Pension Advice- Fund in Deficit
Posted: December 29th, 2017, 6:45 pm
Assistance appreciated on decision of taking one of my DB pensions in a fund which is in deficit. Do I sit tight or transfer?
First some background. I’ve just turned 65, married, no mortgage with 3 children in their twenties. I have crystallised 4 DB schemes to date. With the state pension I shall get £35k before tax, with the outstanding DB pension raising this to £39k. This is more than ample as I have a healthy capital to fall back on. LTA is not an issue as this brings to 65% LTA. As I see it I have the following options:
- Annuity of £4,100 (LTA 8.2%)
- Reduced annuity of £2,478 plus cash £16,525 (LTA 6.6%)
- Transfer of £57,920 to another provider
Under normal circumstances I would go for 1st or 2nd option. However, the pension scheme is in deficit and I’m worried it might be wound up.
Re: the third option of transfer; the ratio of transfer value to annuity is 14.1 which I understand is low, and confirms the needs of the company to prevent excessive withdrawal of funds.
The company is mid-size UK company owned by an Abu Dhabi parent company. Annual turnover £60mm with a loss before taxation last year of £9mm. As business is linked to oil price I can’t see things improving short term. Last year the pension fund had £25mm assets with £33mm liabilities with £8mm deficit so the funding level was 75%. Company appears to be supportive by recent contributions and it intends to contribute £360k until 2020 and £1mm per year until 2026.
Last year’s annual report states the holding company has confirmed its financial support for another 18 months, but nothing mentioned for after that. It states they might not have enough funds to pay for insurance should the scheme be wound up. I understand that the Pension Protection Fund might be take over the plan, which would give me a good guarantee. I’m unsure though what requirements need to be met for the PPF to do this.
So, do I sit tight and crystallise the funds, hoping that the pension fund stays solvent or take a low transfer value elsewhere with lower risk.
I understand that as the fund value is above £30k I would need to discuss with a financial advisor, though obviously any advice from yourselves would be very much appreciated.
First some background. I’ve just turned 65, married, no mortgage with 3 children in their twenties. I have crystallised 4 DB schemes to date. With the state pension I shall get £35k before tax, with the outstanding DB pension raising this to £39k. This is more than ample as I have a healthy capital to fall back on. LTA is not an issue as this brings to 65% LTA. As I see it I have the following options:
- Annuity of £4,100 (LTA 8.2%)
- Reduced annuity of £2,478 plus cash £16,525 (LTA 6.6%)
- Transfer of £57,920 to another provider
Under normal circumstances I would go for 1st or 2nd option. However, the pension scheme is in deficit and I’m worried it might be wound up.
Re: the third option of transfer; the ratio of transfer value to annuity is 14.1 which I understand is low, and confirms the needs of the company to prevent excessive withdrawal of funds.
The company is mid-size UK company owned by an Abu Dhabi parent company. Annual turnover £60mm with a loss before taxation last year of £9mm. As business is linked to oil price I can’t see things improving short term. Last year the pension fund had £25mm assets with £33mm liabilities with £8mm deficit so the funding level was 75%. Company appears to be supportive by recent contributions and it intends to contribute £360k until 2020 and £1mm per year until 2026.
Last year’s annual report states the holding company has confirmed its financial support for another 18 months, but nothing mentioned for after that. It states they might not have enough funds to pay for insurance should the scheme be wound up. I understand that the Pension Protection Fund might be take over the plan, which would give me a good guarantee. I’m unsure though what requirements need to be met for the PPF to do this.
So, do I sit tight and crystallise the funds, hoping that the pension fund stays solvent or take a low transfer value elsewhere with lower risk.
I understand that as the fund value is above £30k I would need to discuss with a financial advisor, though obviously any advice from yourselves would be very much appreciated.