Beware of pension 'rip offs'

Dear Colleague,



I have been contacted by our representatives across LUL/TfL who have raised with the RMT their concerns that financial service (insurance) companies are offering to “release” TfL Pension Fund members' pensions in return for a lump sum payment. I have been passed letters from a certain company who are offering a lump sum payment of 25% of the members' total TfL Pension Fund value with the remaining amount being reinvested.

While there is nothing illegal about individuals wishing to carry out the action mentioned above, it is the RMT's opinion that any member considering cashing in their accrued TfL pension will be making potentially the biggest mistake of their working life.

The TfL Pension Fund is one of the best Defined Benefit pension schemes in the UK. The fund offers a final salary promise i.e. when you retire you will receive a lump sum (if elected) and a certain level of pension which is payable for life. Other benefits include annual pension increases in line with RPI inflation, ill health and dependants' benefits. It is also worth pointing out that if you are no longer a member of the TfL Pension Fund your life cover will be affected.

The benefits being offered by these financial service companies in return for you pension has no such promise other than you will initially receive 25% of your TfL Pension Fund “Transfer Value”. The remaining 75% will be reinvested and offered as an annuity (pension) and/or possible lump sum when you retire. Basically the value of your TfL Pension Fund will be transferred to a Defined Contribution (Money Purchase) arrangement.

It is a fact that investment based pension arrangement, i.e. Defined Contribution arrangements, cannot match pound for pound the benefits you will receive as a member of the TfL Pension Fund. It would not be unreasonable to suggest that your annual pension offered under a Defined Contribution arrangement will be in the region of 50% lower than the benefits you will receive from the TfL Pension Fund.

While it is not for the RMT to tell our members what to do with their money it would amiss of this union not to raise our concerns that some members may be considering taking such action. We also understand that many of our members may have fallen on financially hard times but it is crucial that if any member is considering taking such action they should seek Independent Financial Advice. Such advice can be found at

Yours sincerely,

Mick Cash
General Secretary