is this mis-selling?

sunshine54

my company are moving the retirement goalposts yet again.

They are changing the normal retirement age from 60 to 65. i would have done 40 years by the time i'm 58 and should have recieved full pension at 60

i have statements telling me what i am to expect at 60 and how much etc (not a projection),but now that is out the window. This isn't what i signed up to, so was i mis-sold?

i have declined adding to my pension in the past, thinking that my company pension was adequate:mad:

DavidLaGuardia

1. How old are you now?
2. Have you received a revised quote fo what you could get at 60?
If you are in a money purchase scheme (based on a fund) and the contributions are the same, your position is unaltered as you can still go at 60
If However I am assuming correctly (from what you have written) that it based on defined benefits (a final salary scheme) You may still get a full pension after 40 years.
Accepting it is possible that the benefits from here on in are changed for you, any entitlement you have built up so far almost cetainly would be retained and you have received what you were promised. If the goal posts are moved for the future benefits and you are told about this, then you have not been misled and can accept or rejcect the benefits of continued membership. If its a final salary scheme, chances are it is still a good thing to be in but you must adjust your assumptions about what you receive for service from this p[oint forward and make any necessary plans.
Before losing sleep, ask the trustees for some projections on you taking the pension at age 60 rather than age 65.

dunstonh

is this mis-selling?

Has a financial adviser told you something incorrectly and recommended an unsuitable product? The answer is no. So, you have not been mis-sold.

The important thing, which David refers to, is if the scheme is money purchase or final salary. If money purchase, then it really doesnt matter as you can take the benefits when you like anyway (caveat to that just in case there is a rare scheme that doesnt allow it).

MrChips

You say the goalposts are moving yet again - what other changes have been made in the past?

As already stated (assuming this is a defined benefit scheme) any pension accrued will be unchanged. You may well still be able to take future benefits at age 60 (subject to a likely reduction).

I can't see a great problem here - I'd gladly swop an NRA 65 DB scheme for my NRA 60 money purchase one!

sunshine54

i am 48 and have contributed for 30 years.
the scheme is based(at present on final salary)
1% pay for each year = 40/80th = half pay for 40 years service.
the reduction for taking early is 10% per year, so retiring at 60 as planned will now lop off 50%

MrChips

10% a year reduction is extremely high and can't be justified as anything near cost neutral (unless they consider that none of their pensioners will live past 70)! See if you can ask your trustees/pensions manager why this is approximately twice as harsh as what other final salary schemes offer. It's the Trustees that choose the early retirement factors and they have a duty to be fair to all members!

Even so, it would only be the pension accrued over the next 12 years that would be reduced - the vast majority of your pension will have a retirement age of 60 (and this can't be changed without your agreement) and thus wouldn't be reduced if you took it at 60 as planned.

So, if your salary at age 60 is £20,000, you would get a pension of £10,500 (42/80 x 20000). Of this, £7,500 would have a retirement age of 60 and wouldn't be reduced (30/80 x 20000). The remaining £3,000 would be reduced somewhat (usual practice is about 5% for each year early).

Some schemes don't allow more than 40 years service to be included in the pension calculation so you should check if you can keep accruing pension indefinitely beyond age 58!

Also, I'm still curious as to what other changes have been made to your scheme that you referred to in your original post - if you can let us know we can try and assess to what extent they would affect your final pension too.

MikeJones_2

Hi sunshine54,

Recommend you check to see whether any other changes are taking place at the same time. Making changes to scheme benefits is contentious enough so many employers use the upheaval to make more than just the increase in Normal Retirement Date to save having to go through the process again in the (not too distant) future.

Check, for example, definitions of pensionable pay, final pensionable salary, pension increases at retirement, tax free cash (calculation basis - and requirement to take it or optional), commutation rates and dependants' provisions.

You also mentioned that the scheme is 'presently final salary'. Has there been any mention of shifting this to a Career Average Revalued Earnings (CARE) scheme, for example?

Mike

I work in the field of Pension Education and Pension Guidance in the UK. I am a current 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.

payless

None of this is unusual http://news.bbc.co.uk/1/hi/business/7722031.stm

and many others have had their future conttibtions moved over to a MP scheme

MrChips

It's not unusual at all, and hardly surprising. In the OP's example, he has been in the scheme for 30 years. That's a long time and of course the value of the pension promise made 30 years ago will be significantly different to the same promise today (for many reasons, but chiefly increased life expectancy and legislative changes designed to protect pensions). It is right that benefits already built up shouldn't be altered, but the company should be able to change future benefits if the present format becomes overly expensive. The alternative is for the company to become uncompetitive and eventually go bust and for all the members to end up in the PPF with reduced benefits anyway!

If the company is just trying to reduce benefits to be greedy, employees should vote with their feet. In the OPs example, they are still offering a final salary pension which is a far better alternative to the changes many other companies have made.

sunshine54

im afraid i can't contribute more than 40 years payments, so i will stop paying in at 58 and have to wait wait 7 years till i can draw on it (health permitting).
the final salary calculation is also threatened with an service average scheme and the employers contribution is being reduced. (seems like robert maxwell has risen)

payless

MrChips wrote: »

It's not unusual at all, and hardly surprising. In the OP's example, he has been in the scheme for 30 years. That's a long time and of course the value of the pension promise made 30 years ago will be significantly different to the same promise today (for many reasons, but chiefly increased life expectancy and legislative changes designed to protect pensions). It is right that benefits already built up shouldn't be altered, but the company should be able to change future benefits if the present format becomes overly expensive. The alternative is for the company to become uncompetitive and eventually go bust and for all the members to end up in the PPF with reduced benefits anyway!

If the company is just trying to reduce benefits to be greedy, employees should vote with their feet. In the OPs example, they are still offering a final salary pension which is a far better alternative to the changes many other companies have made.

Yeah my wife's went from 60 NRA to 65 NRA
then a 33% hike in employee contributions
then it was replaced by a MP scheme , and the FS scheme ( her accrued benefits) isn't looking to healthly ( especially as the employers in the scheme are being asked for more and more- and its not just 1 employer there a group of affinated separate employers )