DB transfer value bad

Muscle750

Just as a matter of interest i asked the company to provide a transfer value of our old DB side of the pension we are now in a DC scheme. The figure they gave was reduced by over £23k as there is such a shortfall in the funding. The fund two years went from a 18 million deficiet to in excess of 30 million in 12 months and the reason was given as "Poor returns" and stated no money was used for company issues etc. However at the same time the company started getting heavily into sponsorships of motor racing etc . Needless to say i wont be taking them up on their so called "offer" but its certainly concerning.

sandsy

Pension scheme valuations are generally only done 3 yearly to determine the level of the deficit. During 2017, 5 in 6 funds were reported as being in deficit.

It's normal for transfer values to be reduced once deficits exceed a specific level and, just this week, the regulator has been berating schemes who have not been doing so. If schemes pay out too much to those who transfer out, then the funding situation would become even worse for those who remain in the scheme and trustees have a duty to be fair to all members.

The money in a pension fund simply cannot be used for company activities. It is ring fenced and the trustees are personally liable for for ensuring it is secure. The trustees should be speaking regularly with the employer about the employer's contributions to the scheme vs the employer's other monetary commitments.

Brynsam

Muscle750 wrote: »

Needless to say i wont be taking them up on their so called "offer" but its certainly concerning.

It's not a 'so-called' offer; that is the current transfer value and it is on a basis set by the trustees, not the employer.

The increase in deficit isn't particularly surprising (depending on the investment strategy being followed by the scheme) and isn't especially worrying. How the employer chooses to spend their marketing budget (which certainly doesn't come out of scheme funds) is neither here nor there, save to extent that if their new marketing strategy improves the company's financial performance, their ability to bolster up the pension scheme (known as 'the employer covenant') also improves.

Alexland

Muscle750 wrote: »

However at the same time the company started getting heavily into sponsorships of motor racing etc.

Advertising is a valid business expense to attract customers to generate revenues for which margin can be earned which may help fund the pension scheme liabilities. However the effectiveness will depend on specific circumstances.

Alex

Dox

Muscle750 wrote: »

Just as a matter of interest i asked the company to provide a transfer value of our old DB side of the pension we are now in a DC scheme. The figure they gave was reduced by over £23k as there is such a shortfall in the funding.

£23,000 sounds a lot of money, but you haven't given the amount of your transfer value, so it is impossible to know what sort of %age reduction is (temporarily) being implemented. Nor have you given the overall size of the scheme. But as you say, you only asked 'out of interest', so it has no impact on you.

peterbaker

£23,000 is indeed a lot of money and it is of the same order of magnitude as a shock I had a couple of months ago on one of my deferred DB pensions.

In June 2018 I received a supposed CETV which was 12½% less than a CETV I was given in September 2017.

Naturally I queried it and Willis Towers Watson (the ultimate administrators of half the country's surviving volume DB schemes perhaps?) wrote to say they'd made an error.

I've queried their second attempt too as I know they are prone to multiple errors - these things happen when you create a niche specialist business from your professional ability to mess with people's long-term pension savings and market it to corporates to protect and enhance their interests and pay only lip service to yours

hyubh

Muscle750 wrote: »

Just as a matter of interest i asked the company to provide a transfer value of our old DB side of the pension we are now in a DC scheme. The figure they gave was reduced by over £23k as there is such a shortfall in the funding.

Just as a matter of interest, has Mrs Muscle asked her LGPS administrator for a CETV quote? You could compare notes.

hyubh

peterbaker wrote: »

I've queried their second attempt too as I know they are prone to multiple errors - these things happen when you create a niche specialist business from your professional ability to mess with people's long-term pension savings and market it to corporates to protect and enhance their interests and pay only lip service to yours

Bit of a niche conspiracy theory you have there - are lizards involved too..?

Silvertabby

hyubh wrote: »

Just as a matter of interest, has Mrs Muscle asked her LGPS administrator for a CETV quote? You could compare notes.

LGPS CETV transfer factors are set by GAD - and are so low they may make OP's offer look generous in comparison!

peterbaker

hyubh wrote: »

Bit of a niche conspiracy theory you have there - are lizards involved too..?

Well if Goldman Sachs decides to get involved in anything (and they have long since on the DB pension scheme I alluded to) then you have to wonder