Poor deferred pension performance, should I move it?

sheffield_lad

Hello all, I was made redundant from my old workplace in 2019. They had a defined pension scheme that I had been in for around 11yrs. In 2019 the deferred benefit to date was £3985 PA, the scheme states that the benefit rises inline with inflation to a maximum of 2.5%. I have been on the site today for a revised update to see what the pension is worth today, the statement states £4002. So in 5yrs it has risen by £17. Which seems at odds with the 2.5%, but even that sounds low. 
I have always been advised not to move out of a defined benefit scheme but this seem unbelievably poor performance & even with the 2.5% rise over the 5yrs is poor. So my Q is would it be worth looking to transfer this elsewhere?
I am 55yrs old & thankfully have another workplace pension.

Tommyjw

When you say "to date" do you mean it is a 'current' projection to your Normal Retirement age, say 65? If so, they've are likely using assumptions in their estimates to assume future inflation e.g. they could be using a 2.0% assumption for future years and so depending on the real inflation it could match up as the years go by.

If not, and you're looking at a current 'Early Retirement' projection, it is likely that since 2019 (given ordinarily it changes every 3 or 4 years or so) the Early Retirement retirement reductions have changed, and the reduction has increased, so your pension had increase as expected but the actuarial reudction for going early has reduced as well, coincidentally putting you back to the roughly same starting point.

Regardless, there is no 'performance' with a DB Scheme, as you mention you have a guarantee of inflation linked increases, seemingly for yourself all earned post-April 2009 as it caps at 2.5%, you're looking at several thousand pounds to pay for the financial advice to transfer and hope you get a positive recommendation from it, which is unlikely these days.

 

Gary1984

As above, your pension doesn't 'perform' as your benefits are defined. Your comparison will be off somewhere as inflation even capped at 2.5% easily exceeds the increase stated.

artyboy

I have a small deferred DB pension that still only provides an annual payment value as per the deferral date of 2008. Any statutory revaluation to now is for me to work out. Are you sure you are getting a value as of now?

Marcon

Tommyjw said:

Regardless, there is no 'performance' with a DB Scheme, as you mention you have a guarantee of inflation linked increases, seemingly for yourself all earned post-April 2009 as it caps at 2.5%, you're looking at several thousand pounds to pay for the financial advice to transfer and hope you get a positive recommendation from it, which is unlikely these days.

 

Think £5K+ for advice rather than just several thousand - and you can always choose to ignore the advice to stay put (however good that advice might be) and transfer to a stakeholder pension. The requirement is for a DB scheme member to receive advice; they don't have to follow it and the common myth that financial advisers can somehow act as the gatekeeper is oft peddled but wrong.

xylophone

Hello all, I was made redundant from my old workplace in 2019. They had a defined pension scheme that I had been in for around 11yrs. In 2019 the deferred benefit to date was £3985 PA

Do you mean that your statement of deferred benefits on leaving showed a pension to date of £3985 per annum?

Are you saying that unlike  with many deferred DB pensions, the administrator provides you with annual statements which show the revaluation in deferment?

https://www.pensionfundsonline.co.uk/articles/how-to-get-ready-for-the-annual-pension-benefit-statement-iorp-ii

sheffield_lad

Hello all, thank you for the information.
The info I have seen today is a 'retirement illustration' so when I reach pensionable age.
So not an early retirement projection.
This was not a statement that came through the post, it was via a website portal where it asked if I wanted to see an up to date projection.

I was just surprised to see over almost 5yrs the annual pension has hardly moved (£17). 
Would it be worthwhile requesting a transfer value? Or accept the performance & treat it as a small bonus when I reach pension age.


 

Marcon

sheffield_lad said:

Hello all, thank you for the information.
The info I have seen today is a 'retirement illustration' so when I reach pensionable age.
So not an early retirement projection.
This was not a statement that came through the post, it was via a website portal where it asked if I wanted to see an up to date projection.

I was just surprised to see over almost 5yrs the annual pension has hardly moved (£17). 
Would it be worthwhile requesting a transfer value? Or accept the performance & treat it as a small bonus when I reach pension age.


 

Rather than requesting a transfer value, it would be worth getting to the bottom of what's going on with the numbers, because an increase of only £17 in the annual pension makes no sense at all. Contact the administrators and explain what you are seeing and why you are baffled, and ask them to confirm the true position. Be prepared for a bit of a wait...or possibly quite a long wait!

Alternatively, you could post a screenshot of your original letter from 2019/today's online figures in the hope someone here can unscramble the confusion. Remember to redact all your personal information (doesn't really matter if the name of the scheme is shown, and indeed it might help - someone might be familiar with it).

JohnWinder

'So my Q is would it be worth looking to transfer this elsewhere?'

We don't know much about your DB pension, but the issue comes down to how likely am I to invest elsewhere and get at almost no risk, at zero cost, preservation of my principal, and a withdrawal of £4000/year inflation linked (max 2.5%/yr) until I die?

I think that would be hard to answer even for an investment expert who knew the surrender value, which you may not be.

Spread your retirement funding risk by using your new pension to provide all the agonies of investing for retirement, and keep you DB pension for peace of mind unless it's glaringly poor value.

sheffield_lad

Thank you all for the helpful comments, I have sent a quey in to get to the bottom of why the pension PA has only risen £17 I will update when I hear back from them.