Former Employer Pension Scheme from '98'-'03': Forum Feedback/Ideas Request

Marcon

matt.j_3 said:

Leading this back to my original post to understand if it is best to leave it where it is and taken the monthly (or weekly) amount from it, or take a lump sum and reinvest it in my personal pension or other investment. The paperwork in 2003 offered a lump sum of £14,000, the Trustee's didn't give me a lump sum value in the letter the sent me, probably because I didn't ask, or maybe it is not possible to get it anymore. This I would need to ask. 

If all the above is correct then is what I need to consider (and take advise on) is could the lump sum value taken today be invested better to increase it's value over 25 years (of working life left) and the 20 years from retirement to death to a greater level than £72,500 or if it is best to leave it where it is with a guaranteed £3,625?

If you had the option to take a lump sum in 2003, then it's highly likely you will have an option to do so now (although be aware that you can't take the lump sum now and the pension at some future date; it's both at roughly the same time).

Endless threads on this forum about the pros and cons of transferring from a DB to a DC scheme. It boils down to your attitude to risk - and what other assets you have if the transfer out goes horribly wrong for you.

matt.j_3 said:

Also, I have heard times where company pensions have been raided or wiped out when they are taken over or mismanaged to bankruptcy etc. I friend of mine had a pension wipe out in the 90's when a US investment firm took it over. What is the risk of something like this happening or doesn't it work this way anymore?

That was certainly possible in the 1990s but isn't the case any longer. Regulations are much tighter and if the worst happens and the company goes bust, the Pension Protection Fund (colloquially known as the 'pensions lifeboat') is there to take over a good proportion of the pension you should have received: https://www.ppf.co.uk/about-us

hyubh

matt.j_3 said:

I am assuming this £900 increase over 17 years is due to inflation, which averages as £53 per year.

It's likely statutory 'revaluation' of inflation capped to 5% p/a.

If I was at retirement age today then would get £2,300 per year (£191 per month less tax) from retirement to death?

Being all 97-05 excess, there are statutory minimal increases in payment of (again) CPI capped to 5%. The scheme may be more generous than that though, worth finding out. (Above statutory 'revaluation' between leaving and drawing a DB pension is unusual, above statutory 'increases' in payment less so.) Were you to die with a surviving spouse, there will also very likely be a spouse's pension of perhaps 50% yours due too.

If this is the case then £72,500 is way more than I contributed over the 5 years '98' to '03'.

As noted more than once before, employee contributions mean nothing in particular other than what it takes to participate in a DB scheme while an active employee 

Leading this back to my original post to understand if it is best to leave it where it is and taken the monthly (or weekly) amount from it, or take a lump sum and reinvest it in my personal pension or other investment.

The term is 'CETV' (cash equivalent transfer value) rather than 'lump sum', which instead refers to the option of taking tax-free cash on retirement, typically in lieu of some of the pension due. But yes, what you describe is basically what the statutory requirement to take professional advice before transferring out of a DB scheme involves.

The paperwork in 2003 offered a lump sum of £14,000, the Trustee's didn't give me a lump sum value in the letter the sent me, probably because I didn't ask, or maybe it is not possible to get it anymore. 

There is a statutory right to a CETV from a DB scheme up to one year before your normal pension age in it. However a CETV is a complex calculation; while some schemes can issue CETV estimates relatively willy-nilly, an official quotation will always be a more formal affair.

Also, I have heard times where company pensions have been raided or wiped out when they are taken over or mismanaged to bankruptcy etc. I friend of mine had a pension wipe out in the 90's when a US investment firm took it over. What is the risk of something like this happening or doesn't it work this way anymore?

The possibility of a DB scheme being 'raided' is in the distant past. The two main pillars of the current (since mid-00s) regime are the Pensions Regulator (tPR) and Pension Protection Fund (PPF). When the sponsoring employer of an existing DB scheme fails, then the scheme will typically fall into the PPF and its benefits converted into PPF 'compensation' (the exception will be if the assets are enough to properly maintain more than PPF compensation levels).

The PPF is a government agency but funded by a levy on remaining private sector DB schemes and the assets from schemes fallen into it, rather than taxpayers. For pension scheme members, falling into the PPF is not all sweetness and light (pensions in payment lose any above-statutory increases, deferred members get an immediate 10% 'haircut', GMP increases are wiped out for 88-97 service). However it is a very secure 'backstop' and well respected in the pensions world - the fact it strips back source pensions somewhat is what helps make it sustainable, combined with tPR putting systematic pressure on sponsoring employers to keep (or get) legacy DB schemes well funded.

matt.j_3

OK Thank you to everyone who posted to me on this question. I have received a lot of information and I feel a little more informed when discussing this with my IFA in the near future.