Final salary pension, who to advise?

[MrChips]

Evening all,

Our company is currently in the middle of the mandatory consultation period after it announced it plans to close down the final salary pension scheme. It closed to new applicants around 5yrs ago, but the spiel is saying it's facing a deficit etc blah blah (company is not in trouble at all, record sales year on year etc, so i can't believe this unless they publish the figures).

The replacement scheme doesn't sound bad in the general context of things (they match your input up to 10%, and add 6% themselves so max 10% me/16% them contribution).

However i really need some professional advice, as my pension understanding is strictly the basics really. But... i'm not sure exactly who to turn to and how much the advice would likely cost if i'm paying for their time? Is unbiased.co.uk the best place to search for someone, and if so, what kind of stuff should i be thinking about in how to narrow down who i talk to?

In addition, at the same time, they are also proposing to increase the employee contribution and use this to offset their increased national insurance costs (due to a "recent change in the law"). I guess this one might just be a suck it up if it happens scenario!

[ellroy]

The pension deficit is hugely likely irrespective of how the underlying business is going. It's a matter of matching future liabilities with current value, inputs, increases in life expectancy and all married to low returns on investments and the gilt market impact.

I'm sure Siddicks will be along to explain in more depth, it's his area of expertise, but it's a hugely complex area and even if you pay an IFA those basic facts impacting the FS scheme ain't going to change any time soon.

As regard the defined contribution alternative? If their paying in for you that's always a good thing if the current option isn't there anymore.

[basherX]

We can elaborate on probable reasons for the DB closure but the simple fact is that it's (very likely) going to close and it's hugely unlikely that the consultation will change anything unless you work in a highly unionised and/or public sector environment.

The proposed DC contribution is very strong but you should get independent financial advice: previous assumptions about your retirement may no longer hold.

Finally, following the ending of contracting out there is an additional (NIC) burden on employers and some have chosen to respond to that by upping employee contributions so don't feel too hard done by.

[brickwall]

If the DB scheme is going to close, there's not much you can do about it. Your accrued benefits to date should still be honoured.

So you begin building up a second pension in the new DC scheme. The deal sounds pretty generous to me.

You should get independent financial advice on the level of contributions you should make to give you the retirement you want, taking account of potential tax liabilities etc.

[Trabi601]

Not sure there's any need to look for advice - employer contributions of 16% are very generous, with a total of 26% going in, you'll be accruing a decent pot.

Obviously, you may want to look at other investment options, too - have to be honest, I do the company pension (7.5% contribution plus 20% company contribution) and stick my pay rise into our 2 share save type schemes each year.

[MrChips]

Cheers all, i've accepted it's going to close at some point sooner or later, so really the advice i'd be looking for is twofold - firstly what the impacts mean in reality for me and what the best use of my input into the new company scheme (i.e. someone to look at my personal circumstances, tax situation etc).

I'd also be looking for advice on what options i should consider outside of the company pension as don't want all my nuts in one basket (Dad lost several hundred £k in the equitable life issue back in the late 90s/early 00's!!).
We already have one BTL (our old house) but our joint income is relatively modest compared to the equity in our 2 houses as we used all my inheritance to buy our forever home.

My engineering background means i'm into the detail/analysis side of things so I'm conscious that i'd prefer advice from someone happy to talk through specific figures and the mechanisms of how possible scheme/products might work.

[Ozzie Osmond]

Your employer will almost certainly ONLY contribute if you become a member of its new DC scheme. They are very unlikely to be saying, "We'll pay ££ to any scheme you choose". That would be a logistical nightmare for them.

If you think your total pension may be approaching the Lifetime Allowance of £1million then by all means finesse the difference, but otherwise you basically want to be filling your pockets on those generous terms offered.

Yes, by all means go and spend some money with an IFA for "advice" if you want to, but what value are you hoping to get out of it? No point paying for something unless you get some benefit from it.

Might be an idea to come back to this thread when you know,

• What your employer is actually offering,
• What investment choices are available within the proposed new arrangement,
• In general terms, how you feel about risk, and
• Your age.

[CarlosFandango11]

Ozzie Osmond said:

Your employer will almost certainly ONLY contribute if you become a member of its new DC scheme. They are very unlikely to be saying, "We'll pay ££ to any scheme you choose". That would be a logistical nightmare for them.

