Pension transfer value???

ess0two

Just received a transfer value on a deferred pension I currently hold, paid in to it for best part of 20 yrs.
Am currently mid 40's and believe can draw at age 65?


Can anyone answer what's puzzling me,its states 'total pension at date pensionable service ended £9,156.30.


Does this mean when I left in 2007 the above figure was accurate for that leaving date? or is the 9k figure what i'll get each year when I retire in 2020+??


Its also got a current transfer value of £153k.

mgdavid

what type of pension - DB (final salary related) or DC (pot of money invested) ?

It sounds as if you may be a deferred member of a DB scheme and the pension earned was £9k per annum when you left. This will be revalued annually according to the Scheme Rules, for instance by RPI or CPI.
Generally you can access pensions from age 55 - with certain caveats and consequences (eg reductions and tax).

agarnett

I agree - it sounds most like a defined benefit pension scheme of which you are now a deferred member.

The wording that puzzles you is indeed the sort of wording that is typically used to advise you that at the date you left that job, had you been of scheme retirement age on that very leaving date, then that is the pension which you'd have been entitled to starting that day.

If it is indeed a DB scheme then your pension entitlement will most likely be increasing each year on a set scheme date by indexation/percentages written into your particular scheme rules.

If your scheme was a "contracted out" DB scheme, then there will be quite a complicated story behind how different bits of your future pension entitlement increase by different indexed and / or fixed amounts each year. Probably the best way to establish how it works is to call the scheme administrators and speak with them about it.

The normal retirement date for the scheme will again be set by your individual scheme rules. Unless you were in a special occupation which qualified you for earlier than normal retirement, it might be as early as age 60 typically, or maybe 62, or 65 as you suggest.

If indeed it is a DB scheme, it is very likely that the scheme rules have changed significantly during the 20 years you were a member. It may even have been a "final salary" based scheme when you joined it but many such schemes were diluted over the past two decades, and by the time you left, it may have been changed to a lesser value "career average" scheme, but again, a call to the administrators who will be the ones who prepared the transfer value, is probably the first best thing you can do to start to find out how this thing will perform for you.

If you don't mind naming the scheme, there are people on this forum who are adept at decoding the scheme rules from what can be found on the scheme websites. If you'd prefer it stayed completely anonymous, again, some of the better run schemes have a lot of information on their websites.

ess0two

Thanks for the responses, it is in fact a deferred ICI / Ineos DB managed by Mercers,scheme payable at 65.


Further info ;

Total transfer value - £153k
Members contributions - £5754.00
Contracted out rights - pre 97 - £13,693.00 / post 97 - £71,996.00
Amount of transfer value which is subject to increases at 5% or cost of UK living - £71,996.00.


Pension benefits as at date pensionable service ended - Post 5.4 1988 GMP at DOE - £632.48
GMP PRE APR 88 - £11.44 ,
PRE 97 EXCESS ESC - £4108.41 ,
Post 97 Sch Pen subject LPI at £4403.61
total pension at date service ended of £9156.30.


Defined benefit components of total transfer value payable - scheme total -£644.28 , scheme post88 - £632.48 fixed rate revaluation 4.5%


I requested a future prediction, I got the above as a summary?


Surely the above figure of £9k will be higher when I come to draw in future?

mgdavid

ess0two wrote: »

.............
Surely the above figure of £9k will be higher when I come to draw in future?

as I said in post #2,
' This will be revalued annually according to the Scheme Rules, for instance by RPI or CPI.'

You need to read and digest a copy of the Scheme Rules (and are entitled to one). Is it available online, else just call them and request it.

ess0two

mgdavid wrote: »

as I said in post #2,
' This will be revalued annually according to the Scheme Rules, for instance by RPI or CPI.'

You need to read and digest a copy of the Scheme Rules (and are entitled to one). Is it available online, else just call them and request it.

They told me, this couldn't be forecast? and sent me the info posted, prior to this I'd heard nothing since 2007 when leaving, hence my request to them about performance / figures.

GunJack

Any help? It seems to imply the annual raise may be 5% or RPI

http://www.icipensionfund.org.uk/documents/icipf_member_handbook.pdf

Finst

They can forecast it, but legally they don't have to. To save money on administration costs, they may have decided not to.

The £9.1k is the figure in 2007, when you reach retirement age it will be higher.

The GMP (£644) will increase at 4.5% a year, the rest will go up in line with inflation (RPI or CPI - you'll need to ask) up to a cap of 5% a year over the whole period.

The revaluation from 2007 to now using CPI is 23.8%, using RPI it'll be a bit higher.

If you make a sensible guess about future inflation you could guess what you're pension will be (the BoE targets CPI of 2.0% pa, which would suggest RPI of 3.0% pa). Alternatively, you could think of your pension as roughly £11-12k in "today's money"

agarnett

There could be a lot of other questions that start to occur to you if you wanted to assess where this deferred pension sits in your own grand scheme, and in the grand scheme of things at large!

