ABF Final Salary Pension

Andyjflet · 17 February 2017 at 3:15PM

This isnt my main pension but I have a small final salary pension that I had as a young man that lasted a few years and isnt worth much.

I have had a letter offering the option to transfer to a defined contribution arrangement with more flexible benefits.

As the Transfer value is over £30k I have to speak to a financial advisor first.

The deffered pension when I left in 1999 was £1988.40

Cash Equivalent transfer value is £72,929.28

Any thoughts would be very much appreciated before I speak to a pensions advisor.

Silvertabby · 17 February 2017 at 5:25PM

Did the letter just give you the option of transferring, or did it give you the current value of your pension - ie, £1988.40 plus 17 years of index linking?

If they have indeed only given you the old pension figure but a current cetv, then that sounds to me like they want to 'encourage' you to transfer out - and they won't do that from the goodness of their hearts!

Can you get a current pension value and come back to us?

I've just had a look at your scheme regs, and looks like for a 1999 leaver GMP increases by 6.25% per annum and excess is CPI capped at 5%. A very rough back of fag packet calculation makes your current pension £3K per annum, so that's the figure you need to be comparing with the cetv (but get a quote from them just in case there are some ts & cs I can't see).

xylophone · 17 February 2017 at 6:26PM

You are currently rising 50?

An earlier post mentions a divorce - there was no pension sharing order on this or any other of your pensions?

https://www.abfpensions.com/527/home

Have you obtained a New State Pension Statement?

https://www.gov.uk/check-state-pension

What does your statement of deferred benefits on leaving ABS show for

your GMP/excess?

Andyjflet · 20 February 2017 at 10:59PM

No pension sharing from the divorce, no current value just a cetv I believe, I will check again and come back, thanks for the comments so far.

Andyjflet · 20 February 2017 at 11:07PM

OK some figures from the statement.

Value of Pre 5/4/97 excess: £25583.14

Value of GMP £16615.73

Value of Post 5/4/97 £30730.41

Total CETV £72,929.28

Includes Members total Cont £5160.64

xylophone · 21 February 2017 at 12:54AM

Now see https://www.abfpensions.com/953/deferred-pension-increases

Andyjflet · 21 February 2017 at 3:40AM

My rate as correctly guessed earlier would be a 6.25% yearly increase. I'm currently 49 and now confused on what to do.

My state pension forecast shows £155.65 per week

bowlhead99 · 21 February 2017 at 7:52AM

Andyjflet wrote: »

My rate as correctly guessed earlier would be a 6.25% yearly increase. I'm currently 49 and now confused on what to do.

Well, do you have a compelling reason why you would want to give up the nice defined benefits and guarantees and then have to try and match that level of income using your own knowledge of investments and the vagaries of the market?

You mention it is not your main pension and you have a bigger one and also a full state pension entitlement. So presumably if you converted it to a DC pot and invested it badly or frittered it away you would not be entirely destitute in retirement? However, just because you could afford to take the risk of managing it yourself and fail to match the benefits without having to live on the streets, is not in itself a reason to make the move.

PensionTech · 21 February 2017 at 10:09AM

Did the letter just give you the option of transferring, or did it give you the current value of your pension - ie, £1988.40 plus 17 years of index linking?

If they have indeed only given you the old pension figure but a current cetv, then that sounds to me like they want to 'encourage' you to transfer out - and they won't do that from the goodness of their hearts!

Not at all. The pension at exit forms part of the transfer value calculation. The revalued pension does not; it's an extra calculation, done by the administrators rather than the actuary. It's therefore quite common for transfer quotes to include only the pension at exit, if that.

Andyjflet · 21 February 2017 at 10:34AM

bowlhead99 wrote: »

Well, do you have a compelling reason why you would want to give up the nice defined benefits and guarantees and then have to try and match that level of income using your own knowledge of investments and the vagaries of the market?

You mention it is not your main pension and you have a bigger one and also a full state pension entitlement. So presumably if you converted it to a DC pot and invested it badly or frittered it away you would not be entirely destitute in retirement? However, just because you could afford to take the risk of managing it yourself and fail to match the benefits without having to live on the streets, is not in itself a reason to make the move.

My thoughts are currently to leave it where it is, I have made provisions for my retirement with an additional couple of pensions, one work and one private which should be OK, this is a bonus really and therefore the guarantee of a fixed income at retirement however small would be nice, I also have no desire or indeed the knowledge to invest it myself and take the risk.

bowlhead99 · 21 February 2017 at 11:25AM

Andyjflet wrote: »

My thoughts are currently to leave it where it is, I have made provisions for my retirement with an additional couple of pensions, one work and one private which should be OK, this is a bonus really and therefore the guarantee of a fixed income at retirement however small would be nice, I also have no desire or indeed the knowledge to invest it myself and take the risk.

Sounds sensible enough. It also means you don't need to use up a portion of the pot to pay for advice to enable the possibility of a transfer that you might not want anyway.

At the end of the day, a Cash Equivalent transfer value is supposed to be what it would cost them to absolutely guarantee you would get that same level of annual benefit (including the initial annual cash flow and inflation rate, and spouse provision, and whatever else is in there) using some standard assumptions....

Taking the Cash Equivalent and buying your own investments now and later taking benefits with the proceeds of them, you might be able to get a better overall result (especially if you didn't stick to investment products that would absolutely guarantee the return, because you felt it was only a bonus anyway so you could take a fair degree of risk). It also gives you more flexibility in terms of when to take chunks of it in the future. However, it does of course come with risk and responsibility of managing the investments (or paying someone else to do so) without guarantees.

As buying super-low risk investments to guarantee the annual amount is very expensive at the moment, CETV rates are relatively high compared to a few years ago, so some people who previously felt they should definitely definitely never transfer a DB pension might be rather more tempted to cash in. This doesn't mean it's suddenly right for you though. You can always re-evaluate in another decade's time. Even if the CETV is lower at that point, it may not be much harder in practice to purchase alternative benefits, and as you get nearer retirement it may be clearer to you what you would like to do with the value that's built up.

ABF Final Salary Pension

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