forced to transfer or refund payments

iaingra

HelloI have recently switched employer and started a new pension scheme. My old pension scheme has given me the option of transferring the value, or taking a refund of my contributions. The pension was a final salary (paid at 5% for 1/80th) scheme with optional AVC's. I paid in 2% AVC's which were matched by my employer. The total time I paid in was 16months. I paid in a total of £2,034 for the final salary and £814 for the AVC's.I have been given a refund value of £1,200 for the final salary and £641 for the AVC's (after tax deduction and re-instatement to state pension, company also pays £1,702 to HMRC). The transfer value is given as £1,201 for the final salary and £1761 for the AVC's. I have to move both parts in the same way.The three options I have considered are: 1. Transfer into new company scheme, 1/80th final salary(my wage is about the same as previous employment) - they only offered me 170days.2. Refund of money paid in - Gain nothing from 16months pension investment.3. Open a personal pension account and transfer the money there.The two questions I have are: A. How can my transfer value for the final salary section be so low? I know transfer value is based on the cost of supplying my predicted pension but how can it be so low compared to my and the company's contributions (not sure if company did contribute) of at least £2034? I clearly understand how the other three figures were achieved.B. Assuming option 3 yeilds the best return for me, can I just put in the lump sum and add nothing else to it?Thanks in advance, Iain (29)

dunstonh

A. How can my transfer value for the final salary section be so low?

The schemes are not like for like. Different retirement age or death benefits for example?

Assuming option 3 yeilds the best return for me, can I just put in the lump sum and add nothing else to it?

You can but transfer to occ scheme is "probably" the better option long term. Only way to tell is to compare benefits and find out what the critical yield is.

iaingra

dunstonh wrote: »

You can but transfer to occ scheme is "probably" the better option long term. Only way to tell is to compare benefits and find out what the critical yield is.

Just looking through the benefits of the new and old pensions:Both 1/80th'sBoth give death in service of 3 x pay and pension to spouse / dependent children.New pension gives extra benefits as follows:Pension in payment will increase with inflation when retired.An immediate pension if I retire early from permanent incapacity (not acturially reduced).So the new pension is a bit better, but I am talking a MASSIVE difference in the period that my transfer will buy. If I may juggle the numbers about I calculate that the final salary section of my old pension buy's 69days (transfer value of final section / total transfer value x total no. of days offered in new scheme = 1200/2961x170). So if I paid into the old scheme for 480 days at a higher monetry rate than the new pension, why is the new pension offering only 69days for this part of the transfer. Add the fact my old company possibly contributed then I would of liked to of seen an increase in day's! Could please explain where this all goes wrong.

MrChips

What are the retirement ages of the respective schemes? This can make a big difference. Benefits payable unreduced from 60 are about 30% more valuable than those payable from 65.

An inflation linked pension is about 50% more valuable than one which doesn't increase at all.

iaingra

Thanks for replies. I have looked at the retirement dates and the new pension is 60 compared to old pension of 65. I have also noticed my old pension will increase with inflation also. So I see one pension is better than the other but for 480 days of paying in to be worth 69days in the new scheme where I will in fact be paying less per month. I still can't see it adding up.