is my deferred pension underperforming??

bockster

hi there,
firstly, do i have the correct terminology? i call my 1st pension to which i no longer contribute, and no longer work for the company, deferred. when i left the company 6.5 years ago it was a final salary scheme.

anyway, as a matter of curiosity, i had a transfer vauation on 25.11.05 of £18,246.
then another one recently on 8.10.07 of £19,486.

on the face of it, to me this doesn't look very good, but then i'm no genius when it comes to pensions, am i correct to only look at this figure for the performance of the fund?
also on my valuation letter it says that any part of this pension in excess of the gmp will only rise by rpi (max 5%). so am i to believe that this fund is actually no longer 'invested'.

the short of it is, that i want to find the best home for this money, obvious really.

thanks in advance for any answers, if anymore info required, just ask. or if you think a visit to an ifa would be in order, please say.

cheers
bockster.

EdInvestor

bockster wrote: »

...it says that any part of this pension in excess of the gmp will only rise by rpi (max 5%)....

The Government is suggesting today that it plans to introduce rules which allow companies to cap the index-linking of deferred pensions at 2.5% in future.

So even if your pension is doing fine now, be prepared to watch inflation carefully as at current levels this pension would be eaten away over future years.

[Being a f/s pension, there is no fund to perform well or badly, only a guarantee to pay you x mount based on your leaving salary and uprated by inflation or 5% until you retire.]

bockster

thanks edinvestor,
i didn't realise the pension income still depended on my 'final salary on leaving the company'? even though i won't be working for that company when i retire.
so, how do i work out if this is still the best place for this money.
and, what would be the situation with drawing the money early, are there across the board rules or would it be specific to the scheme, which, when i left, was something like sacrificing 3% of the income for each year early up to 65?
cheers,
bockster.

oh ps, recently there was talk that the company would end the final salary scheme, but that it would not affect deferred pensions like mine, could i trust this?

jonathon_hart

Be a little careful here. You have quoted a transfer value. This is dependant on lots of factors that could have changed between those dates, such as the actuarial assumptions. This means that this is not a good judge of performance, especially as the transfer value in no way affects the benefits you would get at retirement if you left the money with the scheme.

Another thing to be careful of is that Final Salary schemes normally only increase the deferred pensions (yes that is the right term ) once per year at a fixed date (6th April being common or using September RPI as that is the same inflation figure as state pensions) I noticed the dates that you gave were less than 2 years apart so depending on when and how the do the increases there may only be 1 or 1 and a bit increase in that time. This could also have distorted the increase in the transfer value.

It would be worth finding out from the administrator when the increase is applied and they should also be able to tell you all the increases that have been applied to your pension and how they were calculated.

A Final Salary scheme does not have a specific fund of money that is yours (as does a DC scheme) so no your money is not "invested" in the sense you are thinking of.