Pension very depleted

steliz

Hi,

My wife has a final salary pension pot from her years as a bus driver. 14 months ago it was valued at £31k and it dropped in value to £20k. The only explanation we could get out of them was that 'investments can go up and down in value' so, we thought it would probably bounce back and left it at that. Today it dropped in value again to £7.5k and we are very concerned about what is going on. Is this in any way normal as it feels like the money is being stolen!

DE_612183

Surely if it's final salary pension it doesn't matter the value of the pot?

Has your wife retired yet?

molerat

If it is a final salary pension there is no pot and the "value" does not affect the pension.  The transfer value is purely what the cost of that pension is to the provider and how much getting you off their books would save them.  The funds these pensions are invested in are now giving them a greater return so they need a smaller amount of cash to provide that pension.

Brie

She should be getting regular benefit statements that show how much she will be paid at her normal retirement age (might be 60 or 65).  That should be going up with inflation at least a bit.  Given that it's unlikely she would be able to transfer anything out then the "pot value" is meaningless to her.

steliz

We are retired but not yet at state retirement age. As the value was too small to convert into a meaningful pension the intention was to take it out as a lump sum. She has taken out other smaller pension pots without any problem. Have we misunderstood the options?

dunstonh

My wife has a final salary pension pot from her years as a bus driver. 14 months ago it was valued at £31k and it dropped in value to £20k

Defined benefit schemes do not have a value.     They pay a range of defined benefits.     The only time value is mentioned is if you request a transfer value.  And those have, as expected dropped by upto half.  However, that has no impact on the defined benefits.

The only explanation we could get out of them was that 'investments can go up and down in value' so, we thought it would probably bounce back and left it at that.

Defined benefit pensions are not invested at a personal level and the benefits do not change due to investments.

 Today it dropped in value again to £7.5k and we are very concerned about what is going on.

Unless you wanted to transfer it, there is nothing to be concerned about.

Is this in any way normal as it feels like the money is being stolen!

Its not being stolen. The pension will still pay the defined benefits as it always would have.  Ignore any CETV.

As the value was too small to convert into a meaningful pension the intention was to take it out as a lump sum. She has taken out other smaller pension pots without any problem. Have we misunderstood the options?

Defined benefit schemes do not have a pot.   Are you sure it is a defined benefit scheme?

Flugelhorn

"Defined benefit schemes do not have a pot.   Are you sure it is a defined benefit scheme?"

this is the key question

Marcon

steliz said:

We are retired but not yet at state retirement age. As the value was too small to convert into a meaningful pension the intention was to take it out as a lump sum. She has taken out other smaller pension pots without any problem. Have we misunderstood the options?

This sounds like a defined contribution scheme - but the drop in value from £31K to £7.5 in 14 months sounds unusual. Where are the underlying funds invested - a pension is only a 'tax wrapper', so you need to peel that away and have a look.

Brie said:

She should be getting regular benefit statements that show how much she will be paid at her normal retirement age (might be 60 or 65).  That should be going up with inflation at least a bit.  

If it's a DB scheme, even active members don't necessarily get regular benefit statements. OP, is your wife still actively contributing to this scheme?

Brie said:

Given that it's unlikely she would be able to transfer anything out then the "pot value" is meaningless to her.

No reason she couldn't transfer out.

steliz

I've searched through the paperwork and it doesn't state that it's a defined benefit scheme but I spoke to them on the phone last year and was told it was a final salary pension, is that the same thing?

I did find one statement in the paperwork under 'benefit options' that says a cash lump sum can be taken on the grounds of triviality.

She's not concerned about the effect on any pension this might have produced as she always intended to take the cash lump sum. She hasn't contributed into this scheme since 2011.

Dazed_and_C0nfused

Yes, final salary is a type of defined benefit pension. It is not a pot of money.

Why would she want to take a cash lump sum rather than the valuable pension?

Have you got either a statement of the benefits accrued when she stopped work there or a more upto date (it will almost certainly increase over time due to inflation related increases covered in the scheme rules).

DE_612183

If it's final salary it should be based on what she was earning at the time she left.

Say she worked there for 10 years and her final salary was £20 pa.

Then her final salary would normally be something like10/80ths of the 20k - so £2,500 per annum ( plus any uplifts )

I know uplifts have been quite low for the last few years but mine was 8% this year.

Anyway, she would be entitled to that from the date she can take it - may not be 66 or 67 may be earlier - I was able to take mine at 50.

That 2.5k - 3k PA is worth much more than the lump sum she could take.

You need to find out what the final salary was when she left, how many years she contributed, when she can take the pension and what are the calculations that work out "How much PA that is now".