Transferring out of DB pension scheme

Albermarle

In order to get a final figure for transferring out of my pension I had to leave the scheme. Pension rules apparently

There have been lots of threads on this forum about issues transferring out of a DB pension, but I have never heard of someone having to leave a scheme to get a transfer value. When you say 'pension rules apparently' have you read the scheme rules ?

My pot at transfer with a very modest return should have been in the region of £940k by 2025.

Most investment funds are down around 10%this year and taking inflation into account, more like 20% down in value.

Also when talking about 'pot valuation being down £160K' do not forget that you still have exactly the same rights to the accrued DB pension built up so far. This is not affected by transfer values changing.

As the transfer never happened I am no longer contributing to this scheme, but have joined a scheme not as attractive in terms of company contributions. The original scheme is still open to those who have been in it long enough and the company are still contributing 22%. 

Transferring out of a DB scheme is quite often not such a great idea, so personally I would not be so bothered that it did not happen.  However I  would be really upset about not still being part of the DB scheme going forward.

tightwadapprentice

There have been lots of threads on this forum about issues transferring out of a DB pension, but I have never heard of someone having to leave a scheme to get a transfer value. When you say 'pension rules apparently' have you read the scheme rules ?

Over the last couple of years lots of people left the scheme and all had to do the same. I was going to raise a complaint about this as well, but haven’t as yet. 

Most investment funds are down around 10%this year and taking inflation into account, more like 20% down in value.

Also when talking about 'pot valuation being down £160K' do not forget that you still have exactly the same rights to the accrued DB pension built up so far. This is not affected by transfer values changing.

A colleague I stayed in touch with used the same firm and up until recently he was 3 years in and £25k up after drawing down each year. We can get directional figures for transferring out and they were down £140k recently and will have dropped lower. That would be the amount I would get if I transferred out now.

Yes upset about what has happened but life goes on and I can only do what I have done so far. However I’m not sure how I will be in the same position as if I hadn’t left the scheme, which is what is supposed to happen.

Marcon

Albermarle said:

In order to get a final figure for transferring out of my pension I had to leave the scheme. Pension rules apparently

There have been lots of threads on this forum about issues transferring out of a DB pension, but I have never heard of someone having to leave a scheme to get a transfer value. When you say 'pension rules apparently' have you read the scheme rules ?

You do need to have left active membership of the scheme to get a guaranteed CETV, otherwise all you get is an indicative value. That applies to all DB schemes - the rules aren't the issue here - because until you've actually left membership, your deferred benefits aren't known for certain.

xylophone

Are you being compensated for lost guaranteed pension benefits?


See below

https://www.financial-ombudsman.org.uk/businesses/complaints-deal/pensions-and-annuities/compensation-for-lost-guaranteed-pension-benefits

FCA consultation on revised methodology to calculate compensation - 2016

On 3 August 2016, the FCA announced it would be launching a consultation on redress for consumers who were given unsuitable advice to transfer out of defined benefit pension schemes. In March 2017, the FCA set out its proposals. The consultation ended in June 2017 and the FCA’s finalised guidance - FG17/9 - was released in October 2017.

The FCA said in this guidance that ‘Where a respondent upholds a complaint concerning a non-joiner, opt-out or FSAVC case, the respondent may use this guidance as a basis for calculating appropriate redress, to the extent that it is appropriate to do so and subject to the particular circumstances of the case.’

 

The new methodology applies to complaints received by a firm after 3 August 2016 and for complaints received before 3 August 2016 but not settled on a full and final basis before that date.

These calculations can be complex. There’s software available to help you work it out, but many businesses choose to use a firm of actuaries to do the calculation on their behalf. Professional membership bodies like PIMFA or the Institute and Faculty of Actuaries might be able to help you with suggestions on who to use. 

Once the calculation’s been done, you’ll need to pay the consumer any resulting loss. You’ll also need to send a copy of the calculation to the customer, set out in a way that’s easy for them to understand.

The position seems to be as above - the firm involved will be expected to follow the guidance - you could check the guidance but I suspect it would take an expert and sophisticated software to come up with an estimate.

xylophone

Presumably the FA is being censured because (rather recklessly?) he advised you to opt out before even obtaining an indicative CETV.

As a matter of interest, having opted out and becoming deferred, why could you not proceed with a transfer out? Are you saying that the FA (Pension Transfer Specialist presumably) would not give a positive recommendation after having advised you to opt out just to get a guaranteed CETV?

You say that you originally sought compensation from the FA but could not agree on a figure - how did you calculate the figure?

Are you seeking reinstatement in the DB Scheme? If so, will there need to be a payment into the scheme and the compensation figure will cover?

tightwadapprentice

The position seems to be as above - the firm involved will be expected to follow the guidance - you could check the guidance but I suspect it would take an expert and sophisticated software to come up with an estimate.

