From the little time I have spent talking online with BSPS members, I have been impressed with the matter of fact way they are dealing with the choices presented to them.
Here is a case study of the complexity faced by one member of the scheme. Whether you are reading this as a steelworker or as a pension expert, think of this.
This person was not born to be a pension expert, he has had that thrust upon him.
His grasp of the salient facts of the situation shows that he has fully engaged with what he has been sent.
It is noble that he (and so many others) have got to grips with the choices (a word of commendation for the Trustee’s communications).
A message I received overnight
(I have slightly changed the words but not the numbers)
Just to give you an example of our current dilemma in real terms (my figures).
When I became a deferred member last year I had 21 years service working a 12 hour shift pattern.
On becoming deferred I lost an entitlement to what was known as 1 for 7. Basically for every 7 years service’ a member, I could retire a year early without loss of benefits. Although this benefit had stopped accruing, a few years previously, I had still achieved 2 years and should have had a full company pension at 63.
When I first received my deferred benefit statement it showed an annual pension of £13,500 and CETV of £120,000.
This year my annual pension increased to £14,000 and a CETV of £336,000 (with an 8% insufficiency reduction), Following the announcement of the RAA and cash injection, the reduction has now been reduced to 5% so my CETV has gone up to £347,000.
Here are my choices
Option 1 – remain in the BSPS and become a member of the PPF.
Here are my concerns with the PPF:
The PPF currently has 6,000 live DB schemes paying levies, 4,500 are in deficit. Is it a matter of time before the PPF folds in on itself and has to start reducing pensions payment.
I lose an immediate 10% but receive higher benefits for retiring early.
I get lower spouses benefits.
Option 2 – New BSPS
Here are my concerns with BSPS2:
I’m focussing on the 2016 accounts –
Benefits and expenses payable £676m.
Contributions received and ROI’s £321m. (£168m without contributions)
After speaking to a member of the Halcrow pension he feels like his scheme is unable to recover the deficit due to the low risk investment strategy.
Indexation capped at 2.5%
Fear that CETV’s could be reduced again at any time.
Early retirement reductions: 55 – £13,000, 60 – £17,175, 65 – £21,580
Option 3 – Transfer
I’m aged 47
Based on 3% growth at 55 I’d get £438,953
If I create own bridging pension
55 – 67: £24,378
67 – 90: £17,065 + SP £8,325 = £25,390
Additional benefit that pot carries over as inheritance.
Option to work days or part time 55 – 60 if pot has not achieved 3%.
How would you deal with organising this information?
My correspondent has not sent me the downsides of transferring ; I suspect he has read enough on my blog.
There are many things I don’t know, this gentleman’s dependants, his state of health, his current employment status and his willingness to work (part or full time) in the future.
Could I possibly advise him what to do? Of course I couldn’t.
Do I think he has made a proper analysis of his situation? I don’t know. I don’t know what choice he will make though I suspect he is leaning towards transfer.
What I do know is that he very politely pointed out to me that I was wrong in my previous blog (I should have known about the insufficiency report) and that he pointed this out with gentleness and kindness.
It strikes me that we are doing such people no favours , asking them to make choices like these. It is not – even was the “time to choose” longer – a choice that is within the financial capability of most people (whether steel workers or financial experts
Ask yourself ,
“how would you deal with organising this information so that you could take such a life-changing decision?”
Another message received this morning
As well as the message from the steel worker, I got a mail from someone who is a pension expert. He had read the results of the poll I mentioned yesterday
and this is what he wrote…
I cannot believe so many have IFAs an if they did not have one before that so many are willing to allow them to manage their pots.
Proof that this scheme should be in the PPF.
If this goes badly I expect it to be the last such pissing around which the PPF will countenance. And if TPR wasn’t so full of deal-making ex bankers they would not allow it either.
Intermediaries and advisors taking the piss.
I didn’t change any of those words.
My five suggestions to Steel workers taking a decision
- Study http://bspensionschoose.com/ and your statement
- Do not get frustrated by the Helpline, it is what it is
- If you can’t get what you want from the helpline – go to TPAS (free, impartial and clued up)
- Use the Facebook pages if you are looking for an IFA, others have been there before you
- Read Angie Brooks’ blog if you are considering transferring – don’t get scammed
Which is all well and good – as long as you have your information, thousands of BSPS members haven’t and it seems the Pensions Regulator is not too impressed.
For further reading on transfer issues, I would recommend Elliot Smith’s good article in New Model Adviser (BSPS section at back).