Transfer of Section 32 pension

dunstonh

Since 2000 no annual bonus has been added, each year NU saying that no bonus could be added th meet the GMP. No terminal bonus has been added either.

There is little point them adding bonuses as the guarantees are more than the bonuses could achieve.

Tibbledom

Brook Street I understand completely the point you are making and I am intrigued by what is going on here and I wonder whether you might in fact have a case.

It is probably worth going right back to the beginning here.

You transferred an occupational pension to a NU section 32 policy in relation to scheme service ending in 82. This included an initial GMP of £222.56pa or £4.28 pw. The revalued GMP with 8.5% revaluation for the 26 complete tax years between date of leaving and age 65 is 1,856.40 (the calculation based on weekly GMPs is 4.28 x 8.340 (=1.085^26) = 35.70pw or £1,856.40pa).

Under STATUTORY contracting-out legislation that applies to section 32 policies NU have to provide you with a pension at age 65 which is at least equal to the revalued GMP of £1,856.40 and which does not increase in payment (because it is all pre 6/4/88) and with a 50% widow’s pension because you are male, and with no guarantee.

Now that is the absolute minimum they have to pay you.

However the question then moves to what are NU CONTRACTUALLY entitled to pay you. Now this is determined by your policy documentation at time of transfer and any other documentation at that time.

Now this is the difficult bit for me I can’t see what is in front of you.

I would have expected it to say that your policy would provide with what ever pension the accumulated funds at 65 would buy but subject to the guarantee that the resulting pension would not be less than £1,856.40 per annum, non-increasing in payment and 50% widow’s pension, and with no guaranteed period of payment.

But it appears from what you describe (and this does surprise me) that the documentation actually says that the CONTRACTUAL guarantee under the policy is not the statutory minimum of a non-increasing GMP in payment but the GMP increasing at 5% per annum in payment and guaranteed to be paid for 5 years and with a 50% widow’s pension.

Now I am not a lawyer and I can’t see the documentation that you have, but if it does say that, then surely you are entitled to the higher “CONTRACTUAL” guarantee.

Obviously the actual returns have been quite low for various reasons and so the guaranteed pension is what the policy will pay out.

The fact that NU have said in a recent letter 'It has been necessary to remove the 5% pension escalation under the policy to cover the GMP liability.' suggests to me that they have spotted there is a bit of a problem here.

The question we are no doubt both asking ourselves is on what LEGAL basis do NU think they are entitled to remove the escalation from the guarantee? Now they may have one so I don’t want to raise your hopes, but at the same time nobody has identified what that legal justification is and without it I wouldn’t be agreeing to the offer. In value terms there is a significant sum at stake here.

So my way of tackling it would be

• Ask NU what possible legal justification they have for removing the 5% escalation given the 5% was stated in the original paperwork.
• If they can’t answer this to your satisfaction and won’t back down then I would be making a complaint to the Pensions Ombudsman at

http://www.pensions-ombudsman.org.uk/pohome.html

Now a complaint of this nature does seem to be something that the Pensions Ombudsman would deal with. They have looked at a different issue involving the mal-administration in the past of a NU section 32 policy (go to the determinations tab on their website and search for “NU section 32”).



I would be interested in whether Mike Jones has further comment here, given that the first stage in the Pensions Ombudsman complaints procedure is often to see if a negotiated solution can be worked out with TPAS for whom he is a volunteer adviser.

MikeJones_2

Hi Tibbledom,

Tibbledom wrote: »

I would be interested in whether Mike Jones has further comment here, given that the first stage in the Pensions Ombudsman complaints procedure is often to see if a negotiated solution can be worked out with TPAS for whom he is a volunteer adviser.

You're spot on with your comment. If you direct a complaint straight to The Pensions Ombudsman he will refer it first to TPAS to deal with (they even share the same address, although not the same office).

TPAS will assist with the mediation of the case, the use of the TPAS service is FREE, and if it cannot find a satisfactory resolution, the complainant still has the option to proceed to The PO.

