Defined benefit pensions

[moggiek]

Why won't those with DB pensions be able to take responsibility for their whole pension pot after 2015 in the way that those with defined contribution pensions will?

because they do not have a pot.
nor do they have any risk.

DB or final salary schemes are very different to DC or money purchase schemes. DB schemes provide a known benefit i.e. a lump sum and income at a certain point in time. There is no investment risk or decisions and therefore you have little decisions to make.

DC schemes are quite the opposite, where there is no known benefit as it depends on investment returns and what income is available at the time of taking the pension. The new pension rules are trying to allow the people with DC schemes more choice at retirement so they are not forced into buying an annuity when rates are at historic lows or an insignificant income for life.

Those with certain types of DB schemes may be able to transfer to a DC scheme and take advantage of the new rules. These new rules require Royal Assent before they come into effect and much of the details have not been confirmed yet.

At the end of the day, those with DB schemes are generally better off than those with DC schemes anyway.

What I'm not getting is this - if DH (who has been forced to pay 10% of his salary into his pension for years) should die 2 years into his pension, what happens to the money he's saved? If he had a defined contribution pension, he would have invested the money to be passed to our DCs.

If he has a DB pension, chances are it has "widows benefit" of 50% pension to you for the rest of your life

his employers have paid in a sight more than he ever did to the scheme, not a pot

You be entitled to half, possibly two thirds of his pension for life if he died after 2 years. You do not have a pot or fund in a final salary just a promise of income.

If under the dc scheme he dies after 2 years, you would be left with whatever pension he bought via an annuity which could be none to a full pension for you but mostcommonly 50%.

Income Drawdown can give better death benefits are taking the pension but that gets more complicated.

If he is ill you may be a able to take a cash equivalent transfer value, but this may well change with the upcoming changes to pensions. Otherwise sit tight it's worth a lot more than you perhaps realise.