Pension Payment Calculation

[roker]

After paying in to a pension system for many years (possibly up to 40) ,somtimes with a number different schemes if a person changes jobs, or If a pension system ceased a few years previous, it should also include accumulation of fund because they have held onto our money, the pension provider simply gives us a statement at retirement, as in my case.

How can a person check the calculations that the pension provided gives at retirement?
We are really at the mercy of the pension company when deciding what our pension entitlement is, they seem to be able to blame the market condition for a reduced pension. Are we getting the good deal that we first looked at when taking out a pension?

 

[ClubMan]

How can a person check the calculations that the pension provided gives at retirement?

Do you actually mean how do they track that their pension value(s?) reflect the cumulative value of all of the contributions plus any growth to date where pension savings have potentially become "fragmented" across multiple schemes/products/employments? To do this they will probably need to have kept their own documentation on such issues to ensure that they have a record of all pension savings made. Then they can check with each pension company to check the current value of each pension held.

If you mean what will a specific accumulated pension fund be worth in terms of retirement payments then that depends on the pension holder's plans - e.g. take a 25% lump sum tax free and then buy an annuity with the remainder; there may be other options too.

We are really at the mercy of the pension company when deciding what our pension entitlement is, they seem to be able to blame the market condition for a reduced pension. Are we getting the good deal that we first looked at when taking out a pension?

I don't really understand the question or the background behind it...

 

[roker]

This is a general enquiry based on personal experience. When opening a pension scheme many years ago, I do not recall being told what I would receive on retirement; if I was told, it would be assuming that I pay into the scheme until retiring age, which I did not, because I left the employment of the company. I do however recall receiving a letter telling me I will receive a reduced amount because of market conditions. As you say cumulative value and growth they must calculate, but all I want to know is, have they worked it out correctly or is the company screwing me? And how can I check

 

[ClubMan]

This is a general enquiry based on personal experience. When opening a pension scheme many years ago, I do not recall being told what I would receive on retirement;

In most cases it's impossible to tell in advance as much depends on the performance of the underlying assets/funds in which the money is invested. You should at least have received an illustrative projection based on various assumptions but this would still have no bearing on actual or likely future performance which simply cannot be predicted.

if I was told, it would be assuming that I pay into the scheme until retiring age, which I did not, because I left the employment of the company. I do however recall receiving a letter telling me I will receive a reduced amount because of market conditions. As you say cumulative value and growth they must calculate, but all I want to know is, have they worked it out correctly or is the company screwing me? And how can I check

I don't really understand what you're on about here. Perhaps you can post a bit more clearly and in a bit more detail?

 

[LDFerguson]

If I'm undertsnding roker's post correctly, I think s/he's making the point that if one leaves an Occupation Pension Scheme for example twenty years before retirement and opts to leave their fund in the scheme, it's very difficult to verify that they're getting a fair value when they do come back twenty years later to claim their benefits.

If this is the point, there are a number of solutions. (1) When leaving a pension scheme, get a written statement of the member's value and the fund(s) in which the value is invested. (2) Keep the pension scheme trustees informed of any changes to your address. (3) At retirement, get a second opinion from a qualified pension professional that your value is correct - this should be relatively simple by reference to the original value and the historic performance of the fund(s) in question, as fund performance information is generally in the public domain.

 

[roker]

Thank you LD. you got the point. But even if I paid in for the full term, How do I know the calculations are correct? We pay in for many years nor knowing what we will get out of it, there is a lot of money involved, would we do this with anything else? there is a lot of blind faith put into the pension company. A pension professional is possibly the best answer as you say, but how would they know the how the company invested many years back? and how can the pension company just send me a letter saying they had a bad time and I will be getting less (of what). I did get a yearly statement when I was paying in, but not after I left the employment of the company

 

[ClubMan]

I did get a yearly statement when I was paying in, but not after I left the employment of the company

Unfortunately there is no onus on pension providers to issue annual statements to members who have left the scheme even when they leave money invested. And I think most don't. Although they do normally provide valuations/statements on request.

Does your last statement state what your money was invested in? For example the number of units in specific funds? If so then you can track your pension valuation by looking at the relevant unit fund price. If you are asking how do you know that these fund prices are legitimate/accurate then you probably need to talk to the Pensions Board or IFSRA or somebody like that.

 

[LDFerguson]

As Clubman says, you can request a statement from your old scheme after you have left. If you do this from time to time, you will get an ongoing picture of how your fund is performing. If the scheme invests in an insured pension fund (e.g. Irish Life, Eagle Star etc.) the performance of the fund as a whole can me measured against the performance of your individual bit of it. Once you know the name of the fund, you can simply ask the fund manager for details of how the fund is doing.

Another option is to transfer your fund into a Buy Out Bond of your own choosing. This removes the fund from the scheme and into a policy which you own and control. You can watch the performance of your policy (sometimes online, depending on the company) as much as you like.