DB Transfer Value Offer

[qeivinc]

Hi,
I have a small deferred DB pension (from aged 65) from a previous employer, I also have a fund associated with this employment from AVCs. I have a larger fund with my current employer. My previous employer has offered a payment for the DB pension. They gave the following sample transfer figures for a male with €10,000 deferred pension. Obviously, personal circumstances such as health have an influence but these numbers look good (to me) for those under 40 but so good for an older person.

Age	Statutory Min Transfer Value	Proposed value	Excess over Statutory
30	€49,000	€113,000	+130%
40	€73,000	€140,000	+92%
50	€110,000	€172,000	+56%
60	€184,000	€202,000	+10%
65	€233,000	€219,000 or n/a	See note

 

[JoeRoberts]

Not really. The actuary has calculated a value needed that if invested today would provide an annuity of 10k at 65 based on a set of assumptions that apply equally to all members. The difference to the minimum is not really relevant as the assumptions for the minimum penalise younger people more.

 

[MrEarl]

Hello,

What's the DB pension per year, due to you, on retirement?

What transfer value have they offered you, to exit now, and forgo the future DB pension?

How long do you have, until retirement age?

Will the previous employer's DB fund continue, or is it being wound up?

In my view, those are the questions you initially need answers to.

As a rule, I would be extremely slow to surrender a DB pension, however, never say never...

 

[qeivinc]

@JoeRoberts , yes I realise that it's an actuarial calculation with discounted value and growth etc. I recall hearing that they use crazy high values (+8%) for growth. I'm not up to date on annuity rates so I guess that's one of the questions. I recall a few years ago, a rule of thumb of 350K for 10K at age 65 so using the numbers 202K for a 60 year old needs a lot of growth in 5 years. But as I said I'm not up to date on annuity rates. Plus who knows what they will be in 5 years.

@MrEarl Those were sample rates and they haven't offered me anything. I would need to apply. I agree about surrendering a DB pension but your question on whether the fund is being wound up is very pertinent.
They haven't offered DB pensions to new employees in 20 years and their presence is much smaller than before but I believe the fund is fully funded.

 

[Persia]

What happens if you decline? Do you still get the DB at 65?

 

[qeivinc]

Yes, I believe so although as MrEarl alluded to, it depends on the state of the fund when I get there.

 

[MrEarl]

Hello @qeivinc

I'd ask them for the specific numbers, in relation to your own circumstances. While I wouldn't formally apply, I'd say that I needed more information, before any decision can be made. They clearly want to get people out of the DB Fund, so I don't see why they won't share relevant information with you.

I'd also take a look at the last Trustee's Report (I would have expected you to receive one, annually). I'd be looking at:
* the size of the fund,
* the value of annual payouts,
* the number of pensioners and deferred pensioners.
* Check if the employer made payments into the fund, last year, and if so, how much.
* Compare the employer's contributions with the annual fees charged to the Fund, and then, also the payouts to pensioners.

I'd also seek out one of the Trustees and have a chat with them, to see what their view is on the future of the DB Fund.

I'm fairly sure that an Actuary has to do a professional review of the overall DB Fund every three years, and circulate their report. Do you know when the last one was done, and what it said?