Railway Pension

trigger29

Hi all,
Need an opinion or two. I have a pension called Brass 2 which is run by the railway pensions management. I have recieved a letter stating that they have decided that members should no longer be able to make further contributions to the Pesion Assured fund part of the pension. I have been given a number of options.
1. Do nothing and further contributions will go to a Pension Deposit fund. According to supplied booklet, it is suitable for low risk investment best generally suited to short term investments (2-3 years). Average yearly return over the last 5 years has been 4.3% per annum
2. Move part or all into a different part of the fund - Pension managed (av year ret over 5 years 7.1% and suitable for longer term investments of five years or more and is of medium risk.

I am male and 40 years of age and plan to be working for about the next fifteen years aiming to retire around 55 years old.

Any advice?

dunstonh

Brass isnt matched IIRC so there is little benefit of paying into it. The pension assured fund is run by NU and is almost a with profits fund in disguise. It has a graduated ’market depreciation discount’. Rename that market value reduction and you have the same thing.

In-house AVCs are largely old hat now unless they have something unique or very special to offer. The inflexibility of pension commencement combined with low quality or limited investment funds has pushed AVCs from once being one of the better options to being one of the worst.

bigbloke45

Brass is in fact an old Provident Mutual scheme (now owned by NU). The pension assured fund is not a true with profits fund but a "actuarial" fund designed to mimic with profits performance (this is because Provident Mutual were not financially strong enought to run a real with profits fund). As dunstonh says, the "market depreciation discount" is akin to a market value reduction. the reason, I suspect that NU are closing the Pension assured Fund is because it offers no or little value for money. This fund was closed to new investment in other types of pension many years ago.

I'm amazed that NU have kept letting people contribute to this fund in the Brass AVC for so long. One problem is that you can't get advice very easily about where to contribute in an AVC, unless you pay a fee. So, I agree with dunstonh; it's time to change and take your money with you!

Good luck.

trigger29

Thanks Guys,
Forgot to mention in my original post that the company I work for are matching my contributions (£15 week). Is it still worth saying au revuoir?

bigbloke45

Forgot to mention in my original post that the company I work for are matching my contributions (£15 week). Is it still worth saying au revuoir?

No way! You are effectively doubling your contribution at no cost to yourself. I would think that you should consider the managed fund as you are still a long way from retirement. Is it still the Provident Mutual managed fund? This used to be an excellent fund.

testertrev

I wonder whether the fact that the Pension Assured Fund has a guarantee of £1 per unit at age 55 has anything to do with it? I would imagine this could be quite a liability for NU if returns were low. Deposit fund has been chosen as the alternative presumably because it's the lowest risk.

bigbloke45

Whatever the reason, if NU want to shut it to more investment, then this a BIG warning sign. Nobody will/can make any money out of this fund any more. Time to get out trigger29, but not out of the BRASS scheme as you are still getting an 100% contribution match.

As a matter of interest (possibly) Provident Mutual were big in the Railway Pensions Fund and also the Armed Forces funds. It just goes to show that the price of freedom is "Constant Vigilance". We must ALWAYS monitor what is going on with our investments, in particular our pension fund investments, as these can change without our notice!