Mike

I work in the field of Pension Education and Pension Guidance in the UK. I am a member of the Specialist Pensions Forum as well as being a Voluntary Adviser for The Pensions Advisory Service. I work with scheme members, employers, trustees, scheme administrators and advisers on most things to do with employer sponsored pension schemes. The views expressed by me in this thread are my personal opinions. You should seek professional advice from an appropriately experienced and qualified adviser. I am not an IFA.

BrookStreet

I was one step ahead of you and asked NU why they have removed the 5% escalation.

Reply received today:-

'Your Policy was set up with a 5% escalation clause. However under a Section 32 Policy there is no legal requirement to provide escalation on GMP benefits prior to April 6th 1988. Where the retirement fund is insufficient to secure the GMP, an escalation is removed to provide the benefit.

Section 9 of the policy document (Copy returned to you) refers to the increased applicable. I have highlighted the last sentence which explains any escalation will be removed to meet GMP' (Gramatical errors by NU not me)

Section 9 Final Sentence states :-

The rate of increase in Pension shall not be such that the pension and Widow's pension which can be purchased by the capital shall be less than the GMP and the GMWP respectively.

I don't understand that sentence at all.

I do know that NU by not paying any Annual or Final Bonus since 2000 have engineered the fund to be insufficient so that escalation will not have to be paid.

BrookStreet

In my 32 Policy under Payouts there are three headings

Guaranteed Minimum Pension

Guaranteed Minimum Widow's Pension

Escalation Pension Rate

'5.00% perannum compound'


The get out that NU are using is the fact that the escalation heading does not include Guarantee.

I would argue that this escaltion applies to the Guaranteed Pensions above

MikeJones_2

Hi BrookStreet,

BrookStreet wrote: »

The rate of increase in Pension shall not be such that the pension and Widow's pension which can be purchased by the capital shall be less than the GMP and the GMWP respectively...I don't understand that sentence at all...

We know your revalued guaranteed minium pension (RGMP) at age 65 is £1,856.40 p.a.

We know that this is the absolute minimum you must receive from the NU Section 32 Buyout at age 65.

Let's imagine that to buy you:

- a RGMP of £1,856.40 p.a.
- with a statutory 50% widow's pension
- and no escalation (i.e. no pension increase during retiement)
- at age 65 in a few weeks time

NU might need to have a fund value of (say) £40,000. Remember they will be using current annuity rates (unless there was a Guaranteed Annuity Rate referred to in the Policy Schedule).

If the fund in your Section 32 Buyout policy at age 65 is worth more than £40,000 (in my example): let's say £45,000, then the £5,000 extra could be used to provide you with pension escalation. In fact it could be used to provide you with a cash lump sum, extra pension or other benefits that you may choose.

However, as appears to be the case in your situation, the Section 32 Buyout policy seems not to have accumulated sufficient growth (bonuses) on the original transfer value to even pay you the RGMP.

Continuing my example, if the policy value is only (say) £38,000 then NU have to 'make up' the difference themselves because thay have a legal obligation to pay you your £1,856.40 p.a. from your 65th birthday.

Summary
I very much doubt now from what you have stated in your last post that you have sufficient grounds to push for the 5% escalation.

Nevertheless, it is always more difficult to deal with a case like yours without actually having the paperwork at hand. If you have any doubts, get TPAS involved. It might not get you any more pension/monies, but at least you will have the knowledge that you have covered all avenues rather than be left with any niggling doubt.

With reduced bonuses, lower annuity rates and lacklustre with-profit returns over recent years I'm afraid there will be many more policyholders like you suffering the same fate.

Hope that helps.

Mike

I work in the field of Pension Education and Pension Guidance in the UK. I am a member of the Specialist Pensions Forum as well as being a Voluntary Adviser for The Pensions Advisory Service. I work with scheme members, employers, trustees, scheme administrators and advisers on most things to do with employer sponsored pension schemes. The views expressed by me in this thread are my personal opinions. You should seek professional advice from an appropriately experienced and qualified adviser. I am not an IFA.

