Defined Benefit Transfer Trap

Kev.Penny

Having worked 40 years for the same global company and being in the DB pension, I asked for early retirement under the scheme rules for early (reduced) pension.
My request for early retirement was refused on the basis that the scheme is in deficit.
Im approaching 60 years old, still employed by the company that holds my pension and am told by my company that my only option for access to my pension is to resign and become a deferd member and to transfer my DB pension.
My estimated transfer value is in excess of £500,000 yet I'm struggling to find a IFA that will take the business, or a pension provider that will take on my pension without "positive" advice from the IFA.
So, wanting to retire at 59, I am trapped, working for a company that won't let me transfer my pension until I'm deferred. And faced with IFAs and pension institutions that are running scared of DB transfers.
Any advice welcomed! 😊

mgdavid

You could force their hand by going long-term sick with stress....

Kev.Penny

Thank you mgdavid, you're not the first with this suggestion, but after over 40 years Service I'd prefer not to leave via the back door on a sick note.......... though stress levels are high! :-)

Aegis

Kev.Penny wrote: »

Having worked 40 years for the same global company and being in the DB pension, I asked for early retirement under the scheme rules for early (reduced) pension.
My request for early retirement was refused on the basis that the scheme is in deficit.
Im approaching 60 years old, still employed by the company that holds my pension and am told by my company that my only option for access to my pension is to resign and become a deferd member and to transfer my DB pension.
My estimated transfer value is in excess of £500,000 yet I'm struggling to find a IFA that will take the business, or a pension provider that will take on my pension without "positive" advice from the IFA.
So, wanting to retire at 59, I am trapped, working for a company that won't let me transfer my pension until I'm deferred. And faced with IFAs and pension institutions that are running scared of DB transfers.
Any advice welcomed! 😊

You definitely won't find a provider willing to take that on without advice, unfortunately, as the law was written to cover the very generic situations that most people find themselves dealing with rather than specifics like this (which are unusual to say the least).



Keep looking though; you should find an IFA willing to help, as it's only uncommon to hold these permissions rather than like finding hen's teeth!

AnotherJoe

Kev.Penny wrote: »

Thank you mgdavid, you're not the first with this suggestion, but after over 40 years Service I'd prefer not to leave via the back door on a sick note.......... though stress levels are high! :-)

Your loyalty is entirely misplaced. Its clearly not being reciprocated.

crv1963

Kev.Penny wrote: »

Thank you mgdavid, you're not the first with this suggestion, but after over 40 years Service I'd prefer not to leave via the back door on a sick note.......... though stress levels are high! :-)

If there is one thing that I have learnt in almost 40 years of working it is that the bottom line is everyone is replaceable, your personal colleagues may value you but the organisation is like the Borg in Star Trek- it only wants you for what you can do for it.

It would appear you have three unfortunate options-

1) Find then pay a sizeable sum to an IFA to transfer which may or may not be good for you.

2) Take the sickness ill health route, which may or may not be possible, could they possibly terminate the employment on capability grounds?

3) Stick with it to the bitter end and suffer increased stress as your unhappiness levels rise.

Or is there an option four that some but by no means all employers offer of gradual step down of responsibilities as you head towards retirement?

sandsy

What is the scheme's normal retirement age, ie how long are you trapped for?
Do you have any other savings or investments?
Is it the employer who declined your request or the scheme trustees, or both?

k6chris

Kev.Penny wrote: »

Thank you mgdavid, you're not the first with this suggestion, but after over 40 years Service I'd prefer not to leave via the back door on a sick note.......... though stress levels are high! :-)

Your loyalty to the company is admirable, but they have not employed you for 40 years out of loyalty or charity to you, they have been getting their pound of flesh and that is clearly impacting you now. You can do a scientific test to see how much loyalty the company really has to you and how much you will be missed if you left - get a glass of water and put your index finger into it. Next, focusing on your stress levels, slowly pull your finger out. Finally look at the size of the hole that is left, it is proportional.....



Good luck, not easy, but don't have misplaced loyalty - put yourself first!

tacpot12

I think you should complain to the Scheme Trustees. The scheme rules allow early retirement, and it is not your fault that the scheme is underfunded. The trustees should be making life very uncomfortable for the directors and shareholders, but they seem to be pushing the problem onto you. You are willing to accept the scheme's reduction for early retirement, so you taking your pension now doesn't alter the degree of unfunding either way. (It might shift the liability in time somewhat, but I'm struggling to see how one employee taking his pension five years early will affect the scheme overall).

I think I would also reinforce you your management that it is not a good idea to have an uncommitted employee at work. It's not disloyal, it's realistic.


You haven't said too much about your current financial situation, but if your children and grown up and your mortgage is paid off, you can potentially save a large proportion of your salary now. This potentially reduces the time you have to soldier on. I found it easier to finish my last two years at work when I had a viable plan in place to allow me to retire at the end of that time, because I knew it was going to happen and I was in control of the plan. Being made redundant with two months to go was the icing on the cake!

Your best option, financially speaking, is probably to not take your DB pension early and not transfer it out to another pension. However, this depends on the underfunding situation. If you can get evidence of the degree of underfunding is severe and the trustees think the situation is going to impact on the pensions that are paid, this could be the tipping point when transfering out is the better idea, but I doubt this is the case. You might also have a read of the information about how the Pension Protection Fund might protect your DB pension scheme if the employer goes bust, see: https://www.ppf.co.uk/

If you can save enough to live on for three years over the next 2.5 years, you can retire at 62 and draw your DB pension at 65. (I'm assuming this is the scheme's normal retirement age).

If you still want to persue resigning and transfering out, you will need to carry on hunting for an IFA. It is not a quick job. I paid for transfer advice three years ago now, for two DB pensions. It took about three months, and I had to meet the IFA at their office twice. The recommendation was not to transfer either pension, which I took. There was no option to do these meetings over the phone. The IFA needs to be sure you understand all the risks, and you need the opportunity to ask all the What-if questions.

You should explain to the IFA that you are openminded about a transfer - you want their advice and you expect that you will take it, but ensure that as part of agreeing any fee schedule, you tie the IFA into agreeing to sign any paperwork that your scheme needs to check that you have received the advice that is required.

I think AJ Bell will accept transfers from DB schemes even when the IFA's advice is not to transfer.

HappyHarry

If you still want to persue resigning and transfering out, you will need to carry on hunting for an IFA. It is not a quick job. I paid for transfer advice three years ago now, for two DB pensions. It took about three months, and I had to meet the IFA at their office twice. The recommendation was not to transfer either pension, which I took. There was no option to do these meetings over the phone. The IFA needs to be sure you understand all the risks, and you need the opportunity to ask all the What-if questions.

You should explain to the IFA that you are openminded about a transfer - you want their advice and you expect that you will take it, but ensure that as part of agreeing any fee schedule, you tie the IFA into agreeing to sign any paperwork that your scheme needs to check that you have received the advice that is required.

If you pay an IFA to give advice, then they must sign the paperwork saying they have given advice, regardless of whether their advice is to transfer or not.

xylophone

What exactly is said in the Scheme Rules about early retirement?

Have you appealed to the Trustees?