# To pull out of DB pension?



## eoghanlk (1 Nov 2009)

A defined benefit pension is supposed to be a big plus when starting a new job. At what point does it actually become a drawback? I have been given the option of withdrawing from a db pension at work. The fund is less than 60% funded. Employee contributions are 12% of pensionable salary. The employer is making a large contribution also. When liabilities for existing pensioners (who have first call on funds) are accounted for the remainder is only 43% funded. As I have little invested in this scheme am I mad to start throwing money in to make up the shortfall? Would I be better off with a prsa despite the charges, where at least I have some control? I am 34 and have a good sized AVC fund also.

thanks for opinions.


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## LDFerguson (2 Nov 2009)

If you decide to pull out, will your employer pay anything into your alternative plan, e.g. PRSA?


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## eoghanlk (2 Nov 2009)

No my employer will not contribute to a private pension.
I have a number of fears regarding the company pension. If I am made redundant or decide to leave then the transfer value of my pension will be based on my contributions and the figure which the actuary decides the overall fund is funded by eg. 40 - 50%, or so I'm told. This is despite my contributions being increased to try to make up for underfunding and bad investment decisions in the past. A similar situation would arise if the fund was wound up or the company closed. Could I end up putting a lot of money in over a lot of years only to end up in a Waterford Wedgewood scenario? Will I end up funding older employees pensions only to find the pot empty when my turn comes? The Trustees have already made a number of changes to reduce retirement options. It is hard to sacrifice the company's contributions but at least I would have control of my own retirement to some degree if I did. Am I mad?


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## dewdrop (28 Sep 2010)

I would like to reactivate this thread as i feel the questions raised are relevant to quite a few people who work with an elderly workforce in a DB scheme and are wondering whether their future contributions would be better off in a Defined contribution pension scheme. Hope my action in raising this matter is in order.


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## fobs (28 Sep 2010)

We have been given the following options for out pension :
1. Go DC and company will match contributions up to 10%
2. Stay DB but increase contributions from 7% to 10%.
3. Go DB CARE - Carerr Average REvalued Earnings.

Not sure which to go for. Am almost 40 and am in the pension for 15 years (since 25).


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## Deas (29 Sep 2010)

Personally I'd go with option 2 which will geive you the best return once the pension remains solvent - which I expect has been factored in to allow them to offer it.  You take all the risk in option 1 and if your salary is much higher at retirement than when you started you will get a lot less than 2/3 pension that you will get with option 2.


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## THENORTHSIDE (8 Oct 2010)

fobs said:


> We have been given the following options for out pension :
> 1. Go DC and company will match contributions up to 10%
> 2. Stay DB but increase contributions from 7% to 10%.
> 3. Go DB CARE - Carerr Average REvalued Earnings.
> ...


 

Looking at your options I think we work for the same company. Its a mixed bag here in terms of what people are doing but the feeling of the guys who work in my department is to take the DB final salary for the moment and when the dust settles get further advice. We believe that u can move from DB FS to DB CARE but not the other way. we are waiting to see what the budget will bring as well before committing long term


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## fobs (11 Oct 2010)

THENORTHSIDE said:


> Looking at your options I think we work for the same company. Its a mixed bag here in terms of what people are doing but the feeling of the guys who work in my department is to take the DB final salary for the moment and when the dust settles get further advice. We believe that u can move from DB FS to DB CARE but not the other way. we are waiting to see what the budget will bring as well before committing long term


 
We must do! Have decided to do what you are thinking as well for the same reasons. At least we can opt out of the DB final salary but can never opt back in to it. It is 3% extra but will do it for the time being.


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## DerKaiser (11 Oct 2010)

fobs said:


> We must do! Have decided to do what you are thinking as well for the same reasons. At least we can opt out of the DB final salary but can never opt back in to it. It is 3% extra but will do it for the time being.


 
I'd say option 2 if the employer demonstrates some kind of realistic effort to get the scheme back to 100% funding.

The problem with the CARE structure is that you would be screwed in terms of accrued benefits if there was ever a period of high inflation before you retired, even DC would be better in this scenario (under DC chances are that your investments would increase with inflation).

If inflation remained reasonably low for the forseeable future CARE would be grand, but there's always the inflation risk in the background.


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