1 GET THE FACTS
Get as much information from the scheme administrators as you can about the planned closure – what is happening and why, as well as the alternatives proposed by your employer. Don't rely on advice from colleagues in the canteen.
2 ASK FOR A PROJECTION OF BENEFITS
Specifically ask the scheme administrators for a projection of the pension benefits you would have received had the scheme not closed and what you will now get as a result of the scheme closure.
3 INSURANCE BENEFITS
Many final salary schemes provide a lump sum death-in-service life assurance payment. Will this benefit be replaced with an equivalent arrangement so that members still enjoy this valuable protection? If not, why not?
4 TIGHT DEADLINES
Many employers planning to close their final salary schemes require members to make a decision quickly. This is unreasonable as many people need to consider matters and take advice before arriving at a considered decision. If you are put under pressure contact the administrators and request more time.
5 TAKE PROFESSIONAL ADVICE
Pension advice is the most complex area in financial planning, and final salary pension advice is the most complex type of pension advice. This type of financial advice is highly specialised and many financial advisers are not qualified to do this type of work. You should consult an independent financial adviser (IFA) with specialist pension expertise – two websites, www.unbiased.co.uk and www.financialplanning.org.uk can help you find a suitable IFA in your area.
6 PENSION PROTECTION FUND
If your employer has become insolvent since April 2005 and your scheme can't pay the benefits you were expecting, you may be eligible for compensation from the PPF.
This safety net was set up by the government to protect against people losing all of their pension benefits when an employer goes bust. For most people below their scheme's normal pension age the PPF will generally pay a 90 per cent level of compensation subject to an annual cap, which, as at April 2010, equates to 29,750 at age 65.
7 BEWARE ENHANCED TRANSFER VALUES
Some schemes offer incentive payments for you to surrender your rights to pension benefits in return for a lump sum payment to another pension scheme. They do this to reduce their scheme liabilities. You must consider such an offer very carefully as the money offered may not adequately compensate you for the loss of scheme benefits.
8 GET A PENSION AUDIT
Review your overall retirement planning to assess whether you will have the income you want when you stop working. This should look at not only the final salary scheme but also any other pension provision you have and indicate how much you need to save for the future. You can expect to pay between 500 and 1,000 for this advice, depending on complexity.
9 SAVE MORE
Don't fool yourself that the closure of the pension scheme is no big deal – it is. The damage to your prospective pension benefits is huge as such pension schemes are the best form of retirement scheme you can have. You now have to put your hand in your pocket and save more for your future.
10 PENSIONS ARE NOT THE ONLY WAY
There are other ways of saving for retirement. Review your overall financial planning with an IFA and look at using investment allowances such as individual savings accounts and other vehicles to build your wealth efficiently over the longer term. The FSA's Moneymadeclear website is a good place to start: www.moneymadeclear. fsa.gov.uk /products/pensions/pensions.html