I haven't looked at the your particular scheme's info online, and am not qualified to make a judgement, but if you left this for another 20 years hoping it will perform as per what seems to still be showing through the rigours of half a career lifetime on the tin, then that might be a generally naive given the rather depressing reports on the UK's remaining 5,000 odd private sector DB schemes generally - it is said that some perhaps surprising and large names will be effectivley bankrupted over the next 5 or 10 years by their legacy DB pension scheme liabilities. Is yours one such?

So, is the sponsoring employer going to survive? What really will happen to your pension if it, and a number of other biggies in the UK fall? Will the PPF be able to bale you out? Is the latest £153K transfer value fair or deliberately under or over quoted? In this regulatory climate where IFAs are scared of their own shadow to facilitate or to even formally advise upon such a transfer without an enormous fee so they can pay their PI insurance to cover them right into their own retirements, could you actually transfer it even if you wanted to?

Have you arranged extra life insurance for the loss of this £153K (and for the hopefully growing number) should you die before taking the pension, or before successfully transferring it?

Find out on what anniversary date each year your scheme revalues. Also find out when the next mandatory triannual scheme revaluation is due. Find out when sponsoring employers Annual Reports and Accounts are released - they often contain / pretty much have to contain commentary on pension scheme liabilities. You may find more information between the lines than you will ever read from your scheme trustees on the scheme website or via newsletters.

If you do very little with this over the next few years, do at least obtain a requote of the Transfer Value as often as you can for free (usually once per year).

Gather together all the documentation you ever had on joining the scheme and thereafter, and keep it safe.

Has the pension already been diluted since you joined the scheme e.g. from final salary based to CARE based?

The GMP portion of the pension is as has been said, revalued at a fixed percentage up to GMP date which I think is currently 65, same as you thought your scheme normal retirement date is?

I have one deferred private sector DB scheme which has two retirement dates within it - the scheme retirement date itself, which in mine is age 60, then the GMP date which is 65, and then of course there is State Pension Age which for me is 66, but by the time you get in the same ballpark, they may have fiddled some more with the last 2.

My scheme was "contracted out" like yours - hence the GMP part.

The revaluations up until the time you start to take the pension are based on one set of indices and/or fixed percentages, but after you start taking the pension, the annual increases have been messed with by in many cases ditching RPI and bringing in CPI, and more importantly perhaps, by the government changes over the past couple of years affecting all contracted out schemes starting with those retiring from next year I think.

From schemes like yours (and mine) which were once probably as good as some of the best public sector schemes, most have become a bit of a moving feast, with large questions now about whether there will be enough private sector loaves and fishes to keep feeding the remaining 5,000 or so private sector schemes before all the deferred members like us come down from the mountain from age 60 or 65 or whatever expecting to start drawing on our pension entitlements, such as they might still be!

Whilst you can see that the revaluations mean that there is on paper at least, still some effective "revaluation" or "inflation-protection" of our pension entitlements from the date of leaving a scheme up until the scheme retirement date, the government has now reneged upon its commitment to fund the post-retirement index-linking of the GMP parts of our scheme pension entitlements. Those parts are significant, and if you live to 90 and beyond, how do you think the GMP parts of your pension might look by then if there's been no increase for 25 years?

These are just some of the types of concerns that I have for my own DB pension entitlement, and I am perhaps 20 years closer to scheme retirement date than you ...

jamesd

agarnett, please cut out the scaremongering like suggesting that a change to career average might be done. That will not affect past benefits for a deferred member of a scheme so it would continue to be based on their leaving salary.

ess0two, find out the normal retirement age of the scheme. It is usually best to take the money then. Sooner will involve and actuarial reduction and those can often be punitively high. Later may produce no increase at all, just throwing away money that could have been received, though there are schemes where there is some modest increases for not taking it. These depend on the individual scheme so you'd have to ask them to determine what applies to this specific one. Taking a defined benefit income at 55 would usually be a bad move because of a likely large actuarial reduction but since the reductions do vary it might not be punitive after al. it might even have a preserved normal retirement age of 50 or one of 55 instead of 60.

Once you've found out about the actuarial reduction for age 55 you could then go on to determine if it's better to transfer at 55 to use drawdown instead. That can be best, depends on the specifics of the scheme and it's not possible to say with what we know so far.

bigadaj

It's interesting how real events can sometimes catch up and supersede conventions and rules.

We've obviously had the issues around Tata steel and the issues of the pension scheme funding and whether that will fall into the PPF. More worrying is the whole BHS scenario which potentially shows how easy it is to get rid of a company with huge pension liabilities, with no consequence to the original owners.

Whatever happens I can't see green stumping up any significant money to maintain the old pension scheme, and once these larger schemes start failing they won't be able to be saved because of the huge premiums necessary from other schemes to be paid onto the PPF.

It's a downward spiral, virtually all private sector db schemes are closed to new members but can existing members liabilities be funded, that now has a massive question mark against it.