Defined pension scheme closed

Steveairdrie

The defined pension scheme that I was a member of since 2007 closed in December 2015 and I recently received the closing statement where I read that the balance will only grow by the rate of inflation each year. I'm currently 35 and I have a fund of £57k in the defined scheme and I also have roughly £30k in a private stakeholder pension which I paid into up until I started paying into the defined scheme.

As I am now paying into the companies new pension scheme what options are available to me regarding the closed defined scheme pension pot? Would both my defined pension and stakeholder pots be better invested in a sipp or transferred into the companies new pension scheme? I'm thinking the pot would be better invested elsewhere instead of sitting in the closed scheme where the value will only increase by the rate of inflation.

Stephen

dunstonh

what options are available to me regarding the closed defined scheme pension pot?

Depends if they are fully closing the scheme or just closing it for future qualification.

Would both my defined pension and stakeholder pots be better invested in a sipp or transferred into the companies new pension scheme?

Possibly. But possibly not. Statistically, the defined pension scheme is likely to be best left where it is. Stakeholder are old hat and largely a niche option nowadays with personal pensions and auto-enrolment schemes largely taken their place.

I'm thinking the pot would be better invested elsewhere instead of sitting in the closed scheme where the value will only increase by the rate of inflation.

There is more to it than that as you also have indexation in retirement factored into the scheme benefits and the transfer value may not be worth as much as the benefits and the investment returns you need (critical yield) may be too high to be realistic.

Either way, you will need an IFA if you want to look at that and expect the IFA (statistically) to tell you to leave it where it is.

Linton

What are the terms of the "defined pension" ? Assuming its some form of final salary type scheme....

The defined pension value wont increase with inflation. It will increase by whatever it needs to increase by to give the guaranteed pension you have earned so far. It is almost certainly the final guaranteed pension that increases by inflation. The current value will be based on the assumption of some investment return occuring between now and your retirement. This will need to be higher than inflation.

To say anything more one would need to know the Ts&Cs of your defined pension, particularly what is your current guaranteed pension benefit on retirement

Steveairdrie

The defined scheme has been fully closed and they've opened a new savings retirement plan. I can now understand that the defined pension will increase by whatever it needs to to guarantee the amount which has been quoted, given this information I think it'd be best left in the defined pension pot.

Many thanks.

mgdavid

'defined' what?
Defined Benefit and Defined Contribution are both 'defined' schemes yet are polar opposites when it comes to evaluating what you might do. So far I think we are all making guesses or assumptions.
The fact that it's been closed and replaced by another scheme tends to suggest it's a DB scheme.
Then again, mention of 'fund of £57k' suggests DC!
Do you have (or can you obtain) a copy of the Scheme Rules for the closed scheme, as they will be crucial in evaluating options.