Tiny pension from old employer
Discussion
I have a small pension pot from a company I worked at (for less than a year). It was a final salary scheme (but that ended after I left). Latest statement looks like this:
Am I right in thinking that at it's current value it'd pay out £355 per year during retirement? Although small, that seems pretty good value compared to what my contributions would have been in the 11 months of employment.
I now have a SIPP that I'm paying into, and is likely to be my primary retirement funding. As it stands, is there any point taking my pot from this other pension to put into my SIPP? I'm thinking it's probably best just to leave it in the ex employers fund?
Am I right in thinking that at it's current value it'd pay out £355 per year during retirement? Although small, that seems pretty good value compared to what my contributions would have been in the 11 months of employment.
I now have a SIPP that I'm paying into, and is likely to be my primary retirement funding. As it stands, is there any point taking my pot from this other pension to put into my SIPP? I'm thinking it's probably best just to leave it in the ex employers fund?
Jimboka said:
Will be interesting to get a transfer value
I had a similar fund & the transfer value is more than 50x the annual pension @ age 55
I wonder how they calculate a transfer value? Presume they don't just do it as an inverse of current annuity rates? Never thought of asking them before, but I probably will do now.I had a similar fund & the transfer value is more than 50x the annual pension @ age 55
Also, looking at the most recent fund report/review, the funding level has dropped quite a bit over the last year or so, it's now at 78% (i.e. the entire fund is predicted to be 22% short of being able to pay it's liabilities). The company is making some extra contributions to try and help improve things. The scheme has been in a contracting state for quite a long time now - with many more pensioners being paid out (3000) than deferred members (1500). And I must be one of the youngest people in the scheme, so I'll be one of the last to start drawing from it, maybe that's worrying me unnecessarily? But there must come a time when the scheme ends up so small that it isn't efficient/economical to keep it running?
I've asked them for a transfer value. They just emailed back to say that transfer values are currently suspended awaiting new factors from the scheme actuary. Should be available in a couple of months apparently. Not sure if that's likely to be good or bad? Moot point really, since I've no idea what the old factors were.
I guess the ultimate question is whether it's worth leaving it in the current fund with what is presumably a guaranteed defined benefit, compared to what it could/is likely to do if I transfer it elsewhere? My only other pension is a SIPP that I started fairly recently, and it only has about 5k in it. So transferring this other pot would give my SIPP a decent boost. But on the other hand, I'm an amateur investor self managing the funds in the SIPP, so it has potential to under perform.
Searching online seems to suggest anywhere between 20x and 50x for the transfer value. Even at 20x, it's a huge amount more than I paid in, even factoring in employer's contributions. I really under appreciated it at the time I was an employee there though (in my early 20's).
I guess the ultimate question is whether it's worth leaving it in the current fund with what is presumably a guaranteed defined benefit, compared to what it could/is likely to do if I transfer it elsewhere? My only other pension is a SIPP that I started fairly recently, and it only has about 5k in it. So transferring this other pot would give my SIPP a decent boost. But on the other hand, I'm an amateur investor self managing the funds in the SIPP, so it has potential to under perform.
Searching online seems to suggest anywhere between 20x and 50x for the transfer value. Even at 20x, it's a huge amount more than I paid in, even factoring in employer's contributions. I really under appreciated it at the time I was an employee there though (in my early 20's).
I'm starting to get my head around that now. Until the other day, I'd never even considered it worthy of trying to transfer it. It's worth £6/week or so, which isn't exactly going to go far. Am I missing any risks with what I have with it now? Is it an absolute dead cert that I'll get the annual amount of at least what they're currently stating?
I realise that the company is obliged to make up the shortfall and keep the pension fun solvent. But I'm still nearly 30 years away from starting to draw it, is there anything that could go wrong by then? If the firm goes bust (and I suspect the pension deficit could be enough to cripple them), does the govt guarantee mean I won't miss out at all?
Ultimately, the higher the multiple they're offering me, the more likely I am to transfer out I guess. How do DB schemes work when it comes to taking the lump sum? Presume it's still possible? Do they calculate that lump sum using the same factors as the CETV or some other way?
I realise that the company is obliged to make up the shortfall and keep the pension fun solvent. But I'm still nearly 30 years away from starting to draw it, is there anything that could go wrong by then? If the firm goes bust (and I suspect the pension deficit could be enough to cripple them), does the govt guarantee mean I won't miss out at all?
Ultimately, the higher the multiple they're offering me, the more likely I am to transfer out I guess. How do DB schemes work when it comes to taking the lump sum? Presume it's still possible? Do they calculate that lump sum using the same factors as the CETV or some other way?
