Although it is full value, it will not be a sufficient amount to buy your accrued pension.
Can you explain this a little more?
In very broad and simple terms, the transfer value calculation will give you a value, which if invested at approx. 7% return per annum until your normal retirement age (probably 65) would give you a fund which should be sufficient to buy an annuity equal to your accrued pension.
The method is set out by the Society of Actuaries and the rate is determined by the Dept of SW (I think). Depending on your age and as you get closer to 65 there will be favourable adjustments to the 7% rate.
So, the closer to 65 you are, the less inequitable the value will be. Even if you were say 64 there could still be up to 15% shortfall.
There are a lot of other factors involved in the calculation but that's it in simple terms.
A very bad deal for deferred members.
Why is it allowed to continue ? - if it was changed, then more schemes would fail the funding test each year.
If scheme is closing, then you should lobby Trustees to negotiate a better rate for the calculation of the transfer value.
Guys all this points to more lack off/mis information from the Financial Sector i.e. give the masses information they don't understand. And before anybody gets annoyed about this I'm generalising as I'm sure this may not always be the case.
Joe 1 point you did make " If scheme is closing, then you should lobby Trustees to negotiate a better rate for the calculation of the transfer value."
At face value this seems sensible but with the scheme of which I'm a deferred member of I have attempted to communicate with the Trustees and I'm finding it extremely difficult to get any information out of them. For example I found out by chance the scheme was being wound up and when I queried this with them I eventually was told "we have to inform members within 12 weeks of being notified of the Company winding up the scheme". But within this 12 weeks they are negotiating! For example I also asked "what does 100% of The Minimum Funding Standard represent in terms of the scheme being fully funded and what is the Funding Ratio". The answer after repeated follow up's "In relation to your query regarding % terms of the Scheme being fully funded, this is different for each individual and is not a figure that as Trustee we have."
Also there are 2 sets of Trustees to the DB Scheme 1. Individuals, who are scheme members and 2. Corporate Trustees who are out of the same business as the Scheme Adminstrators and to my mind thus have a vested interest.
Anyway I've spoken to the only individual Trustee and was told that really his role is to be as Independent as possible and this means not really discussing issues with members as it could be seen as impartial. However he has engaged Independent Advisors separate from the Corporate Trustees.
This whole area to me is very reflective of the culture of how our country got to the position it is in today.
TELL THE MASSES AS LITTLE AS POSSIBLE AND WHAT YOU DO TELL THEM MAKE IT CONFUSING AND THEN NOBODY WILL ASK US QUESTIONS AND WE'LL CARRY ON AS WE KNOW BEST!
Existing pensioners won't be bothered as they have 1st call.