though, see if they can see through the statement.

jamesd

The person in this case is 25 years old. Perhaps 40 years from normal retirement date at which the undertaking is 16%. A normal revaluation based on the date of transfer for a defined benefit pension taken 40 years early will be tiny compared to the value at normal retirement date.

But maybe I'll end up being pleasantly surprised and it'll end up being something else. But I bet that they try to dodge giving an answer that will let a young person understand how much they are really getting. I'll be pleasantly surprised if they don't.

quotememiserable

kidmugsy wrote: »

Why? Because for 5% of your pay you get an entitlement to 1.5% of that pay as pension PER ANNUM. Suppose you survive for 20 years in retirement. 20 x 1.5 = 30. 30 is much, much bigger than 5.

It sounds to me that is what the scheme offers and this is right its a good scheme. People are getting sidetracked by interpretting the index linking as an interest rate. The real thrust of this is that members earn 1.5% of their pensionable pay every year. OP - can you find out what the pensionable pay is? Its it final salary, or average salary for instance?

Linton

kidmugsy wrote: »

Why? Because for 5% of your pay you get an entitlement to 1.5% of that pay as pension PER ANNUM. Suppose you survive for 20 years in retirement. 20 x 1.5 = 30. 30 is much, much bigger than 5.

Where do you get this from?? According to the Morrisons website what you get on retirement is a lump sum that can be used to buy an annuity. There is no guarantee I can see that this will be sufficient to provide any particular % of your salary. The Morrison's scheme is not defined benefit in the usual sense of the term, it is only defined benefit in that the value of the final lump sum is defined and is not a function of market investment return.

If the end result is a lump sum the effective return on investment is key.

Got it - the OP refers to two different schemes. I suspect that the 1.5% of salary per year refers to the previous FS scheme which was closed to new employees in 2009.

jamesd

quotememiserable wrote: »

People are getting sidetracked by interpretting the index linking as an interest rate.

No, people aren't. You should read the past discussion here about this pension scheme or the benefits it offers. The issue is comparing the benefit from joining this pension with the benefit of investing the same amount of employee contribution outside the scheme. After a decade or two the outside the scheme investment produces a value higher than the value that this scheme produces. Which for younger employees makes the transfer value critical, because if they can transfer out the full employer contribution it may still be a good deal to pay into it, then transfer out.

If the older scheme was available there would be no need for this discussion because it'd be easy to write that it's a good idea to join it.

andy013

Linton wrote: »

Got it - the OP refers to two different schemes. I suspect that the 1.5% of salary per year refers to the previous FS scheme which was closed to new employees in 2009.

Yes, sorry for the confusion. Although I'd like to know where you read that this scheme is now closed to new employees, since I believe I still have the option to join it (is that because I was working there prior to 05?).

I don't really understand the CARE scheme though. Can someone explain it to me in terms of some example numbers? Would it be better than a SIPP with an index tracker?