A question about final salary pension scheme

TillyTea

Hello,

I hope this is the right area to post in.

I joined a final salary pension scheme in my last job, around 2006 I think. I accepted voluntary redundancy during a company restructure when I went on maternity leave in 2011 and have been at home with my child since. I am now looking for work again and I was wondering what happens to my final salary pension scheme? I would like to stay with it if possible. I was told by my employer when I signed up that I can take it with me to wherever I start working next - but at the same time, I have heard a lot about final salary pension schemes shutting down. Does a new employer have to accept that I want to stay with it? I asked my previous employer how to get more info, but they were very unhelpful and uninterested. Also, I will have to work part-time initially, will this affect the scheme negatively in any way?

I would really appreciate some advice, in layman's terms please as I am not great at understanding financial advice (I do really try)...

Many thanks in advance!

Lokolo

Are you public sector?

If not then you are unlikely to be able to keep with it unless your new company also runs a final salary scheme. You can't just "stay" with it as such. Pension schemes are run on a company-to-company basis. You will usually get the option to transfer pensions from previous employers though, but depends on the schemes offered.

Company A offers Company Pension A.
Company B offers Company Pension B.

When you go to Company B you can't choose to stay with Company Pension A, you go to Company Pension B, of which if it's in your best interests, you can transfer Company Pension A into Company Pension B.

Andy_L

Your pension has been "deferred" ie it will increase in line with inflation until you reach retirement age.If you get a new pension you have the option to transfer your old pension to the new scheme which may or may not be a good idea rather than leaving it where it is depending on the details & your personal circumstances

InsideInsurance

In the private sector at least you would "keep it" but it is now locked as you have left that employer.

So at your new employer you'd join, if you want to, whatever scheme they have and when you finally retire you would get both the money from the final salary scheme at employer A and whatever pension you get from employer B.

I've never had a job with a final salary scheme but I understand that you get X% of your old salary depending on how many years service you had with that company

TillyTea

Thanks, I have a clearer understanding of the situation now. Not as good as I hoped at all, but better than nothing. Yes, it is in the private sector, I worked for a charity with no government funding.

fergual2

Hi Tilly - yes as already stated above the pension has been deferred so you have locked in the value of your contributions paid and the final salary that you obtained before you left. So most final salary schemes work around basis of 2/3 of final salary paid out if you have the maximum 40 years service. Say £20000 was your final salary and you have 40 years service, pension would be £13,300 per annum. Lower number of years of service will obviously reduce this percentage, say 10 years service would get just a 1/4 of the pension (£3,325 per annum pension). In terms of transferring it to another scheme or a new company scheme then it should be possible but bear in mind there will be an underlying cost in doing so and the transfer rates might not be favourable (best get a financial adviser involved if you are serious). When you say final salary schemes closing - yes they are but it could be a case of freezing existing schemes (in which case you would be unaffected) or just shutting to new employees but the old scheme remains intact. It would only be a problem if the old scheme closes and forces you to transfer to another scheme - In this case you would probably be wise to review your options in transferring it over to a new company scheme. So overall I would say leave the old plan in place unless the scheme changes signifcantly.