Commution of Trivial Pension

...translates as...

"Inflation since that period was 2000% so I can only expect to get 1/20th of what I probably hoped for at the time".

Not that I expected anything - at the time. Though it is not quite as bad a

1/20th, since it has been increased by a factor of 3.35 :-) So, 1/6 let us say - still a trivial sum. I do recognise that an 8% investment return would be required to get near to 2000%. That may sound pretty optimistic but, at one time in the '70s, one got several salary increases a year due to the rate of inflation.

By the way, what point are you making? That the question is absurd?

If you are member of a final salary scheme - which I assume this was, investment returns are not relevant for an individual member. The scheme booklet will tell you what happens to pensions in deferment, as yours is, but generally your salary at date of leaving will be inflated by a figure such as 5%, or RPI if less, to arrive at a notional final salary at the date you actually take the benefits and you will get a percentage of this (say

1/60th per year you worked) depending on the scheme rules. Because it's all so small they are offering a lump sum to pay you off rather than send you a pittance every month.

Rob Graham

It's not that I don't understand these things in principle. It's the arithmetic that gets me. It seems to imply that had I, foolishly (?), retired with this company 38 years ago, I might now (aged 113 ), be a total pauper. Actually, since the trivial pension for 2 years' service was less than 1/100 of my salary at that time, I might have been a pauper for the whole of the last 38 years. I had such faith in them, too - how naive can one get? I have never joined a company pension scheme since. My investments have increased by about a factor of 3 in the last 15 years, far less 38 years.

No, because the index that is used to uplift pensions is different to the index that is used to increase frozen contributions.

In fact, for a large part of those 38 years the index for frozen contributions could have been zero.

Surely it should be 1/40th?, 40 years service usually gave you a half pension, so each year is worth 1.25%

But no-one retires after 2 years service.

Faith in them to do what? Methinks that you didn't read what was printed on the tin!

OK, but do you have any other form of pension. Expecting 2 years of contributions to grow to something worthwhile is silly, regardless of the indexation rules applied.

Frozen pension never were a good investment, the current pensioners get first dibs on whathever is in the trough.

tim

In message , GPG writes

Hang on, as already said it was a final salary scheme and you only worked for them for two years, which means you can only have a maximum of 2/60ths of your salary. If you had worked the other 38 years at the same job with no increases other than inflation then 40/60 * your current salary would give you a realistic pension today. It all seems quite fair to me. How much did you expect for 2 years work? What did you expect? Your pension was defined at the outset so invest returns are irrelevant.

Paying you a lump sum of 11 times is the equivalent of you needing an annuity paying 9.09% to get the same initial return which is going to be hard to get. Dont accept the buy out.

A riend of mine was in this position; his pension was something like

3/4 in old money. They offered him £200 to give it up; he held out for £2000. The issue isn't the pension, but the cost of administering it.

I understood that you didn't have a choice

tim

In message , "tim (moved to sweden)" writes

Assuming the 'you' is in fact 'he', then I understood they were offering him an option.

"tim (moved to sweden)" wrote

That'd be an "80ths" scheme.

Some (older) schemes actually had accrual rates as low as 200ths, or even

300ths!

blooming 'eck

what would be the point in contributing?

tim

"tim (moved to sweden)" wrote

Those were often non-contributory ;-)

Thanks to all who have generously contributed ther opinions on this matter.

I can't say that I feel much the wiser as to what, if anything, I might be justified in doing to get the company to improvr their offer. Perhaps I did not express myself very well, given the number of people who seem to have have gained theimpression that I was some sort of fruit and nut case who imagined that he could live happily ever after on the proceeds of 2 years pension accrued 38 years ago - back to "English for Scottish People"?

Bitstring , from the wonderful person GPG said

Ask them to explain how they arrived at that number. However I'm not hopeful, back 38 years ago (and for many years thereafter) there was NO requirement for frozen/deferred final salary pensions to be increased in line with anything (they now have to go up in line with inflation, or 5% whichever is lower, iirc). Many such pensions withered away to very little .. as your seems to have done.

If you put money in, feel free to be aggrieved. If it was just your employer, who contributed then whatever you get is, I guess, better than nowt.