Deferred Pension

[europbaron]

My company has just announced 20% of its workforce will be made redundant. If this was to happen to me I'm wondering what to do with my pension. I'm 35 and only have about 7 years worth of a final salary pension scheme.

I've been talking to one of the committee who manages the pension fund and was alarmed to discover that if I was to take a deferred pension, it would only be index linked to inflation (RPI) up to a maximum of 2.5% p.a. This change was sneaked in recently and I don't recall being informed, although I'm assured everyone was. I'll need to check all my pension documents as it used to be 5% limit. I don't fancy the thought of my pension being eroded in real terms over 30 years.

What courses of action are open to me and what would people advise? Unless I want my pension to deflate in real terms I see no option but to invest it in another scheme. Whatever I choose will have to be pretty flexible as, if made redundant, I intend to have extended periods where I will not receive income. I could still contribute at a lower level from other investments/savings.

Thanks in advance.

[Killer Bunny]

What courses of action are open to me and what would people advise? Unless I want my pension to deflate in real terms I see no option but to invest it in another scheme. Whatever I choose will have to be pretty flexible as, if made redundant, I intend to have extended periods where I will not receive income. I could still contribute at a lower level from other investments/savings.

Sorry to hear of the position. MAy I ask what sector?

Leave it where it is, transfer to new employer's scheme, tfr to your own private pension

You don't need to add to it if you tfr to private scheme

Seek professional advice: http://www.thepfs.org/2_Personal/2-2_finda...&nav1=2&nav2=12

all the best

FP

[New Darker Law]

It's good you are thinking about your pension provision. You are already ahead of most people.

If the worst does happen and you do lose your job, it may be worth waiting until you gain new employment before making a decision. For example, your new employer may also operate a final salary scheme (I know, it's getting rarer these days), to which you could transfer your service.

Basically I am saying it is good you are thinking about this, but don't rush into anything and it is usually best to get professional advice if you don't have the knowledge yourself.

Hope your situation works out.

NDL

[dipsy]

I think you should check the exact position of your final salary scheme. I think what they are talking about is that your pension when it is paid will be increased in payment by 2.5%, generally when you leave service your salary is dynamised, usually by NAE (although each scheme will have it's own rules), so if you retire in 30 years time your pension will be based on 7/60th's (assuming a accural rate of 60th's) of your leaving salary, increased each year by NAE or whatever index they use.

You need to think carefully before investing in a SIPP, the charges can be quite high, you tend to have to pay a one off set up fee, plus annual charges plus transaction charges, so it usually works out best for large funds, in excess of say 100k.

If you speak to an IFA they will be able to do a transfer analysis which will show you how much you need to earn each year (critical yield) from the fund in a personal pension to match the final salary benefits. This will also take into account any death benefits for spouse/dependents (if they are important to you) as if you invest the money in a personal pension you would still have to buy these benefits from the fund.

Good luck!