Final Salary Pension Advice Please

[countrykid]

I am lucky to be part of a final salary pension scheme. It allows retirement at 55, which I have just turned, although I plan to retire at 60. There are concerns that the company's future is uncertain and I might become redundant. I have a simple question but the answer I guess might be less simple: If the company folds and I am made redundant can I then still claim my pension based on what was my final salary? If I can't then perhaps I might be better off retiring now before it folds, although I would much rather be able to retire at 60 and have a more worthwhile monthly amount. Thanks

[webbo3]

you can transfer it into a personal pension but only with the permission of the trustees if they run the scheme, or you can wait until April 6th when the pension rules change, then you can take the whole lot as a lump sum, 25% will be tax free and you will be taxed on the rest at the standard rate.

you can take a lump sum and buy an annuity with the rest, lots of options if you are worried.

I work in the industry and am dreading april 6th, the phones will be ringing off the hook.



Dave.

[factor-fiction]

I don't really understand the question. The final salary will be the final salary on leaving as defined by the scheme rules-whether it be 55 ,60 or in between. In real terms the figures for 55 or 60 would be pretty similar unless the company gives annual pay rises which are well above or below RPI.

What's more important is the number of years' service . Your pension will be higher if you have an extra 5 years service. It's unlikely the company will pay the extra money into your scheme on redundancy to effectively make it as if you had worked until 60, but it's worth asking.

If you take the pension early there will be actuarial reductions to reflect the fact that you will draw it for longer. Taking it 5 years early would mean a reduction of 20-25% typically

[Hymie]

If the worst does happen and the company goes belly-up, taking the pension money with it – the good news is that in such circumstances the government will step in and pay you 90% of what you otherwise would have received, had your pension paid out normally.

The only down side – and it is a significant down side, is that the pension paid by the government (at 90%) is fixed at the amount first paid, and not indexed linked with inflation.

The rules of pension schemes are such that those who have already retired get first claim on any pension money remaining – if there is not sufficient to pay out those yet to retire, then they are protected (as detailed above).

Therefore it might be best to sit tight, hope the company does not fold, even if you are made redundant. If you take your pension now, there may be a significant reduction for taking it early – which might be worse than the 90% you would get from the government.

You can always ask your pension service what they would pay you at age 55 – but normally such final salary schemes will not allow you to draw your pension while you are still employed by the company.

[countrykid]

Thank you to you all. I think my job is safe for as long as the company remains in business. What I was trying to ask is that if the company closes, would I get some form of redundancy payment (from the government if the company folds) and would I still get the full pension. From the three answers it seems at worst I would get 90% of the pension (via Government but not index linked). I currently have 17 years service. I plan to take 25% as a lump sum when I do retire which I realise reduces the monthly pension.

I think I'll make contact with the person who oversees the pension to seek clarification. Somehow I bet I'm not the only person asking the same thing. Thanks again

[gness]

If the scheme is in any bother, then remember that current pensioners are always at the front of the queue for whatever benefits are still payable - future pensioners and deferred pensioners may be reliant on government guarantees and therefore less well provided for.

It can be very advantageous to retire 'just in time' before a company and/or its pension scheme folds.

[gness]

[ Mr G was in this sort of position at one time ]

[SirOracle]

You haven't said whether the scheme is funded by the company you are employed by,or whether it is underwritten by an Assurance company.

Factor Fiction has pointed out that by retiring early the difference in your pension is very considerable,plus the amount will be reduced as the no.of years service are being reduced.

You cannot get advice on a site such as this.....you need a good fully qualified financial adviser. Not an easy person to find though.

[bob561941]

I worked for a british insurance company which got taken over by an Aussie firm whose agenda was to sack as many as they could and avoid paying redundancy they made my life hell hoping I would resign but I got my union on the case and they finally agreed to make me redundant at age 54 I had the option t and I reckon I dido take my pension at 55 which I did although i got another job in those days interest rates were higher than today and I reckon I made the right decision.