Defined Benefit Transfer Trap

Dox

tacpot12 wrote: »

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).

The trustees' obligation is to provide the benefits to which a member is entitled, not those which are discretionary. The scheme rules may give the possibility of early retirement, but it will certainly require consent - possibly from both employer and trustees if you are going to be retiring from active scheme membership.

If the scheme is in deficit, the trustees are, quite correctly, protecting the fund to ensure that one member doesn't benefit at the expense of others. Even with a reduction factor, it could be hard to justify allowing early retirements (and possibly tax free lump sums) if the scheme becomes seriously underfunded.

OP, check three things with the scheme: are they reducing transfer values on the basis of serious underfunding (which would indicate there are also serious concerns about the employer's viability)? When is the scheme expected to be sufficiently well funded for early retirements to be permitted, assuming it is the trustees alone who are declining your request? And what sort of 'recovery plan' is in the place? All this information should be in a document you receive each year called the Summary Funding Statement...now might be a good time to read it.

TBC15

Have AJ Bell stopped taking transfers against advice?

atush

Aegis wrote: »

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!

I wouldnt keep looking, i dont think he should transfer the pension. I think he should appeal to t he trustees.

I would however, stick every penny and pound you can into savings and live off that for a year (most companies have an age date of 60?). Or better yet, a DC pension that will get tax relief for a boost.

If you dont have any savings, you probably wont survive on your pension.

AlanP_2

atush wrote: »

If you dont have any savings, you probably wont survive on your pebnsion.

Most people could survive quite well on 40/60ths of final salary and SP I think.