Leaving a Defined Benefit Scheme

[PensionTed]

Hi,

I am currently in a Defined Benefit pension scheme (~15%) for 6 years and am leaving to join a new company and will be in a defined contribution scheme

I have options to take the amount thats there (approx 6 years) or leave it and let it grown

I was wondering what happens my money if I leave it in the Defined Benefit scheme to grow - I was informed that my final leaving salary will increase by up to 3% per year and that will form my final pensionable salary ?

Can anyone shed some light on how exactly this works ?

Cheers

 

[Don_08]

What happens in most DB schemes, a pension is calculated when you leave based on your final pensionable salary at date of leaving and the service earned to date.

This pension will then increase at CPI to a max of 4% per annum between date of leaving at the 1st of January before your Normal Retirement Age.

Depends on a number of things as to whether you should transfer to your new scheme:

1. Funding position of DB plan - if below 100% on the Minimum Basis then is likely your transfer value would be reduced - not advisable to transfer in this case.

2. Your own risk appetite. Advantage of DB scheme you can see what level of benefit you will get at retirement. DC scheme - you are going to be taking the investment risk on - with no guarantee of what your pot of money will buy you at retirement.

You can transfer this money at any time between leaving and retirement - so if you change your mind in ten years time you can do so then.

Personally, if it was me I would leave where it is, and start the DC scheme from afresh - so you'll have a combination of the pensions on retirement