When I stopped being employed and became self employed I had to leave the company pension scheme.

The old scheme was based on my final salary – 1/60 of my salary will be paid as pension for every year that I was a member of the scheme – yes, it was was of the old fashioned schemes, I was very lucky.

Last year, out of curiosity I asked the scheme how much they’d give me to transfer out of the scheme – essentially I am a liability as they are obliged to give me alot of money when I am 65.  Many schemes are quite generous when it comes to letting members go, but my scheme offered quite a paltry amount that I felt undervalued my pension.

If I’d taken their offer, I’d have had to invest it,  achieving growth of 11.9% just to match the amount they would be contractually obliged to give me when I am 65.  Now, that seemed daunting, even to me – in some years maybe, but not every year. So, I left it with them.

This weekend they have written to me asking if I’d transfer away from them if they gave me some cash.

1. Ethically, I wonder if is it right to encourage me to transfer by offering me cash – the amount intimated was £3000. I know what I’m doing and will judge the final offer on it’s overall merit.  Many will not, and may make a bad decision purely based on a handy windfall.

2. I’m in the odd, possibly unique position of knowing the ‘old figure’. It will be interesting to see how the new figure compares – will it be £3k lower than my original figure, but with £3k as cash?

3. They have appointed an IFA for people who don’t have one. Clearly that isn’t me, but presumably they wouldn’t be recommending transfers if people need to get absurdly high growth rates to just break even, so maybe the old employers have ‘seen the light’ and will be offering proper valuations.

I am concerned about this offer. While I would welcome the cash as much as anyone, I can’t help but feel that a ‘sweetener’ is being offered to offset the bitter pill of transferring the good, guaranteed pension into a potentially less good one.  Or, putting it a different way, they wouldn’t need to offer me cash if they were offering a good deal on the pension.

So, while I hope the deal is good, I don’t expect it to be. And, if it is poor, I really hope that people don’t take up the offer. But I expect they will.

photo credit: LOLren