Should you accept a “pensions increase exchange” from your employer?
The business behind High Street retailer Boots has been accused of leaving itself open to mis-selling claims after offering pensioners a one-off increase to the value of their pensions in exchange for an annual inflation linked rise in income.
According to the report in the Telegraph, the Alliance Boots’ defined benefit (final salary) pension scheme had an actuarial deficit of £600m at its latest valuation in March 2010.
The decision to accept a pensions increase exchange like this would be based on views of future price inflation and expectations of life expectancy. Both of these factors are incredibly difficult to predict accurately, which makes such a decision a real challenge.
Scheme members have until the end of the year to decide on the right course of action.
We are always very suspicious about offers like this from pension schemes, particularly schemes with large deficits that need to reduce their liabilities.
It always makes sense to seek professional independent financial advice before making what could potentially be a very expensive decision.
In some cases, the pension scheme will pay for the cost of advice. If they are unwilling to do this, it could still be worth the cost of our fees to properly understand the option and make the most suitable decision based on your own circumstances, objectives and attitudes.
Photo credit: Flickr/smig44_uk
