Defined Benefit Pension - Advice Please

Tricky1979

Hi - I have a Defined Benefit Pension. I'm in my early thirties and have the pension 4/5 years. I was previously part of a Contribution Pension Scheme and I transfered this into my Defined Benefit Pension when I switched jobs (I can't recall the exact details of the transfer).

My question is, if I moved to a company now which operates a Defined Contribution Pension, what happens to my Defined Benefit Pension?

Thanks
T.

3DataModem

You can leave it where it is.... You will get a statement of benefits on leaving, it will normally tell you how much pension p.a. you will get from retirement age, usually increased by inflation between now and then.

You can transfer this pension as a lump sum into a new pension ... However this is probably a terrible idea as defined benefit pensions are rare and are not subject to vagaries of stock Market (from your point of view anyway).

Tricky1979

Thanks for the advice.

Are there any other factors to consider?

coylemj

3DataModem wrote: »

You can leave it where it is.... You will get a statement of benefits on leaving, it will normally tell you how much pension p.a. you will get from retirement age, usually increased by inflation between now and then.

You can transfer this pension as a lump sum into a new pension ... However this is probably a terrible idea as defined benefit pensions are rare and are not subject to vagaries of stock Market (from your point of view anyway).

+1 You'd need to be completely bonkers to convert a DB entitlement to a lump sum and transfer it to a DC scheme so leave it where it is if your current employer will allow this.

However I find it hard to believe that you arrived in your current job with a lump sum and effectively purchased years of service in a DB scheme. Aside from people moving within branches of the public service, it is virtually unknown for people in the private sector to 'buy' service in a DB scheme which is what you're saying you did, especially if this only happened a few years ago.

More likely your current employer allowed you to bring the money in as an AVC, not as notional service.

Under the terms of your existing employer's DB scheme, you may be forced out of the DB scheme if you leave before you have clocked up a certain number of years service, check the copy of the terms of employment you probably got when you started in your current job.

The way things are going, employers in the private sector will try to reduce their future pension liabilities by reducing the number of people in a DB scheme. In the present day that amounts to (1) closing the scheme to new entrants and putting new people on a DC scheme and (2) booting out anyone (from the DB scheme) who leaves before they have clocked up a minimum amount of service and giving them a lump sum to take to their new (almost certainly DC) scheme.

If you did leave the present job you would be definitely better off leaving your pension where it is as a preserved benefit if this option is open to you.

3DataModem

coylemj wrote: »

You'd need to be completely bonkers to convert a DB entitlement to a lump sum and transfer it to a DC scheme.

99.9% of the time this is totally correct.

coylemj wrote: »

However I find it hard to believe that you arrived in your current job with a lump sum and effectively purchased years of service in a DB scheme.

In the past this was somewhat common. When you moved jobs you could "buy back years" in a DB scheme. Very very rare now, but definitely happened in the public service and elsewhere.

coylemj wrote: »

In the present day that amounts to (1) closing the scheme to new entrants and putting new people on a DC scheme and (2) booting out anyone (from the DB scheme) who leaves before they have clocked up a minimum amount of service and giving them a lump sum to take to their new (almost certainly DC) scheme.

Exactly what is happening. As a holder of two smallish DB pensions (8 years service each) I HOPE that they do this to protect my entitlement!

coylemj wrote: »

If you did leave the present job you would be definitely better off leaving your pension where it is as a preserved benefit.

As above, this is true 99.99% of the time. Leave it where it is. Some brokers will advise otherwise (to get commission or because they think that you are better off playing the stock market). Ignore them.

coffee_cake

coylemj wrote: »

However I find it hard to believe that you arrived in your current job with a lump sum and effectively purchased years of service in a DB scheme. Aside from people moving within branches of the public service, it is virtually unknown for people in the private sector to 'buy' service in a DB scheme which is what you're saying you did, especially if this only happened a few years ago.

It's possible - not unknown. It's also possible it's being held on a DC or AVC basis.

In any case I would echo the advice to leave your pension in DB if possible.

Tricky1979

Thanks to you all.

I will confirm the pt. whether I bought years in the DB Scheme and investigate re the they can boot me out if I haven't clocked up a required amount of yrs.

I'll come back.... thks again.