# DB Scheme closing - transfer value query



## Tomredc (22 Aug 2013)

Hi - the company I work for is closing the DB pension scheme pleading inability to maintain. They have offered the remaining members a transfer value to the DC scheme. The issue is that I believe that the transfer value is too low and as such would not be able to deliver the benefits that had been earned under the existing scheme - i.e. I believe the transfer value offered is only 50% of what it would cost to cover the benefits earned based of the calculations in my last benefit statement. My understanding is that there is a rule of thumb that states that for every €1000 of pension, requires a fund of €20,000.

i.e. if you have a pension of €10,000 this requires a fund of €200,000

Any advice on what are my options to challenge the company and this evaluation ?


----------



## Jim2007 (22 Aug 2013)

I have no experience of this but here is a page that might at least get you started:

     [broken link removed]

     [broken link removed]

And yes over here (Switzerland) we use 5% - 6% for quick calculations as to how much savings is needed to generate a certain annual pension.


----------



## Conan (22 Aug 2013)

If the scheme is being wound up then all members should get a transfer value based on their accrued benefits. But if the scheme is underfunded then the actual transfer value will not represent the full value of your accrued benefits. So for example, if the scheme is 50% funded then your transfer value will only be 50% of that required to fund your accrued benefits.
Ultimately if the scheme is being wound up then all the fund will be distributed. But if the scheme is underfunded then all members will get a reduced transfer value.
Check your scheme's funding level. The Trustees normally disclose this as part of the annual accounts. If not, then ask.


----------



## APG (27 Aug 2013)

Even if the scheme was fully funded, and your got a 'full' or 100% transfer value, the transfer value would be highly unlikely to replace the DB benefits as the basis for working out the TV (prescribed by the Society of Actuaries) uses a very high 7% pa discount rate for most of the pre retirement period (scaled down over the last 10 years prior to retirement). Its a ridiculously high discount rate in current circumstances; a recent Society of Actuaries proposal to reduce the rate slightly was vetoed by the Minister for Social Protection? Why?

The transfer value is then further reduced to reflect underfunding in the scheme currently.

So the transfer value is not 'too low'; it is what is left in the scheme for you. Its reality. The problem is that you were promised benefits for which there was never enough money in the pot to provide. Your employer, in good faith, overpromised and now the reality is laid bare with the transfer value.


----------



## Ember (27 Aug 2013)

At last..... I have an explanation for the vagueness of the annual pension statement. Every year I received a muli-page pension statement with lots of information on the pension that I will receive when I am 65, but no information on how the scheme was performing.
I believe that an estimated transfer value should be included in the annual report every year and then everyone would be aware of their current pension position.


----------



## MrEarl (28 Aug 2013)

Ember said:


> ....I believe that an estimated transfer value should be included in the annual report every year ....



Very good idea, but I'd have thought they could do a lot better than "estimate" ... why not give an exact figure, based on a certain date, value as of that date & defined costs ?


----------



## Attica (8 Sep 2013)

You know, DB schemes are collapsing all over the place and suddenly it is not the fault of the investment managers who took their eye off the ball, or the Wall Street "geniuses" who invented the crazy schemes which allowed private bankers to keep the investment ball rolling and rolling when there was almost no underlying asset; schemes which led to the banking collapse. No, suddenly it is the fault of workers who joined a company many years ago, signed up to a contract which included a MODEST pension, not one worth millions, and now their fund is worth so little that pension is halved. But it is their fault for believing they deserve that pension after 20-30-40 years of faithful service???
Yes,it is reality that the funds will not provide the promised pension. But the DC schemes everyone has to go into now - they leave the worker open to total scamming by the employer. 2018 Oh gosh, you're retiring now - what a pity the DC scheme has made a loss over the last year or so, you're going to get 1000 a year - if only you could hang on for another couple of years, it might improve? I can see it now...


----------