Tibbledom

Yep I am afraid it looks like NU have found their get out clause. Section 9 seems to say quite clearly that they would remove the 5% escalation if there were insufficient funds in the policy to cover the 5% escalating GMP.

To be fair to NU it would never have been their intention to offer a guarantee of a 5% escalating GMP. The question was had they by sloppy paperwork inadvertently done this. And the answer seems to be no.

However Mike Jones calls it correctly. I would say in the strongest terms get it checked out by TPAS to remove any niggling doubt. Nobody can give you a definitive opinion without seeing the paperwork.

And importantly I would say the same to other posters who have read the documentation to say for example that they would get the GMP paid from the retirement date of the policy (where this is before age 65 or 60 for females). Get it checked out by challenging NU to find their get out clause and contact TPAS if necessary.

BrookStreet

Thanks to MikeJones & Tibbledom, I guess I am going to accept NU offer of flat Annuity

casey_junior

doublekite wrote: »

Thanks to those who responded. It would seem foolish to transfer out and lose flexibility and/or benefits.

I really have no grasp of pension small print, but my facts are as follows and I would appreciate your comments:

Current age 51
Pension can be payable at 62 (reduced amount of course)
Transferred in £4970.55 ( of which £2172.63 was my contributions) 9.2.89
With profits benefit £33,431
Annual bonus to date £20,468.30 (cannot be taken away?)
Final bonus not guaranteed, depends on market at retirement.
Guaranteed Minimum Pension £345.28 x 8.5% compound, which I reckon is £5097.45
Lump sum death benefit £2172.63
Maximum pension quoted as £1664.25 x 5% compound (£7,730) or x RPI which ever is greater
Widows pension is 2/3 of max pension or £1109.50 x 5% pa
Guaranteed minimum widows pension is £2548.78

Any help appreciated...are these figures generous?

Am I correct in saying that the GMP of £5097.45 is the important figure to consider?

Do I need to look at annuity tables for my total fund value of £33,431 + bonus so far of £20,468.30 = £53,899.30?

I am a non smoker.

If I may restart this thread, I have A NU Transfer Plan 32 taken out in early 1988 With a premium of £10123, £5159 being my own contribution and due to mature in December 2011 on my 65th birthday,if God spares me.
The with profits benefit is £38182 and the accrued bonus is £23337. There has not been any bonus added since 2001.
There is no mention in my policy document of Guaranteed Minimum Pension, only mention of Maximum Pension of £6841 excepting conditions.
When I look at the above Quote the question springs to mind "Have I been sold a pup?"
What are your thoughts on this? and what pension can I realistically expect when next year comes?
This pension was in respect of my first employment 1966to 1987, my next employment was from 1987 to 2001, the pension from it being in receivership even yet. My last employment was from 2001 to 2009 when I was paid off on health grounds, there was no pension scheme and the pay was too low to afford a personal pension.I am staring a poor retirement in the face and am of the opinion that pensions are a kick in the mouth and not to be undertaken unless in secure employment. :mad:

dunstonh

There has not been any bonus added since 2001.

That is normal on plans where there are guarantees. The value is in the guarantee not the fund value.

There is no mention in my policy document of Guaranteed Minimum Pension, only mention of Maximum Pension of £6841 excepting conditions.

Have you actually asked them for a breakdown or are you just relying on the statement?

GMP is just one of the things. There may be GARs (guaranteed annuity rates) or protected lump sums (more then 25% available)

When I look at the above Quote the question springs to mind "Have I been sold a pup?"

Cant say until the plan is correctly analysed.

what pension can I realistically expect when next year comes?

Impossible to say as it would depend on the terms of the plan.

am of the opinion that pensions are a kick in the mouth and not to be undertaken unless in secure employment.

pensions are fine. They are not miracle plans though. They cant turn small amounts into large amounts. Security of employment doesnt matter as most are pay as you go. So, you pay when you are employed and dont when you are not.