Possible pension transfer

Graham001

I was a member of the "lucas pension scheme" which has since become TWR Pension Scheme. I left my employer some years ago and my pension was deferred. I have recently recieved a newsletter from TRW Stating
Schemes Legal sponsor, TRW Limited, remain unable to support the scheme from its own resources and will remain reliant on the continued direct support of the wider TRW Group.
Following a discussion, TRW Limited has agreed to pay an additional contribution of £30 million on a discretionary basis for the year ending December 2014. The company and the trustees have also agreed to undertake a very significant program in an effort to improve the security of member's benefits. This program includes providing members with a range of different benefit options, and insuring a large portion of the schemes liabilities with a UK regulated insurer.

It the lists the different options to the members, the option (3)that applies to me is:

Deferred pensioners whose benefits are valued at more than £18000
(of which there are more than 10000)

These members are to be offered an enhanced transfer value if they elect to transfer thier pensions out of the scheme to another pension arrangement

and that as i am under 55 will recieve my offer by the end of August.

The question I have is, that as i am unable to transfer this to my current pension scheme (as it is closed) what my options might be, I have been told in the past that I would be unable to transfer my pension pot from a DB scheme (which it currently is) to a DC scheme, as I was informed that it would be unlikely that an IFA would sign it off. But as I do not have a DB to transfer it to this would only leave the option of a DC Fund, or maybe there is a better option. I apologise for the longwindedness of the question, but it is a lot of information to fit in. I also realise that i have not yet recieved an offer but I am hoping to obtain as much information as i can in advance

Drp8713

Just because they have offered you an enhanced transfer value doesn't mean you have to transfer.


Usually DB beats DC by a long way, but whether this enhancement would be enough for DC to catch up, only an IFA doing a proper analysis would know.


Even if the company went bust, the PPF could give you 90% of the value, or up to 100% if have reached you NRD so the pension deficit is the employer's problem and not yours.

atush

Do you want to transfer it? Or do you want your DB pension when it is due? Do you have a spouse and are you in good health?

It could be the enhanced value is attractive, but you need to take that figure and work out how much index linked pension with a 50% spousal pension (or whatever your DB pension gives you now).

the worst that could happen is the scheme fails and you would be transferred to the PPF. Which means you'd get 90% of the promised benefits. Not sure abt indexing but think spousal pension.

Graham001

Thanks for the reply,
Clearly this pension fund is in problems and i would like to be sure that should i elect to stay in this scheme and reject thier offer then my assets are secured. They mention somewhere in the literature that they would like to insure everybodys benefits, but it would be prohibitively expensive which makes me unsure. it only states "All members who reject offers and are not insured automatically will be transferred to a new pension scheme" of which it gives no details.
The query I have is that TRW are keen to reduce the size of the pension risk by offering incentives, then how can this be done if an IFA would be unlikely to sign off a transfer from DB to DC.

Graham001

atush wrote: »

Do you want to transfer it? Or do you want your DB pension when it is due? Do you have a spouse and are you in good health?

It could be the enhanced value is attractive, but you need to take that figure and work out how much index linked pension with a 50% spousal pension (or whatever your DB pension gives you now).

the worst that could happen is the scheme fails and you would be transferred to the PPF. Which means you'd get 90% of the promised benefits. Not sure abt indexing but think spousal pension.

To be honest I am not certain what I want to do with it. The ammount of pension it returns a is minimal an increases by only a small ammount each year. With regard to the index link and 50% spousal benefit, this is covered by my current schem (which is closed) so at present i am looking to gain as much information as possible so that I can make an informed decision when the time comes. I do not pretend to know very much about pensions, but it is time I started paying some heed to it.

atush

In this case, if the incentive payment is high enough, an IFA might sign off on it.

But as said, while not insured, you can be assured of getting 90% of the benefits promised. Unless your pension due is over 30K/yr- is it? If you were due a pension of say 45K per annum, but the PPF will pay only 30K( I think that is the limit but check), then you probably should switch and an IFA would probably sign off on it.

But we can't tell as you haven't said enough.

There is also a short term moratorium of switching DB to DC as I understand it- to give people a chance to see the full new regulations. I assume this is what you are referring to.

But it might be a moot point for you if you really would still like your DB pension. But you can only work this out for yourself once you see how high the payment might be.

Graham001

atush wrote: »

Unless your pension due is over 30K/yr- is it? If you were due a pension of say 45K per annum, but the PPF will pay only 30K( I think that is the limit but check), then you probably should switch and an IFA would probably sign off on it.

But we can't tell as you haven't said enough.

I dont know what informatin you require but my deferred pension at 1/5/2013 was in the order of £7600/year if that helps


"There is also a short term moratorium of switching DB to DC as I understand it- to give people a chance to see the full new regulations. I assume this is what you are referring to. "

I was not aware of this as i was under the impression that an IFA would not permit a transfer from DB to DC

xylophone

Why not explore your options with an appropriately qualified IFA?

This would be an example of an IFA offering such a service
http://www.jacobsfinancial.co.uk/pension-transfer-advice/default.aspx

You can look at http://www.unbiased.co.uk/find-an-adviser?gclid=CI_FxdzN_L4CFeyWtAodYDIAAQ

If, after advice, you should want to do this (perhaps because you would like the flexibility a DC pension would provide) now might be the time?http://www.professionalpensions.com/professional-pensions/news/2335119/budget-2014-govt-to-ban-public-sector-pension-transfers-to-dc-pots

"The government will ban public sector workers from transferring pension pots to defined contribution (DC) arrangements and is considering similar restrictions on private sector schemes, it has announced.
It is now consulting on whether the same restrictions should be applied to private sector defined benefit (DB) schemes."

kidmugsy

atush wrote: »

the worst that could happen is the scheme fails and you would be transferred to the PPF. Which means you'd get 90% of the promised benefits. Not sure abt indexing but think spousal pension.

That's the prob, Atush. In my case if I ended up with the PPF I'd lose almost all my inflation-protection. That would be serious for my widow, who is from a remarkably long-lived family.

kidmugsy

Graham001 wrote: »

my deferred pension at 1/5/2013 was in the order of £7600/year if that helps

Then it's no small thing; for some purposes you could value that by multiplying by 20. If the inflation-protection is good (e.g. an unlimited link to RPI) multiply by more.


Unfortunately, you'd then have to multiply by some probability of it not being paid in full - a number that you can't estimate with useful accuracy.

In your shoes, I'd seek an IFA qualified in this area. The alternative is to decide to sit tight - they might always come up with a better offer later.

nearlyrich

Almost £8k a year takes some big numbers in a money purchase scheme, get some proper advice so you don't lose out.