We have had numerous calls and enquiries from members of the Rolls-Royce pension scheme, many are experiencing large transfer values from the scheme and the main question we get is why is it such a large transfer value?
Understand the numbers
Firstly you need to understand the calculations in a bit more detail, the pension at date of leaving is very different to the actual income on offer at the Normal retirement Date. If you left in 2001 with a Pension at date of leaving of around £5000 then that amount will increase up until your retirement date, either 60 or 65 and that income amount may well be nearer £10,000 if you are going to be 65 in 2030. Of course the numbers here are just estimates as all members incomes are different and they depend on many factors such as date of service, age, retirement date and other scheme specific information. We will give you an accurate account when we have your specific information.
Why are my numbers so attractive?
Of course, once you have understood the numbers and you are fully aware of the actual income that is on offer at your normal retirement age you may still question why the Rolls-Royce pension its such a large transfer value. The reasons are;
– 15 yr guilt yields
– Interest rates
– Scheme Funding position
– Actuarial Calculations
– Scheme Demographics
– You are getting older
If we look at the first two points above, these historically low rates directly impact the cost of income, or the cost the scheme will have to spend to buy the income for the member at retirement. In short buying a guaranteed income is now expensive, historically members and scheme and private pensioners bought annuities and those annuities are expensive so therefore more money is needed to buy that income and therefore it leads to higher transfer values.
Those two points are the single biggest factor in leading to higher transfer values for the Rolls-Royce pension scheme. I would say getting older or closer to retirement is the next biggest factor. This really is why schemes would like to get rid of younger members if they could and why you will find most financial advisors cannot actually find the Insurance cover to help members below age 50. As you get older your guaranteed income gets bigger and therefore the transfer value needs to increase.
The other factors such as scheme funding position, which Rolls-Royce have done a good deal with Legal and General with lately, means that the scheme may feel a good way of getting rid of members is to increase the transfer value and make it more attractive to leave. The reason for this is to reduce liability for the scheme.
Actuarial calculations and scheme demographics are all confidential information that the scheme will hold and then the actuaries will do some weird and wonderful calculation that will have an effect on the transfer value of the Rolls-royce scheme. Unfortunately we will never be able to tell what this will actually be but we do know its part of the equation.
How much will you charge to transfer my Rolls-Royce defined benefit pension?
Cost is paramount here and I know you want to know how much this will cost but this is actually changing all the time due to the market and risk involved. We cant confirm exact numbers, as these could change next month if PI insurance becomes more expensive or the FCA require more work to be done for cases.
All I will say is we have never been accused of being expensive, in fact our fees are often the reason why people will use, if they are very price sensitive.
Contact Matthew Renier directly to discuss on firstname.lastname@example.org