I'm pretty sure my transfer value will be under the 30k threshold (it would have to be on an 80x multiplier for that!).
The funding ratio is calculated making a bunch of assumptions about future financial climate:
As you can see, there are now a lot more pensioners drawing from the fund than there are deferred members not yet claiming, and the fund is shrinking as a result of that. I must be one of the youngest members, and therefore likely to be one of the last to start drawing from it. I'm guessing that at some point, the fund will shrink to the size that it's inefficient/uneconomic to continue it as a stand alone thing, and it'll be sold/passed off into part of another fund? Could I end up losing out in any way if that happens.
There is also a page in the review about "what happens if the fund closes", and while they state that there is no intention to wind it up (at the moment), the amount needed to purchase annuities to cover members benefits would have a shortfall of £172m. Seriously doubt the company would be able to meet that shortfall now or in the foreseeable future, even though they are obliged to. And that was at the 2015 calculation, when the funding level was 83%.
sidicks said:
Is the pension rip-linked or not?
If yes, you'd expect a factor of closer to 40. Otherwise you might expect a factor of more like 20. But it depends on a number of factors and whether the scheme deficit position is taken into account.
On what basis is the 78% funding ratio calculated?
I don't know if its rip linked (presume that's retail index inflation linked?), neither the annual review or my annual statement mention it. The annual payment has increased from £254 to £355 since I left the company in 2004. Not sure if the increase is due to inflation or the fund investments performance? Although, wouldn't investment performance be used to make up the shortfall before increasing the payouts?If yes, you'd expect a factor of closer to 40. Otherwise you might expect a factor of more like 20. But it depends on a number of factors and whether the scheme deficit position is taken into account.
On what basis is the 78% funding ratio calculated?
The funding ratio is calculated making a bunch of assumptions about future financial climate:
As you can see, there are now a lot more pensioners drawing from the fund than there are deferred members not yet claiming, and the fund is shrinking as a result of that. I must be one of the youngest members, and therefore likely to be one of the last to start drawing from it. I'm guessing that at some point, the fund will shrink to the size that it's inefficient/uneconomic to continue it as a stand alone thing, and it'll be sold/passed off into part of another fund? Could I end up losing out in any way if that happens.
There is also a page in the review about "what happens if the fund closes", and while they state that there is no intention to wind it up (at the moment), the amount needed to purchase annuities to cover members benefits would have a shortfall of £172m. Seriously doubt the company would be able to meet that shortfall now or in the foreseeable future, even though they are obliged to. And that was at the 2015 calculation, when the funding level was 83%.
The Leaper said:
Note that the scheme in which you have the pension is legally required to calculate a CETV when requested no more frequently than annually, so you have a legal right to transfer the amount away from that scheme.
However, the planned receiving scheme has no legal obligation to accept the transfer and many DB schemes now do not accept CETVs.
So, for anyone thinking of making a transfer from scheme A to scheme B, check that B is will receive it. Otherwise you could have an unfulfilled expectation, a waste of time, and maybe fees incurred to no effect.
If transferring to a personal pension, SIPP etc, there will be no problem about receiving it there, although I think some providers do insist on a minimum amount.
R.
I've asked them for a CETV, but it could be a couple of months til they provide it. Presume it stays valid for 12 a set period too? My SIPP provider says minimum transfer in is 10k, but suggests I can top it up to 10k with new contributions if required. However, they also say this: Because of their valuable benefits, it is generally not advisable to transfer benefits built up in a final salary pension scheme or defined benefit pension. We will not accept these pension transfers on an execution-only basis. Which presumably means I'd need to pay for financial advice to transfer it to them anyway. However, the planned receiving scheme has no legal obligation to accept the transfer and many DB schemes now do not accept CETVs.
So, for anyone thinking of making a transfer from scheme A to scheme B, check that B is will receive it. Otherwise you could have an unfulfilled expectation, a waste of time, and maybe fees incurred to no effect.
If transferring to a personal pension, SIPP etc, there will be no problem about receiving it there, although I think some providers do insist on a minimum amount.
R.
williaa68 said:
A small point but is the marital status still correct (they may well accept a nomination of a significant other in addition to marriage)? If not you should update as there may be spousal benefits which will impact the value, both perceived and actual.
Yes, I'm still single (never married), although I do have kids with my ex partner. So presumably nothing useful to be gained there?Gassing Station | Finance | Top of Page | What's New | My Stuff