If you think your total pension may be approaching the Lifetime Allowance of £1million then by all means finesse the difference, but otherwise you basically want to be filling your pockets on those generous terms offered.

Yes, by all means go and spend some money with an IFA for "advice" if you want to, but what value are you hoping to get out of it? No point paying for something unless you get some benefit from it.

Might be an idea to come back to this thread when you know,

• What your employer is actually offering,
• What investment choices are available within the proposed new arrangement,
• In general terms, how you feel about risk, and
• Your age.

I'm don't think you have read and understood the OP's posts.

He is not asking for finiancal advice in this thread. He is asking where he can get professional financial advice from.

[Ginge R]

Chips,

Just so I have it right, you're in the middle of the period, so thirty days to go? These days, it's a brave employer why tries to circumnavigate the pensions regulator's relatively relaxed requirements, and the replacement deal sounds fair. I'm just surprised that the new scheme rep hasn't pitched up to talk to you all. Or have they? From the sounds of it, the issues you refer to are distinct - firstly, the matters arising due to the business of the scheme closedown, and secondly, the requirement for you to formulate a more general plan. Any decent adviser will be able to help you, taking into account your property portfolio, DB scheme etc. Have you tried the Vouched For/Unbiased websites which offer paid for advertising?

[MrChips]

Ginge R said:

Chips,

Just so I have it right, you're in the middle of the period, so thirty days to go? These days, it's a brave employer why tries to circumnavigate the pensions regulator's relatively relaxed requirements, and the replacement deal sounds fair. I'm just surprised that the new scheme rep hasn't pitched up to talk to you all. Or have they? From the sounds of it, the issues you refer to are distinct - firstly, the matters arising due to the business of the scheme closedown, and secondly, the requirement for you to formulate a more general plan. Any decent adviser will be able to help you, taking into account your property portfolio, DB scheme etc. Have you tried the Vouched For/Unbiased websites which offer paid for advertising?

Yep that's pretty much it. Around 3 weeks of the consultation period left, yet it seems i'd overestimated what they would be doing during that period. I would have expected them at the very least provide a route to ask questions and get answers within the consultation period. They have been accepting questions, and actively encouraging them, but there's no sign of real answers. One of my questions is whether they will pay for individuals to get independent advice or (seeing as everyone will have similar questions but different circumstances) will they link up with an advice service to provide advice directly.

The thread was more to find our who i need to be asking for the advice so in essence it sounds like the unbiased website isn't a bad place to start. What I wanted to try to limit was the risk of spending time (and money) going through the details with someone only for them to say "Oh, i only deal with pensions, you also need a tax adviser" or "I can tell you about this, but i don't know anything about the other questions"

Thanks for the input all

[sidicks]

MrChips said:

Yep that's pretty much it. Around 3 weeks of the consultation period left, yet it seems i'd overestimated what they would be doing during that period. I would have expected them at the very least provide a route to ask questions and get answers within the consultation period. They have been accepting questions, and actively encouraging them, but there's no sign of real answers. One of my questions is whether they will pay for individuals to get independent advice or (seeing as everyone will have similar questions but different circumstances) will they link up with an advice service to provide advice directly.

The thread was more to find our who i need to be asking for the advice so in essence it sounds like the unbiased website isn't a bad place to start. What I wanted to try to limit was the risk of spending time (and money) going through the details with someone only for them to say "Oh, i only deal with pensions, you also need a tax adviser" or "I can tell you about this, but i don't know anything about the other questions"

Thanks for the input all

Just seen this thread. I think you've been given decent advice so far:

1) It's not unlikely that the scheme has fallen into deficit, given interest rate (and inflation) moves recently - these types of schemes are hugely expensive!
2) You've done well to keep a final salary scheme for so long - most were phased out 10-15 years ago!
3) The new scheme is pretty good (not as generous as a final salary scheme and you now take all of the investment and longevity risk, not your employer) and certainly far superior to many private sector DC schemes
4) Usually with this type of change, the employer will provide some form of education / training on the changes, albeit maybe not on an individual basis.
5) You probably need to choose what to invest your future contributions in, which will be determined by your risk appetite and time until retirement. Taking some external advice here might be helpful, but not essential, depending on your level of expertise. Usually there will be plenty of literature available to help you with your choice. (Remember an IFA can help you choose the right investment option given your objectives and risk appetite but they can't be expected to predict the future!).

Sidicks