Anthony – Retail Chain
“When I asked my accountant what I should do about my pension he saw the complexity of the situation and suggested I speak to Nicola who was an expert in this field. ”
Anthony, 57, was a member of major department store’s final salary scheme which had a deficit of £68 million. He was aware that other board level directors had already transferred out of the scheme. It was likely the pension administrators would apply to the Pension Protection Fund (PPF) but to date there had only been discussions.
If the pension went to PPF he would receive up to 90% of his deferred pension benefit of £21,881. However, if the company went in to liquidation it was likely the scheme would go into wind up and he may end up with significantly less.
Anthony had been offered a much reduced transfer value and needed to know whether to take the offer or stay with the scheme. His primary goal was to preserve the pension benefits accrued with his former employer. He also wanted to take a ‘phased’ retirement from work commencing when he was 60.
Anthony’s accountant recommended he obtain expert advice from final salary pension specialist, Nicola Downs.
What we did
We showed Anthony 5 scenarios in plain English to help him make a confident decision.
Scenario 1: Stay in the pension scheme to age 65 – the scheme pension could be worth £21,800 per annum.
Scenario 2: Scheme accepted by PPF – the pension would be worth 90% of £21,881 = £19,692 pa.
Scenario 3: Take the £153,586 transfer value on offer. This was a poor ‘value’ which meant that on a realistic/cautious investment approach, c. £15,000 pa could be expected at 65.
Scenario 4: Wait for the employer’s legal department to resolve the financial issues (highly unlikely in his lifetime and the company’s lifetime). Result would take him back to Scenario 2.
Scenario 5. Sit and wait for new transfer value. This could be significantly less than that currently on offer. If the scheme went to PPF or wind up then the transfer value option would be removed.
- Anthony stopped worrying about whether the pension he expected was going to be there when he retired.
- He now had a plan in place to start a ‘phased’ retirement when he was 60.
Note: The events and figures quoted in this case study are from a real Trentham Invest client; however, the names have been changed to protect client confidentiality.