Changing job- do I move DB pension

[jackdandb]

I have a defined benifit pension with current employer (17yrs) with 50% for spouse in event of death. On current income of 55k. Moving to new employer whom also offering DB pension on higher income of 70k. I am 37 with NRA of 63.
Should I look at leaving my current pension where it is or should I move it to new employer.
Views welcome.

 

[South]

Re: Changing job- do I move pension

Will your new employer accept it to the DB Plan?

Will they allow you to buy years?

Or will it have to be on a DC basis?

 

[jackdandb]

Re: Changing job- do I move pension

They will allow me into their DB scheme.
I am unsure if I can buy yeras. If so, how do I calculate how many?

 

[South]

Re: Changing job- do I move pension

Their scheme actuary will tell you how many.

If it's satisfactory (compared to the years you had in old job and taking into account salary difference) then it may make sense to go for it.

 

[jackdandb]

Re: Changing job- do I move pension

Thanks South

 

[South]

Re: Changing job- do I move pension

No worry jack good luck and might be good idea to establish health of the finances of your new DB scheme before going for the transfer.

 

[oysterman]

Re: Changing job- do I move pension

Given the woes of DB schemes at present, is it worth considering leaving the membership of the old company's scheme untouched in order to spread the risk? i.e. two DB schemes are less likely to go belly-up than one.

Of course if the OP were allowed to buy a similar number of years to those worked in the previous firm it would be tempting to transfer, given the higher wage level enjoyed in the new firm.

But I know I wouldn't mind having a few DB schemes waiting for me in retirement. It might help me sleep better.

 

[pinkyBear]

Re: Changing job- do I move pension

A friend of mine was in the same situation as you, he was advised by a financial guy not to leave the DB scheme as the value that would be estimated by the underwriters would be calculated possibly under the real value. He was told to leave his old pension where it is...

 

[South]

Re: Changing job- do I move pension

Given the woes of DB schemes at present, is it worth considering leaving the membership of the old company's scheme untouched in order to spread the risk? i.e. two DB schemes are less likely to go belly-up than one.

Of course if the OP were allowed to buy a similar number of years to those worked in the previous firm it would be tempting to transfer, given the higher wage level enjoyed in the new firm.

If a scheme is wound-up the OP would receive his entitlement in the form of a lump-sum payment anyway, except in exceptional circumstances!

If the OP is allowed to buy added years it will be done in such a way that the years will be based on the higher salary so (other things being equal) it would be a lower number of years.

 

[oysterman]

Re: Changing job- do I move pension

If a scheme is wound-up the OP would receive his entitlement in the form of a lump-sum payment anyway, except in exceptional circumstances!

If the OP is allowed to buy added years it will be done in such a way that the years will be based on the higher salary so (other things being equal) it would be a lower number of years.

My point is that you don't usually (ever?) gain an advantage from transferring so, even if the additional security in diversity is small, why not just hang on to the old scheme?

 

[South]

Re: Changing job- do I move pension

My point is that you don't usually (ever?) gain an advantage from transferring so, even if the additional security in diversity is small, why not just hang on to the old scheme?

Can gain hugely if there is good salary growth in the new pension scheme, can make a massive difference because benefit links to new salary!

 

[oysterman]

Re: Changing job- do I move pension

Can gain hugely if there is good salary growth in the new pension scheme, can make a massive difference because benefit links to new salary!

I assumed that the potential for salary growth would always be priced into the amount of service purchased on transfer. If not, it's no wonder so many DB schemes are in trouble!

Having said that, if the OP turned out to be an unprecedentedly stellar performer in the new job, then it would be a good deision to transfer.

 

[Homer]

Hi Jack

Other reasons why you might want to take a transfer instead of leaving the money where it is are as follows:

1. It will give you immediate vesting in your new employer's pension scheme as the 17 years will count as 'qualifying service'.

2. There is the convenience of having all your pension in one place instead of having to go chasing several different bits of entitlement when you retire.

Having said this, 17 years is a fairly significant period of time and the financial implications of accepting a transfer may well outweigh the above factors.

The first thing you need to do is to establish the basis on which the transfer value will be accepted in your new employer's pension scheme. It's likely this will be on a defined contribution basis and, if so, you should ask the scheme's advisors to cacluate the rate of return you would need to earn on the transfer value in order to replace the deferred pension you will be giving up. You can then make an informed decision (guess?) as to whether or not you should accept the transfer value.

Regards
Homer

 

[South]

Re: Changing job- do I move pension

I assumed that the potential for salary growth would always be priced into the amount of service purchased on transfer. If not, it's no wonder so many DB schemes are in trouble!

Having said that, if the OP turned out to be an unprecedentedly stellar performer in the new job, then it would be a good deision to transfer.

An estimated salary growth would be used.

If the OP's salary is likely to increase by more than the assumption, then the added years would be relatively better value for the OP.

 

[Snoopy23]

You should also check that your old DB scheme is 100% funded. If not, then they may be unwilling to transfer the full amount of your pension. For example,if the scheme is 90% funded and your transfer value is worth €200,000, only €180,000 would actually be transfered to your new scheme. In this case, it would obviously be a bad option to transfer at this time. Maybe wait untill the scheme is fully funded. The scheme actuary/administrator should be able to tell you the funding position of the scheme.

 

[Actuary]

Re: Changing job- do I move pension

A friend of mine was in the same situation as you, he was advised by a financial guy not to leave the DB scheme as the value that would be estimated by the underwriters would be calculated possibly under the real value. He was told to leave his old pension where it is...

Yes as a lot of the assumptions used (by the new scheme) tend to be prudent (to allow for the risk they are taking on, for example low investment returns). So you 'may' not get as good value by transferring. You should be able to get a quote for the number of added years your old pension will buy in the new scheme.