pension fund value advice

faedundee

My Dad had a pension which, had he lived another 2 years would have had a value of £280,000. However, as he died 2 years before he was 65 (his chosen retirement age) the pension company is only going to give my mum approx £950. Is this correct?

dunstonh

My Dad had a pension which, had he lived another 2 years would have had a value of £280,000

Where did you get that value?

It sounds like a final salary scheme which never accrues an investment value. If it had been money purchase (investment based) then your mother would have got the lump sum value at date of death.

A final salary scheme will pay a spouse/dependants pension based on years of service. A £950pm index linked pension is worth about £280k

Retired_I.F.A.

Sound like it's a widows pension of £950 p/a to me too, although it could be a money purchase plan known as a Retirement Annuity Contract They could be written with a zero return on death or just a return of contributions or even a set figure.

faedundee

when my mum advised the company of my dad's death they sent her a letter saying how much they were going to give her (approx £950) but it didn't say per year - it appeared to be a one-off payment. My Dad was self employed and couldn't get insurance due to ill health from an early age so he took out the pension. After my mum received the letter from the company she checked paper work she had in the house and it said projected value at age 65 £280,000 approx with an annual pension of approx £1200

faedundee

I don't know if this is relevant but he paid £50 per month into it.

Retired_I.F.A.

Oh dear, it's sounding more like a Retirement Annuity Contract now.
Does she have any of the paperwork still you can have a read of? If not the name of the company and the address of your dad at the time should be enough for them to trace it and say what it was at least.

When did he start it too would help because when Personal Pension Plans were introduced by law they had to offer a return of fund on death. If he started it before their introduction then it's a Retirement Annuity Contract for sure.

faedundee

I can have a look at the paperwork next time I'm at Mum's. I'm sure it was started in the late 1980s (1987 I think).

dunstonh

I don't know if this is relevant but he paid £50 per month into it.

How long was he paying £50pm for? It would have to have been for a very very very long time to get close to £280k. Probably around 41 years. That doesnt match your late 80s estimate.

it said projected value at age 65 £280,000 approx with an annual pension of approx £1200

Those figures dont add up. £280k would provide and income closer to £1200 pm. not p.a.

Retirement annuity contracts used to return premiums plus interest as the most common death benefit. However, post 2001 and then further changes in 2006 meant that most provided return of fund value or premiums plus interest whichever was the higher.

faedundee

Oh Dear, I think I need to look into this further for my Mum - not easy when I don't know anything about Pensions. Might ask her to get all the paperwork together from his different plans and go see a Financial Adviser. I'll let you all know the outcome though. I'll also have to make sure I get the right kind of Pension Plan too - it's all very confusing and worrying.

faedundee

I think you're probably right and I wouldn't be surprised if my Dad decided to take a bit of a gamble in the hope he'd reach his 65th birthday. However, I'm sure he wouldn't have fully understood the ins and outs of the policy. I just hope the other policies are better.

dunstonh

Who was the provider of the pension?