Compensation will be based on FG17/9 and will require a actuary along with specialised software to complete the calculation, up to a maximum of £355k. 

  You do need to have left active membership of the scheme to get a guaranteed CETV, otherwise all you get is an indicative value. That applies to all DB schemes - the rules aren't the issue here - because until you've actually left membership, your deferred benefits aren't known for certain.

I assume the FA should have worked on directional figures rather than me leave the scheme. 

Presumably the FA is being censured because (rather recklessly?) he advised you to opt out before even obtaining an indicative CETV.

I have no idea. I would hope there is some punishment for their actions. 

As a matter of interest, having opted out and becoming deferred, why could you not proceed with a transfer out? Are you saying that the FA (Pension Transfer Specialist presumably) would not give a positive recommendation after having advised you to opt out just to get a guaranteed CETV?

The FA went through a 3rd party for the final decision. This was not explained from the off. 

You say that you originally sought compensation from the FA but could not agree on a figure - how did you calculate the figure?

I was looking at lost contributions from the company and the loss of life cover for the amount of the pot value until 55. However when looking at the expected position in 2025 (when I am 55) it was impossible to work out. 

Are you seeking reinstatement in the DB? If so, will there need to be a payment into the scheme and the compensation figure will cover?

That is the suggestion of the ombudsman and I would assume a payment would need to be made. 

JoeCrystal

tightwadapprentice said:

I was looking at lost contributions from the company and the loss of life cover for the amount of the pot value until 55. However when looking at the expected position in 2025 (when I am 55) it was impossible to work out. 

Hang on. But you didn't really lose contribution since this is a DB pension scheme therefore the employer's contributions are nominal. After all, the reason why so many employers shut down the DB pension schemes is that they cost so much to maintain.   Did your company pension scheme warns you that once you leave, you cannot rejoin?

 Frankly, the way I read it that you said that your advisor advised you to transfer out. This is not the case, you basically want a large sum of money since you for some reason are not happy with the actual pension income. You should never assume anything,

The fact you seem to think that a value can be maintained with a modest return in a few years is certainly not going to be the case. After all, a bad year could easily see your pot cut in half. There is a reason why the DB pension scheme is amazingly valuable and the DC pension scheme is utterly pathetic. Thankfully, it seems you are stuck with the DB pension scheme, considering you will be able to draw on your DB pension in 3 years' time. Just out of interest, what is the expected pension income? Based on your numbers so far, I assume it is something like £38k to £40k pension per year?

Why did they give you a negative recommendation? You did know that there is a big risk of negative transfer advice right?

dunstonh

As the transfer never happened I am no longer contributing to this scheme, but have joined a scheme not as attractive in terms of company contributions. 

With a defined benefit scheme, company contribution levels are irrelevant and not comparable to a defined contribution scheme.

I still have funds sat in the original scheme but this has deteriorated by roughly £140k, I believe due to the 15yr bond market rates rising from an all time low to a ten year high. These rates are increasing further and this will probably reduce my figures further to nearer £160k down from the time of my original pot valuation. 

DB schemes do not have a fund. There is no value apart from the transfer value.   Transfer values have been in decline but the retained benefits in the scheme are not affected by that.

The original scheme is still open to those who have been in it long enough and the company are still contributing 22%. 

Whether the company are funding it by 22% or 2.2% doesn't matter. It does not change anything directly on your pension benefits.

My pot at transfer with a very modest return should have been in the region of £940k by 2025. As I see it my current pot is £614k, so I will be significantly down. 

There is no pot and any comparison on CETVs is irrelevant.

If I accept the offer the FA needs to ask if I can get back in the scheme. I am not sure if this happens what the outcome would be as I haven’t been in that scheme for 3 years now. 

If the scheme will accept you back as a member, the advice firm will need to buy back the missing period.  You get no compensation, but you are put in the position as if you never left.  Although you may get away without having to make the employee contributions for that period.

Albermarle

Marcon said:

Albermarle said:

In order to get a final figure for transferring out of my pension I had to leave the scheme. Pension rules apparently

There have been lots of threads on this forum about issues transferring out of a DB pension, but I have never heard of someone having to leave a scheme to get a transfer value. When you say 'pension rules apparently' have you read the scheme rules ?

You do need to have left active membership of the scheme to get a guaranteed CETV, otherwise all you get is an indicative value. That applies to all DB schemes - the rules aren't the issue here - because until you've actually left membership, your deferred benefits aren't known for certain.

OK thanks for the clarification . I presume normally all ducks are in a row before this happens, so normally it is not an issue.

tightwadapprentice

Sounds like I need to accept the decision and hope they can get me back in the scheme. Thanks for your inputs.