# Move deferred pension benefit into a PRB?



## Warren (1 Oct 2010)

Hi,

I have a deferred pension benefit entitlement from the last company I worked for (i.e. I didnt transfer the pension plan value into the pension plan of my new company) and now the pension trustees have written to me with some options as to what I can do with the persion benefit. It can be 
- transfered to my new employer
- transfered to a Personal Retirement Bond (PRB)
- or left as a deferred benefit as it is right now

The trustees are recommending that I transfer the pension value to a PRB rather than keeping it in the existing pension plan and they have arranged that there are no charges for the move and that 100.5% of the transfer value will be put in the PRB.

I like the fund options that are available in the existing plan so Im going to continue to leave as a deferred benefit but Im trying to understand the trustees motivations for recommending that I move to a PRB. Is it just to remove the administrative overhead of managing the pension benefit of former employees or is there more to it than that?

Appreciate any thoughts on this.

Warren


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## JoeRoberts (2 Oct 2010)

A lot depends on the funding status of the plan.

Generally you will lose by taking a transfer as the risk of achieving the neceassy fund required to meet the promised pension that you would get as a deferred pensioner will fall on you.
If you stay as a deferred pensioner then the risk falls on the company. Hence their eagarness to get you to take a transfer.  I'm not 100% sure of current figures but at the moment they probably offer you a transfer value that needs to grow at approx 7% pa to achieve what you would get if you stayed as a deferred. And this is based on existing assumptions such as inflation and mortality.

However , the advantage of taking a transfer is you eliminate the risk of the fund not being able to pay the promised pension.

You need more info about the fund and its funding position and the real likelihood of the company abandoning the fund without paying it up. Your age is also an important consideration as to how close you are to retirement.


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## Warren (2 Oct 2010)

JoeRoberts said:


> A lot depends on the funding status of the plan.
> 
> Generally you will lose by taking a transfer as the risk of achieving the neceassy fund required to meet the promised pension that you would get as a deferred pensioner will fall on you.
> If you stay as a deferred pensioner then the risk falls on the company. Hence their eagarness to get you to take a transfer.  I'm not 100% sure of current figures but at the moment they probably offer you a transfer value that needs to grow at approx 7% pa to achieve what you would get if you stayed as a deferred. And this is based on existing assumptions such as inflation and mortality.
> ...




Joe I didnt mention that the pension is a defined contribution pension so all risk is on me and as far as I understand there shouldnt be funding issues as the company paid its controbution for me each month I was employed and that is now invested in my chosen funds. Am I missing something?


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## JoeRoberts (2 Oct 2010)

Sorry, assumed it was DB.
They want to remove the admin burden. The company are also probably paying an annual contract charge for each policy.


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## Austin81 (30 Sep 2012)

*Reasons for the PRB*

Hi 

The most likely reasons for their insistence on moving to a PRB is that administration costs will be kept low, however to be honest, you could stay a deferred member for 10 years without your deferred benefit incurring the same cost as it would to move you to a PRB.

Perhaps the company you work for had a lot of movement in terms of employees coming and going, the trouble is that people don't update addresses when the move etc. and drift out of contact from those running the pension scheme. In such a case, the cost of trying to locate all these deferred members at a later date could be very high. 
That would seem to be the case when they are giving you 100.5% to move!


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