Move to new pension scheme but lose spouse pension benefit?

real_sunfire

I work for a large company and am lucky enough to earn a good salary.

My wife does not work full time as we have a disabled son but she works part time in her own business.

I'm currently in my employer's old defined contribution scheme. It contributes 9% of my salary into my pension. As a member of the scheme, I get a small fixed amount , which remains the same value each year to "buy" additional benefits like critical illness cover,  health assessments, gym memberships, etc. If I die while working for them my wife would get a death benefit of 4 x my salary plus a spouse's pension of 30% of my salary.

I am considering whether to move to my employer's new defined contribution scheme. 

Again they will pay in 9% but my death in service cover would increase to 8 x my salary. Also the money I have available for additional benefits would then be linked to my salary and I would get a much larger amount to spend on these. There is also the option in the new scheme of me paying percentages of my salary into my pension, which my emp[loyer would half match (i.e. if I put in 2% they would put in 1%, etc.). 

However I would lose the option of the spouse pension for my wife if I died in service in the new scheme.

If I moved to the new pension scheme I would not be allowed to move back to the old scheme if I changed my mind.

The reason I am thinking of moving to the new scheme is due to the very small amount of money available to buy other benefits under the old scheme which will never increase even if the cost of the additional benefits I want to buy will increase. At the moment I have to sell some days of annual leave, and overspend on the amount available for the additional benefits. The deficit is deducted monthly from my salary over the year.

My main concern about moving to the new scheme is the loss of the spouse pension for my wife. She has a small private pension fund from when she was working full time and would get the value of my pension fund whichever scheme I was in but I worry.....

What are people's opinions here: should I move to the new scheme and get the increased death in service cover and larger amount to spend on additional benefits or should I stay in the old scheme and retain the spouse pension?

Thanks.

S

Dazed_and_C0nfused

Do you really mean she would get 30% of your salary?

That seems quite a generous option.

dunstonh

However I would lose the option of the spouse pension for my wife if I died in service in the new scheme.

You don't need a spouse pension on a defined contribution scheme.    You either buy a joint annuity at the end or you go into drawdown (the more common option) and your spouse inherits your fund on your death.

Dazed_and_C0nfused

The op never mentioned losing the DC fund in the original scheme though, I'd assumed that would still go to the beneficiaries.  But maybe that was too big an assumption?

Or the original scheme is a really a DB one?

Cus

More details needed, but I doubt your company is offering a new version out of the goodness of their hearts.

QrizB

Dazed_and_C0nfused said:

Or the original scheme is a really a DB one?

OP says (my bold):

real_sunfire said:

I'm currently in my employer's old defined contribution scheme.

@real_sunfire what rate of accrual do you have in the current scheme? 1/60th, 1/80th, something else?

It's quite likely that the current DB scheme will give you a better pension than the DC scheme will. The extra "extras" that your employer is offering with the DC scheme might just be bait to lure you away from the DB scheme.

Struck through, see below.

Dazed_and_C0nfused

QrizB said:

Dazed_and_C0nfused said:

Or the original scheme is a really a DB one?

OP says (my bold):

real_sunfire said:

I'm currently in my employer's old defined contribution scheme.

@real_sunfire what rate of accrual do you have in the current scheme? 1/60th, 1/80th, something else?

It's quite likely that the current DB scheme will give you a better pension than the DC scheme will. The extra "extras" that your employer is offering with the DC scheme might just be bait to lure you away from the DB scheme.

I'm confused now!

Are you pointing out that the op has categorically referred to it as a DC scheme but you then asked about the DB scheme rules 🤔

dunstonh

My gut feeling is the original scheme is DB and the OP mistyped it.  However, there are some Occupational DC schemes that give a scheme pension that automatically includes spouse.  Clarification is clearly needed though.

Albermarle

I'm currently in my employer's old defined contribution scheme. It contributes 9% of my salary into my pension

The % the employer adds would indicate it is a DC scheme. Normally with a DB scheme, you are often not even aware what the employer is contributing but typically it would be 25% +.

If I die while working for them my wife would get a death benefit of 4 x my salary plus a spouse's pension of 30% of my salary.

The spouse pension would indicate it is a DB scheme.

As Dunstonh says it maybe is an unusual DC scheme .

Only OP can clarify !

QrizB

Dazed_and_C0nfused said:

I'm confused now!

Are you pointing out that the op has categorically referred to it as a DC scheme but you then asked about the DB scheme rules 🤔

The confusion is all mine. All I can offer in my defence is that it was getting late and I had had a long day!

Brie

QrizB said:

Dazed_and_C0nfused said:

I'm confused now!

Are you pointing out that the op has categorically referred to it as a DC scheme but you then asked about the DB scheme rules 🤔

The confusion is all mine. All I can offer in my defence is that it was getting late and I had had a long day!

Confused and tired perhaps but I think you were right and the OP is really the confused one.

The way it reads to me is that the OP is in a DB scheme which has generous benefits which includes a 30% of salary to the spouse should he die in service.  I would also expect there to be some pension payable at some point which may be 1/60, 1/80, whatever.  Potentially that would go to the spouse as well at whatever age.

On the side of the pension is what may be a salary sacrifice basket of benefits that can be selected up to X amount.  

What I would wonder is - will the OP retain membership in the DB scheme if he switches to the DC one?  If so how much benefit would remain?  Or would there only be his 1/60, 1/80 benefit which would also provide a survivors pension for his wife assuming she doesn't pre-decease him.