Final Salary end clashes with retirement

chesky369

I hope to retire in October; my employers have just announced that the final salary scheme will end on 31 July and from 1 August a new group personal pension fund will start. They have agreed to vary the amounts they contribute, according to each employees length of service, age, etc. In my case it will be 25.7%. However, it doesn't take a genius to work out that my new 'pot' will be more like a thimbleful. Since our company pension scheme ran from 1 August (when salaries are increased) - 31 July annually, I had calculated my retirement on next year's salary which of course won't happen now (I know, counting my chickens).

Any suggestions as to how I can maximise my company pension at this late stage.

oldwiring

Are you saying that all the entitlement you built up under the FS scheme will be taken away?

Andy_L

Because that would be illegal.

I suspect what is happening is they a freezing the FS scheme and then starting anew with the GPP, so you will have the x years in the FS scheme and 3 months in the GPP scheme

dunstonh

The most common method is to close the scheme to new members but keep exisiting members going. Then comes close the scheme for new contributions with future contributions going into a money purchase arrangement but keep existing membership in the final salary scheme up to that point (i.e. 25 years to that point but nothing added for future years).

Only a full wind up would see the old scheme closed and these things dont happen over night. These can take upto 2 years to go through. There are usually incentives and the pensions are often transferred into a section 32 buy out bond rather than moved into a GPPP.

Can you verify what is happening? Is early retirement an option for you? Take the benefits early?

LittleVoice

Unless you were expecting a really substantial increase in your pay on 1 August, then perhaps the difference in your total pension (old scheme and new) will not be so great.

If you were expecting a really big increase, why would that be? If it is that your role should actually be paid at the higher rate, then seek an increase now. [If it was just a way of the company boosting pensions at less cost to themselves (because most of their contributions would be at a lower rate) then that isn't really fair on scheme members.]

chesky369

I see I haven't been clear enough (and I've managed to post this in the entirely wrong section - should be under pensions).

My final salary scheme is not in question - it will be frozen and available for me when I retire. Since the sums involved are not huge, it actually does make a bit of difference - about £400 p.a. which, when you're calculating pensions, does make a difference. All our salary increases are on 1 August and I don't really think I'm in a position to ask for a salary increase now, as I shall be leaving fairly shortly, and in a final salary scheme it wouldn't make that much difference anyway unless it was backdated for the whole year.

chesky369

Sorry, forgot a few things. The actual closure of the scheme hasn't come as a surprise - it's been closed to new members for about 3 or 4 years now and they've been quite open about the way things are going - I just didn't think they were efficient enough to put things into motion quite so quickly - it was only finally officially decided in June. They're not trying to pull a fast one - I think the rate of 25.7% would have been generous if I'd stayed the course but I've decided to retire at 63 instead of waiting another 18 months.