Consolidation of pension schemes

Disadvantage: the transfer value of a scheme is usually less than the actual value of your investment.

Advantage: once you are no longer an employee, the value of your investment may be frozen (check this as it's not always the case).

It may be a case that you have to decide with which option you lose least. You should find out the transfer value, actual value and the situation if you don't transfer the old scheme before you decide what to do.

"Alex Butcher" wrote

The main consideration will be the type of future growth : by investment return in the GPP and by salary progression in the FS scheme.

Do you want final pension to be linked to future salary, or to the "value of the pot" now plus any future investment returns?

The "just over one year of service" will have been calculated assuming a certain salary progresssion into the future; are you likely to follow the "norm", or (eg) might you have good career prospects for substantial future salary growth? Also, do you think you'll stay in the FS scheme for a while, or might you leave the company in a few year's time?

For instance, if your salary is expected to double before retirement, but actually quadruples, then the transfer to FS scheme could almost double your final pension.

Conversely, if you leave the employer in a year's time with little salary rise by then, the FS scheme pension would be linked to a much lower than expected (when the "one year service" was calculated) salary.

Disadvatage: all your eggs would be in one basket.

Robert

A lot depends on who the with-profits pension is with. For many providers you can expect years of nil bonuses. You might consider this as part of your deliberations as to whether to swap. What pension would you get at 60 with the present fund (assuming no added bonuses) - you'll need annuity rates for a 60 year old from Teletext - compared to a possible pension from your employer instead.

Rob Graham

Also, consider the health of the final salary scheme. Public sector final salary schemes (e.g., local government, teachers) are probably about as safe as any scheme can get while other final salary schemes depend on the health of the company. I'd also consider it a good sign if the directors of the company are in the same scheme as the employees.

Thom

"Thom" wrote

Not necessarily. A common situation, which can reduce the solvency of the scheme greatly, is where a director is given (/gives himself!) a huge payrise just before retirement, boosting his pension substantially ...

Good point - it'll depend on the size of the company and the number of directors. Might such an action be illegal under some circumstances?

Thom