Deferred member, or transfer out of DB pension

Slogger81

Hi all,

The company I work for have just announced that they are to close the DB pension scheme at the end of this year. 

When it closes I will have been a member for 25 years.

From then I have a few options, but the biggest decision to make is whether to remain as a deferred member and retain the benefits I’ve built so far, or to transfer the value out to give the DC scheme I will have to enrol onto a head start?

I’m 42 and would like to retire at around 60-62.

Dazed_and_C0nfused

Slogger81 said:

Hi all,

The company I work for have just announced that they are to close the DB pension scheme at the end of this year. 

When it closes I will have been a member for 25 years.

From then I have a few options, but the biggest decision to make is whether to remain as a deferred member and retain the benefits I’ve built so far, or to transfer the value out to give the DC scheme I will have to enrol onto a head start?

I’m 42 and would like to retire at around 60-62.

Who has suggested transferring out 25 years of guaranteed income is an option with considering?

If you do genuinely think that is worthy of further consideration then a few details would be useful.

What is the accrual rate for your DB pension?  1/80th, 1/60th etc. 

Was it all final salary or is any under a CARE scheme?

How will the DB pension accrued be revalued from now till normal pension age?

What is the normal pension age(s) for the DB scheme? 

Have you got 25 full years service or was some part time?

How much is the total accrued to date?

What are you being offered as the CETV?

MallyGirl

There are many threads on here around how difficult it is to transfer out. It is unlikely- given that you are talking about another 20 years working and so probably don't have health issues - that this is the best choice for you. Professional advice would be required and will cost you something in the order of £5k even if the outcome is against transferring 

Marcon

Slogger81 said:

Hi all,

The company I work for have just announced that they are to close the DB pension scheme at the end of this year. 

When it closes I will have been a member for 25 years.

From then I have a few options, but the biggest decision to make is whether to remain as a deferred member and retain the benefits I’ve built so far, or to transfer the value out to give the DC scheme I will have to enrol onto a head start?

I’m 42 and would like to retire at around 60-62.

Not sure you understand how DB and DC schemes work. Giving a DC scheme a 'head start' by lobbing in 25 years of DB benefits suggests you may not!

Have a look at https://www.moneyhelper.org.uk/en/pensions-and-retirement/pensions-basics before you go any further.

A crucial point to grasp is that your pension isn't 'frozen' - it will be increased each year ('revalued') from now until the time you access your benefits. The increase will be related to prices, subject to a maximum.

Dazed_and_C0nfused said:

Who has suggested transferring out 25 years of guaranteed income is an option with considering?

If you do genuinely think that is worthy of further consideration then a few details would be useful.

What is the accrual rate for your DB pension?  1/80th, 1/60th etc. 

Was it all final salary or is any under a CARE scheme?

How will the DB pension accrued be revalued from now till normal pension age?

What is the normal pension age(s) for the DB scheme? 

Have you got 25 full years service or was some part time?

How much is the total accrued to date?

What are you being offered as the CETV?

All the above questions are pretty irrelevant - the only thing which matters is the transfer value (CETV) being offered. Given that regulated advice will be required if OP is seriously considering transferring out, and they are clearly a pensions novice, ploughing through the above list won't get them very far.

GSP

Without even seeing the numbers, as you are sometime away from pension age I would keep the db pension and remain as a deferred member, and build up a dc fund for the next twenty odd years.

Phossy

My default position would be to stay a deferred member of the DB and I'd only change if I had compelling data to show otherwise.

vacheron

If the transfer value of your DB scheme is more than £30,000 (which after 25 years of contributions it probably will be by some significant margin), you must, by law, get advice from a regulated financial advisor to ensure you are aware of the risks of transferring.

If it is anything like mine was, the advice was a resounding "don't do it". However your personal circumstances may different.