In our weekly series, readers can email in with any questions about retirement and pension savings to be answered by our expert, Tom Selby, director of public policy at investment platform AJ Bell. There is nothing he does not know about pensions. If you have a question for him, email us at money@theipaper.com.
Question: I have been paying into my defined benefit (DB) pension for five years but I am unhappy with the administration of the scheme. I’m worried when it comes to getting my pension I won’t receive payments on time. Some people have been late to get their payments or can’t get pension quotes. I am thinking of cutting my losses and withdrawing from the scheme and investing into a private pension? What are my options?
Answer: A DB pension pays you a promised retirement income from your scheme’s normal retirement age, often (but not always) aligned to the UK state pension age. The inflation-protected income you receive in retirement will usually be based on the number of years you are a member of the scheme, the ‘accrual rate’ and whether that accrual rate is applied to your career average salary or your final salary.
For example, someone in a 1/60ths career average DB scheme who has a career average salary of £50,000 and is a member of the scheme for 30 years will be entitled to 30/60ths, or half, of that salary as an inflation-protected income for the rest of their life from their scheme’s normal retirement age (i.e. £25,000 a year).
Pension arrangements such as these have all but disappeared in the private sector, in large part because firms were unwilling to shoulder the costs associated with them. In other words, it is an incredibly valuable form of retirement provision and not something you should give up lightly, even if there are administrative issues.
Were a scheme to fail to pay your retirement income due to admin failings, you would have the option of complaining to the Pensions Ombudsman if those failings were not satisfactorily resolved.
If you are insistent on quitting your DB scheme, you should at least make sure there is an alternative pension arrangement with employer contributions you can join. But even if there is, this is unlikely to be as valuable as your existing DB arrangement.
In terms of your options if you remain intent on transferring, it will depend on the type of DB scheme you are a member of. If it’s an unfunded scheme, where there are no assets held to support payments to retirees, you will not be able to transfer out. This is the case with most public sector schemes, with the exception of the Local Government Pension Scheme.
If it is a funded scheme which holds assets to pay liabilities, you should have the option of requesting a transfer value from your scheme – essentially a cash value of your DB pension promise. If that figure is £30,000 or more, you are legally required to take regulated financial advice before transferring.
But the key thing to emphasise here is the value of what you would be giving up if you did choose to transfer your DB pension. I would strongly urge you to think very carefully about whether that is in your best long-term interests, and consider speaking to a financial adviser if you need help based on your personal circumstances.
Hence then, the article about my work s pension firm is awful should i pull out and use a private one was published today ( ) and is available on inews ( Middle East ) The editorial team at PressBee has edited and verified it, and it may have been modified, fully republished, or quoted. You can read and follow the updates of this news or article from its original source.
Read More Details
Finally We wish PressBee provided you with enough information of ( My work’s pension firm is awful. Should I pull out and use a private one? )
Also on site :