Guest 655- Registered: 13 Mar 2008
- Posts: 10,247
#1
Some elderly people very wisely asked me to look at an offer the husband's pension scheme made. They were on the verge of accepting it.
They were offered an immediate increase in their pension in exchange for no future increases. The pension company has hit on this method as a means to try to reduce its long term liabilities.
The company is or was a local one and therefore there may be other pensioners in Dover being made this offer and could be tempted.
Whatever you do think carefully.
Inflation is high and on the increase. These schemes provide indexation of up to 5% per annum to existing pensioners currently. Inflation is forecast by the Bank of England to reach 5% by the end of this year.
The documentation show the 'break even point' at 2.5% and 4% inflation. Clearly the relevent figure to go by is the 4% figure but, be warned, that may turn out to be a low estimate. Inflation 5% end of this year is forecast by the BoE and it may remain high for a while yet.
Using 5% inflation the break even point on the case was 3 years with the 'offer pension' topped in the second year. Even at 4% it will not take that much longer to hit break even.
These people were going to accept the offer because the husband thought he might not live more than a couple of years, he is last survivor of his siblings and the longest lived.
However - what he did not consider was the widows pension at 50% of his pension. His wife comes from a very long lived family and she will inherit the regime that he leaves to her. Based on probabilities it was my assessment that they should not take the offer.
Nothing is ever certain in life but I fear that a lot of people may well be tempted by this for whom the offer is inappropriate.
It could be worthwhile for some people but the paperwork did not make the position of widows and widowers clear and, in my view, does not provide full and proper information to enable an informed decision to be made.
If you hear of such offers please warn people about this and to think carefully.
howard mcsweeney1- Location: Dover
- Registered: 12 Mar 2008
- Posts: 62,352
#2
thanks for that barry, never a good thing to rush into any wonderful offers.
trouble is many people would not have the experience or knowledge to make an informed decision.