Final salary pension frozen

jonesMUFCforever

If you are in a defined benefit final salary pension scheme which is to be frozen will a pension debit also be frozen at today's figure or will it continue to grow to (in this case) 25%?

Or is this down to trustees of the pension scheme.

mania112

You mean the tax free cash amount?

It will likely increase, but yes, it's different from scheme to scheme.

Nothing is actually 'frozen' the pension will almost certainly increase in line with inflation, and therefore so will the cash sum.

jonesMUFCforever

mania112 wrote: »

You mean the tax free cash amount?

It will likely increase, but yes, it's different from scheme to scheme.

Nothing is actually 'frozen' the pension will almost certainly increase in line with inflation, and therefore so will the cash sum.

Sorry did not explain myself very well, From next year the pension will be frozen so any pay rises etc from then will not get carried forward with pension.
Some years ago a pension debit was applied to it being 25% of my pension pot due to divorce.
At the moment the debit advised to me is less than 25% but this increases every year - will this be frozen now do you think?

kidmugsy

jonesMUFCforever wrote: »

From next year the pension will be frozen so any pay rises etc from then will not get carried forward with pension.
Some years ago a pension debit was applied to it being 25% of my pension pot due to divorce.
At the moment the debit advised to me is less than 25% but this increases every year - will this be frozen now do you think?

For clarity; I take it that your scheme is one of those where members have been told that their eventual pension will be based on their current salary rather than their final salary? Will there be any inflation-linking?

How about the court order (if that is what it was); does its wording determine what happens? Is it possible to return to court and ask for a modification?

mania112

Sorry, I see what you mean.

Again it's down the scheme and the specifics of the court order.

But, as it's a percentage you're quoting, I don't suppose it matters, it'll be 25% of whatever you're given.

opinions4u

If you remain in the scheme it sounds like your current salary will drive the value of any lump sum. This will rise based on future years of service (as you'll have more 60ths or 80ths or whatever).

If you leave the scheme you'll accrue no more service but see the value of the salary used increase with inflation. This will also push up the lump sum value.

Both options would see a lower lump sum payout than previously available.

Leaving the scheme may, on the face of it, be better if your employer will contribute to a money purchase scheme. But if you wish to retire early you will almost certainly get hammered more than if you remained an active member.

As for the divorce debit, as your pot will be worth less I assume your ex will get the same percentage of a smaller pot. Small mercies if I'm right.

But I think your employer has kindly created a need for you to clarify this with some legal advice. Which is something I'd resent.