Opinions please - Transfer value of old company pension down by 30%.

Troubleatmill_2 · 5 March 2006 at 2:59PM

Requested a transfer value of the old (final salary ) company pension - I got an accompanying letter that states.
"If the funds were sufficient - full transfer value would be £62.6K"
"However Transfer value quoted is £21.7K less."
"The Trustees can do this under section blah blah blah...." :mad:

So I get £40K.

Letter comes with a nice big paragraph on.
"The Govt has proposed that members of schemes like XXXXX should have greater security in certain cases where the scheme's assets would otherwise not be able to provide the members' entitlements in full. The proposals include requirements for the sponsoring company to make additional contributions and a "Pension Protection Fund" if the sponsoring company is not able to contribute more".

It also states that the company is contributing extra - but doesn't detail what.

The $64K question.... What to do.
I was never informed that the transfer values would be reducing....
They haven't explained what they are doing about it.... ( except vague statement)

Should I get out now?
I'm worried that things could get worse.

I have £73K in current scheme. - ( money purchase ) - I have a choice of funds and I can see how it's performing.

Thanks
Troubleatmill

dunstonh · 5 March 2006 at 3:25PM

Final Salary Schemes have to protect their members. If you are leaving and its not "convenient" for them, then they will penalise you. The Final Salary scheme is designed to pay you a pension at retirement, not for you to take your benefits out early.

I was never informed that the transfer values would be reducing....

Not something that needs to be discussed. After all, the commitment for them is to provide you a pension at retirement.

Should I get out now?
I'm worried that things could get worse.

Nothing you have said above indicates any concerns.

Why do you want to transfer a Final Salary scheme which is likely to provide far more in benefits into a money purchase scheme that is likely to provide less?

Troubleatmill_2 · 5 March 2006 at 3:37PM

Hi Dunstonh

The manufacturing facility shut down 5 years ago.
( circa 2000 employees - who were all in the scheme - many with 10 years service)
Company was a market leader in a dying market.

Currently it isn't one of the big boys. ( maybe 200 Uk employees now )

Just worried my fund doesn't produce as planned here. A lot of hungry mouths in the scheme.

Thanks
Troubleatmill

EdInvestor · 5 March 2006 at 6:23PM

Troubleatmill wrote:

Requested a transfer value of the old (final salary ) company pension - I got an accompanying letter that states.
"If the funds were sufficient - full transfer value would be £62.6K"
"However Transfer value quoted is £21.7K less."

It's really unlikely that the full transfer value,even if available, would be enough to provide you with the benefits you are due to get at retirement age.

The PPF has been set up to make sure you don't get left in limbo, it will guarantee to pay out 90% of your benefits up to a cap of 25k p.a. if anything happens to the company.

I suggest you leave the pension where it is, but keep an eye on what's going on with the company, eg plans for topping up the fund.

IMHO trustees of schemes in this kind of situation should be required to update deferred members who take an interest on developments, either at regular intervals (eg annually) or on demand.It would be quite easy to set up an information section on the company website for this.

exil · 6 March 2006 at 1:31PM

I have to declare an interest - I'm in exactly the same position.

There is of course an alternative point of view. That is, the value
you get should represent the reduction in the liabilities of the scheme due to you no
longer drawing a pension in x years' time. This is in fact is
what the "unadjusted" figure is based on.

What the OP is being offered is this figure, reduced by
the %age the scheme is underfunded. However this means
the OP will cost the scheme more by staying in than taking
the transfer, assuming the underfunding is put right - which
the trustees are legally obliged to do anyway.

Having left a company, especially not through your own
choice, it really is expecting too much to have
to monitor its progress (or lack of progress)
in putting right an underfunded scheme, over a period
of 20 or 30 years or even more.

Basically you are being asked to take a punt on
the future prospects of a company you no
longer work for. In this case it is extremely
tempting to take the loss on the chin and put the money
into your current scheme, or into a personal pension (post April 2006).

Bear in mind that the value of x years in your current scheme (if
it's FS) will increase as your career (hopefully) progresses
and (as usually happens) your salary increases above inflation.
It is possible to do some rough calculations based on this
but there is an element of crystal-ball-gazing involved.

With an MP scheme this isn't so clear, as there is no
reason that the contribution to your pension pot will do
any better in the new scheme.

In my own case it's too close to call!

EdInvestor · 6 March 2006 at 8:04PM

You could try the people at the Pensions Advisory Service for free advice.

https://www.opas.org.uk

Pal · 6 March 2006 at 10:26PM

EdInvestor wrote:

IMHO trustees of schemes in this kind of situation should be required to update deferred members who take an interest on developments, either at regular intervals (eg annually) or on demand.

A required for annual funding statements is being introduced this year. By September every member of a scheme should have received a statement of their scheme's funding status on an annuity buyout basis.

Opinions please - Transfer value of old company pension down by 30%.

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