Budget pension changes and final salary schemes

Jolaaled

Quick query: What is the impact of the budget pension reforms on final salary schemes??

thanks all in anticipation

jz5ccn

I'm not sure there is any change. I have Final Salary and AVCs. I'm assuming no change to my Final Salary but my AVCs have suddenly opened up on all sorts of options (may open new thread on this).

Seabee42

Actually there are some implications for final salary schemes especially relating to whether individuals transfer out prior to retirement into a DC arrangement.

Final salary transfer values are often calculated using discount rates which change as people get older to be more gilts based than Equities. So there is possible room for change here to.

Annie1960

Jolaaled wrote: »

Quick query: What is the impact of the budget pension reforms on final salary schemes??

thanks all in anticipation

I watched the budget speech, and Osborne said that defined benefit pensions were more complex so they would look into these in the next year. I think they need primary legislation to change these, but he said they would be trying to use the same principle for defined benefit schemes as defined contribution schemes.

greenglide

Annie1960 wrote: »

but he said they would be trying to use the same principle for defined benefit schemes as defined contribution schemes.

Has the world gone completely mad?

Does he really think that encouraging members of DB schemes to "take the money and run" is a good idea? We have already seen several postings here from people who want to do this with their DC contributions.

Truthseeker_2

Jolaaled wrote: »

Quick query: What is the impact of the budget pension reforms on final salary schemes??

thanks all in anticipation

Why should there be? If you are lucky enough to be in a final salary scheme you have a notional pension pot, not a real one, and your pension calculation is related to your salary alone.

xylophone

Quick query: What is the impact of the budget pension reforms on final salary schemes??

thanks all in anticipation

George seems to have his thinking cap on... http://citywire.co.uk/new-model-adviser/budget-2014-govt-considers-db-to-dc-pension-transfer-ban/a741509

sandsy

They propose that transfers from public sector DB to DC would be banned. The consultation paper is more open to suggestions on what to do with private DB schemes. But the issues are potentially trickier given the funding of private schemes, and protecting the rights of other members.

C_Mababejive

AFAIK the chancellors decisions were not directed at DB/FS schemes so its business as usual.

BobQ

C_Mababejive wrote: »

AFAIK the chancellors decisions were not directed at DB/FS schemes so its business as usual.

No but as Sandsy indicates the consultation paper gives a firm steer as to their plans for DB. They suggest DB schemes in the public sector be treated differently to those in the private sector. In particular he proposes to stop anyone transferring from a public sector DB to a DC.

The reason makes sense as most are unfunded (ie they do not have a pension pot, but are funded by present contributions and taxation). It follows that transfers out mean that the taxpayer has to make up for the loss of income and the cost of the transfer.

atush

I would imagine there could be changes to free standing AVCs along the lines of DC pensions.

But If I had a DB pension, I'd be keeping it in full. To take an indexed linked income with spousal beenfits for the rest of my life.

I'd run a dC pension alongside and exploit that perhaps. People do that now, but more will due to the pension changes.