Consolidation of pension schemes


A

Alex Butcher

I have a pre-existing with-profits group personal pension from another
employer.

My current employer will allow me to transfer that pension fund into a
final salary scheme to give me just over one year of service (out of a
maximum of 40).

Are there any standard ways to assess whether doing so will be beneficial
to me or not? What are the potential disadvantages of transferring? The
obvious one is putting 'all my eggs in one basket', presumably?

Best Regards,
Alex.
 
Ad

Advertisements

D

dp

Are there any standard ways to assess whether doing so will be beneficial
to me or not? What are the potential disadvantages of transferring? The
obvious one is putting 'all my eggs in one basket', presumably?
Disadvantage: the transfer value of a scheme is usually less than the actual
value of your investment.

Advantage: once you are no longer an employee, the value of your investment
may be frozen (check this as it's not always the case).

It may be a case that you have to decide with which option you lose least.
You should find out the transfer value, actual value and the situation if
you don't transfer the old scheme before you decide what to do.
 
T

Tim

I have a pre-existing with-profits group
personal pension from another employer.

My current employer will allow me to transfer that pension fund
into a final salary scheme to give me just over one year of service
The main consideration will be the type of future growth : by investment
return in the GPP and by salary progression in the FS scheme.

Do you want final pension to be linked to future salary, or to the "value of
the pot" now plus any future investment returns?

The "just over one year of service" will have been calculated assuming a
certain salary progresssion into the future; are you likely to follow the
"norm", or (eg) might you have good career prospects for substantial future
salary growth? Also, do you think you'll stay in the FS scheme for a while,
or might you leave the company in a few year's time?

For instance, if your salary is expected to double before retirement, but
actually quadruples, then the transfer to FS scheme could almost double your
final pension.

Conversely, if you leave the employer in a year's time with little salary
rise by then, the FS scheme pension would be linked to a much lower than
expected (when the "one year service" was calculated) salary.
 
R

Robert

dp said:
Disadvantage: the transfer value of a scheme is usually less than the actual
value of your investment.

Advantage: once you are no longer an employee, the value of your investment
may be frozen (check this as it's not always the case).

It may be a case that you have to decide with which option you lose least.
You should find out the transfer value, actual value and the situation if
you don't transfer the old scheme before you decide what to do.

Disadvatage: all your eggs would be in one basket.

Robert
 
R

Robin Graham

A lot depends on who the with-profits pension is with. For many providers
you can expect years of nil bonuses. You might consider this as part of your
deliberations as to whether to swap. What pension would you get at 60 with
the present fund (assuming no added bonuses) - you'll need annuity rates for
a 60 year old from Teletext - compared to a possible pension from your
employer instead.

Rob Graham
 
T

Thom

Robin said:
A lot depends on who the with-profits pension is with. For many providers
you can expect years of nil bonuses. You might consider this as part of your
deliberations as to whether to swap. What pension would you get at 60 with
the present fund (assuming no added bonuses) - you'll need annuity rates for
a 60 year old from Teletext - compared to a possible pension from your
employer instead.
Also, consider the health of the final salary scheme. Public sector
final salary schemes (e.g., local government, teachers) are probably
about as safe as any scheme can get while other final salary schemes
depend on the health of the company. I'd also consider it a good sign if
the directors of the company are in the same scheme as the employees.

Thom
 
Ad

Advertisements

T

Tim

I'd also consider it a good sign if the directors of the
company are in the same scheme as the employees.
Not necessarily. A common situation, which can reduce the solvency of the
scheme greatly, is where a director is given (/gives himself!) a huge
payrise just before retirement, boosting his pension substantially ...
 
Ad

Advertisements

T

Thom

Tim said:
Not necessarily. A common situation, which can reduce the solvency of the
scheme greatly, is where a director is given (/gives himself!) a huge
payrise just before retirement, boosting his pension substantially ...
Good point - it'll depend on the size of the company and the number of
directors. Might such an action be illegal under some circumstances?

Thom
 

Ask a Question

Want to reply to this thread or ask your own question?

You'll need to choose a username for the site, which only take a couple of moments. After that, you can post your question and our members will help you out.

Ask a Question

Similar Threads

BA Pension Scheme 29
Pension schemes 8
Family pension schemes ? 0
PENSION SCHEME CONTRIBUTIONS 1
Two pension schemes? 4
pension scheme doubt 17
Pension Scheme performance ? 1
Final Salary Pensions Scheme 1

Top