# Calculating Preserved Pension/Transfer Value



## Jumbo7 (25 Nov 2006)

I have been contributing to a company pension scheme for approx 8.25 years. The company was sold recently and the DB scheme is being wound up and a new DC scheme is starting. I have recieved a statement from the pension managers outlining my preserved benefit and transfer value and I think there is a mistake!

According to a Pensions Board booklet the formula is as follows
A x B/C
A = average of the last 3 years pensionable salary
B = Length of service
C = No of years remaining if scheme continued
So
A = 45,000+45,000+48,000/3 = 46,000 less 1.5 times state pension = 31,000.
B = 8.25
C= 30

Preserved Benefit = €8,525
However the statement says €4,200.

How did they arrive at this figure?
How did they work out the transfer value which is about €16K?

Incidently, Irish Life will be the DC pension fund managers and in their AIM booklet page 15 they state that "Last year we paid out over €100 million to over 25,000 pensioners. You can rest assured your money is in safe hands" - Do the maths! I can't wait for my retirement pension of €76.92 per week! (€4,000/year)


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## Guest126 (25 Nov 2006)

The preserved benefit formula is A*B/C.

You correctly defined A, its your final pensionable salary.

However, B = your service in the pension scheme since 1991.

C = your total service in the pension scheme up to normal retirement date (i.e. ignores the fact that you left early).

B may be less than the 8.25 you gave...because you may have joined the company a few years before you joined pension scheme?

C may be bigger than 30 when you base it on total period from date you joined the scheme to your normal retirement date.


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## Jumbo7 (26 Nov 2006)

Thanks CapitalCCC,

It looks like I have used the correct values for A and B.  I have worked out that C would need to equal 60 to arrive at the preserved pension I have been quoted. The value i gave in my question was 30 and this is the number of years service i have to 65. I am in the pension 8 years so even dividing by 38 would not lead to the quoted preserved pension figure. 

Are there variations to the formula given by the Pensions Board or are there other factors involved in calculating Preserved benefit?

Regards,
Jumbo7


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## Guest126 (27 Nov 2006)

Hi Jumbo - the statutory minimum preserved pension is the A*B/C.

Please note that A is your long-service benefit...it is the pension that WOULD have been payable at retirement if you had stayed in scheme to normal retirement date...so for you it is probably 38.25/60 * Final PEnsionable Salary, it is not just "Final Pensionable Salary"...taking this into account based on numbers you have given I think this will make the calculation given to you correct?


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## Jumbo7 (28 Nov 2006)

Hi Capital,
Have three choices on what to do with the Transfer value, a bond, a PRSA, the DC pension. 
I was considering a bond, any suggestions? 
Is it true that it can be withdrawn at 50?
If I put it into the new DC pension would it have much of a bearing on the final value?

regards,
Jumbo


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## Guest126 (29 Nov 2006)

The rules governing the bond would be identical to those of the DB scheme that the funds came out of...if early retirement is possible under the DB scheme then it should be possible under the bond (probably from age 50 in both cases).

Note that the PRSA and bond are both invested on a "DC" basis in that they give no guarantee as to the pension you can get with it at retirement.

With the PRSA you can go down the ARF route at retirement - not so with the bond or by moving to DC scheme.

I would probably be looking at the PRSA OR move to company DC scheme if I were you.

The transfer value of €16k into your DC fund would of course increase its value, whether you would call the increase "much of a bearing" or not, I guess, depends on whether you think €16k is a good chunk of money or not!


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## Jumbo7 (29 Nov 2006)

I do value the 16K believe me.What I meant was that if i put it in a prb it would mean that i would be starting the DC from scratch and i would probably loose the benefit of the bond by having to make high payments into the pension. 

Thanks for the advice, I was thinking along the same lines.

Regards,
Jumbo7


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## Guest126 (30 Nov 2006)

But making the payments to the pension (and not contributing to the PRB) would have no impact on the value of the PRB.

A PRB is only designed to take transfers anyway...they are not open to further contributions besides the transfer value.

Anyway, like we agreed, I think your best bet is company DC plan OR PRSA.

Best of luck!


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