Transfer of IBM Pension Administration to Legal and General

nickw56

In January 2021 the IBM Pensions Trust transferred the administration of my IBM pension to L&G since then the vale of the pot has dropped by 4.5%.  80% of the money is in the IBM PP Pre-retirement Bond Fund and 20% in the IBM PP UK Money Fund.  I have pensions of similar values with 2 other providers which have shown increases of 3 to 5 % over the same period.   I asked IBM why this has fall has happened and the answer given was as follows: The recent decrease in your pension fund is due to the negative return on the pre-retirement fund which is in part due to falling bond prices.  If bond prices fall (and yields rise), the member may lose on their pension capital but this will be offset in part with better annuity payments. Consequently the pre-retirement fund aims to reflect the way that typical non-inflation-linked annuities are priced and may be suitable for members who are approaching retirement and who want to purchase an annuity.   Can anyone explain to me what this actually means?   I never had any intention to purchase an annuity.  I left IBM in 2016 and have only now started to draw down from one of my other pensions.  I started this thread because I think that somewhere along the line I made a mistake - perhaps failing to update my retirement date and if so help others to avoid a similar situation or at least be aware of the pros and cons of similar arrangements

Marcon

nickw56 said:

In January 2021 the IBM Pensions Trust transferred the administration of my IBM pension to L&G since then the vale of the pot has dropped by 4.5%.  80% of the money is in the IBM PP Pre-retirement Bond Fund and 20% in the IBM PP UK Money Fund.  I have pensions of similar values with 2 other providers which have shown increases of 3 to 5 % over the same period.   I asked IBM why this has fall has happened and the answer given was as follows: The recent decrease in your pension fund is due to the negative return on the pre-retirement fund which is in part due to falling bond prices.  If bond prices fall (and yields rise), the member may lose on their pension capital but this will be offset in part with better annuity payments. Consequently the pre-retirement fund aims to reflect the way that typical non-inflation-linked annuities are priced and may be suitable for members who are approaching retirement and who want to purchase an annuity.   Can anyone explain to me what this actually means?   I never had any intention to purchase an annuity.  I left IBM in 2016 and have only now started to draw down from one of my other pensions.  I started this thread because I think that somewhere along the line I made a mistake - perhaps failing to update my retirement date and if so help others to avoid a similar situation or at least be aware of the pros and cons of similar arrangements

It's an old fashioned lifestyle approach, where younger members have investments heavily based in equities and are then moved into less volatile funds (typically bonds/deposit funds) as they approach their specified retirement age. If you aren't planning to buy an annuity, then it's probably not the right approach for you. At the very least changing your 'intended retirement date' to age 75 would have limited too much premature switching to bonds.

nickw56 said:

I have pensions of similar values with 2 other providers which have shown increases of 3 to 5 % over the same period.   

Which are doubtless invested in very different funds choices, and/or have much later retirement dates?

jaybeetoo

I assume you are in the M Plan?  If so, you can choose from lots of different funds and whether to lifestyle or not.  If you haven’t made a choice then you’ll go into the default fund which I believe is lifestyled.  I suggest you login to your pension account and look at what investment funds and options you’ve chosen.  Your annual pension report will also tell you.

msallen

The switch to L&G has no bearing on this as you will still be invested in the same funds.

As jaybeetoo says, I assume you are in the M Plan. I am also a deferred member of that plan (I joined 6 days after they closed entry to the old DB plan grrrrr! ) and I changed my option from the old default 'Lifestyle' to 'Lifestyle to Drawdown' a few years ago as this model doesn't shift the bulk from equities to bonds in the final years approaching retirement date, although it does de-risk a little. It may be a bit late for you now but as you said - it may help someone else avoid the default switch (assuming they are not planning on using an annuity).

As an aside, I find this pension makes quite a good core holding alongside my more adventurous SIPP. It is my only remaining "old pot" that I haven't transferred in, and represents roughly 40-50% of my total. A bit of extra caution and extra exposure to more mature stocks here allows me to be a bit bolder in my SIPP portfolio.

Albermarle

As an aside, I find this pension makes quite a good core holding alongside my more adventurous SIPP. It is my only remaining "old pot" that I haven't transferred in, and represents roughly 40-50% of my total. A bit of extra caution and extra exposure to more mature stocks here allows me to be a bit bolder in my SIPP portfolio.
I have a similar situation and also at the back of my mind is that in a very unlikely financial armageddon scenario, the insured funds in the ex workplace/personal pensions should be better protected than the SIPP. Maybe,,,,,,,

green_man

I similarly am in the old IBM M plan as a deferred member.  As stated above, this is not really related to the transfer to L&G (my fund values have increase since the transfer) .   You need to review the funds you are in and act accordingly.  What do you intend doing with your IBM funds and when?  This may guide which funds you should be in.    

My pot is all in the Growth Plus fund as I have no intention of accessing it in the next 10 years. I have transferred my AVCs out to another provider as IBM offered no drawdown options, however it looks like this might now be possible with the IBM scheme?