Friday, 24th February 2017
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John Smiles

I’ve got my final salary

pension transfer value,

what do I do now?

So, you have received your transfer value quote and don’t know what to do next - then consider getting independent pension advice as there are a number of issues you need to think about.

It’s quite possible that DB pension transfer values are peaking, particularly if bond yields continue to rise. Companies are now ‘willing buyers’ of your pension entitlement, as they want to eliminate this liability before it fully crystallises on retirement. Any delay in moving the pension fund could result in a smaller transfer value.

If your sponsoring employer is a big, safe, blue chip company; you have a nice pension to look forward to with no hassle in terms of re-investing a transfer value, you might consider remaining in the scheme. However, today companies are under pressure to close down DB schemes and certainly to reduce pension benefits.

Under Irish pension legislation, retired members’ benefits are rock-solid, so any pain of benefits cuts falls on active and deferred members. Your nice pension entitlement could be under attack and reduced. I know of schemes where the retirement age has been moved up from 65 to 68, suddenly three years’ worth of your pension has disappeared (and the lump sum deferred by 3 years), and the members had no say in the matter.

In 2013, Independent Newspapers negotiated a 40% reduction in pension benefits. Now the company is, according to the Irish Times, in negotiations again with the trustees for a further cut in benefits of around 30%. The Irish Times gave an example of a deferred pensioner with less than one year to go to retirement age whose deferred pension of €40,000 a year was cut to €24,400 in 2013, and could now be cut again to €16,800.

The Independent Newspapers pension fund is perhaps an extreme example, but the trend is clearly against you, if you are an active or deferred member of a DB pension scheme. You should seriously consider getting a transfer value quote and contacting me if you need independent advice.

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