Final salary pension scheme
As a member of your final salary scheme or career average scheme, you will want to ensure you are kept up to date with any relevant information that affects your entitlements and to keep an eye on your Final Salary Pension scheme’s funding status (See PPF notes below).
If you move home or change your correspondence address for any reason do remember to update the scheme administrators with your new contact details. Occasionally, new trustees may be appointed to your defined benefit pension scheme, or their correspondence details may change if they move office.
Many defined benefit pension schemes provide public websites where you can view or download member handbooks that describe the general parameters and benefits your scheme provides. These are generally very useful and help you navigate the often-complex arrangements that Final Salary Pension Schemes are.
Most often, defined benefit pension schemes are run-on behalf of the company you worked for by appointed professional trustees/administrators and not the company themselves in which case, you should always correspond with the administrators and not the original company you worked for.
There are basic online pension calculators but, rather than rely on an online pension calculator, we suggest simply getting in touch with your scheme administrators and ask for everything you need to know. Whether that’s a full-blown Cash Equivalent Transfer Value or just an annual statement you are missing.
A statement of your defined benefit pension scheme benefits will show your pensionable earnings and the amount of your guaranteed income entitlement which is your income for life starting at the pension age set by your scheme. This may differ from your chosen retirement age because you have made other plans since leaving their scheme. The income for life will be index-linked to keep up with inflation.
Your benefits statement will not show you ‘your pension pot’ because it is not a personal pension. This is where the Cash Equivalent Transfer Value (CETV) comes in if you ask the scheme to produce one assuming you belong to a private sector scheme as public sector scheme benefits cannot be transferred.
Some defined benefit pension schemes provide sophisticated web-based portals where you can log in to request a CETV. This level of automation cuts down administration costs and helps speed up the time it takes to analyse whether a transfer would be suitable.
If you had already passed your normal pension age when your employer became insolvent, or if you had retired through ill-health, you would receive a pension equal to the full amount of your scheme pension on the insolvency date. This also applies if you’re receiving pension benefits you had inherited from someone who died before their employer became insolvent.
If you had not reached your scheme’s normal pension age (NRA) when your employer became insolvent, you will see a reduction in your payments to 90 per cent of your scheme pension on the insolvency date.
To check if your pension scheme is currently being looked after by the Pension Protection Fund (PPF) you can search for your scheme name on the PPF website https://www.ppf.co.uk/schemes/index
When seeking personal financial advice about pensions, always check with the Financial Conduct Authority (FCA) website to see whether the financial adviser you are speaking to is on the FCA register. In addition, the firm they represent has the proper permissions to give pensions transfer advice.
Only regulated financial advisers can give insured pension advice so, this does not normally include accountants or solicitors unless they have the specific FCA approved permissions. If in doubt, refer to the government-funded service called Pension Wise who will be able to give you guidance on your options.
If you need help working out how much retirement income you will need then please contact us for an introductory discussion to see if we can help you. We will look at all your retirement savings provisions including state pensions, workplace pensions, personal pensions, and any other pension vehicles you may have to help you get a useful consolidated view.