Contracted out request not actioned

freeganneist

I took out a private pension in 2000, and asked to be contracted out of National Insurance.

I received a letter recently from my pension company saying they discovered that although they sent the request to HMRC, they never received any National Insurance rebates. I remained contracted in, and the money was never invested in my private pension.

The letter from my pension company included a cheque for what they calculate the value to me would have been if they had received and invested the money, minus the value to me of having stayed in S2P (state pension). If I cash the cheque, I will waive the right to query it in the future.

I have asked for further information but they say that the amount I have been sent was calculated by an actuary and is too complicated to explain.

I have no way of knowing whether I am getting a fair deal, and I am not sure what to do with the money if I do cash in the cheque, bearing in mind that it was supposed to have been invested in my pension.

Does anyone have any advice on what I should do next? Obviously if I pay for independent financial advice I will be further eroding the money I've been sent, that I had assumed to be safe and secure.

xylophone

I have asked for further information but they say that the amount I have been sent was calculated by an actuary and is too complicated to explain.

This is not satisfactory. Request the information in writing? Don't cash the cheque?
http://www.pensionsadvisoryservice.org.uk/dealing-with-complaints/financial-ombudsman-service-
"If your complaint is not about sales and marketing, but instead relates to the administration of your personal pension or stakeholder plan, the FOS will not be able to help. Maladministration complaints are dealt with by The Pensions Advisory Service and the Pensions Ombudsman. Click here for further information about how we and the Pensions Ombudsman deal with complaints."

jamesd

The trouble here is that you not noticing means that you would almost certainly have used whatever their default investment was, unless you selected something else when you first signed up for this. This means that they could presumably use their default fund in the calculations.

Ask them these questions:

1. Did the actuary assume that I will purchase a dual life annuity instead of a single life annuity, a requirement that will not apply to me from April this year?
2. Did the actuary use unisex annuity rates or gender-specific rates?
3. Did the actuary allow for the impending ban on gender-specific annuity rates? How?
4. Did the actuary use annuity rates that are currently depressed because of quantitative easing?
5. Did the actuary assume that I would purchase an annuity instead of using capped income drawdown?
6. What allowance has been made for my lost ability to take pension income from age 55 if I wished to do so?
7. What allowance has been made for the worse inheritance handling of Additional State Pension - no inheritance at all - compared to income drawdown - 100% inheritance to a spouse, inheritance with tax charge to others- if I was to choose that income route?
8. What allowance has been made for the lost death benefits of protected rights money within a pension that has not been crystallised?
9. Is the calculation method used one of your own devising, that of your actuary or one set out by legislation or the Pensions ombudsman?

Those should give them some clue that you have some idea of what needs to be considered and may encourage them to do somewhat better if they have tried to minimise payment.

dunstonh

1. Did the actuary assume that I will purchase a dual life annuity instead of a single life annuity, a requirement that will not apply to me from April this year?

Protected rights used unisex rates anyway.

jamesd

Was that intended for question 2 rather than 1? For 1 I was thinking more of spousal benefits after death of the pension holder and what that may do to the annuity payment level if there is no need or desire for spousal benefits.

Agree that it may not be worth mentioning unisex rates given the pending change that will presumably make that part moot. Would mainly be relevant if freeganneist is male and wanting to take benefits soon after April 2012, also being at least 55 then.

Anything else that you'd add to the shopping list of things you'd want them to consider?

freeganneist

Thanks. I'm a 53 year old female (currently married to the same person as when I took out the pension).

I really appreciate your suggestions. I'll write back and ask for more information.

jamesd

Since you're female I suggest skipping these two questions:

2. Did the actuary use unisex annuity rates or gender-specific rates?
3. Did the actuary allow for the impending ban on gender-specific annuity rates? How?

The potential detriment there is only something that would affect males. Unisex rates help females and the impending ban is also expected to help females.

Your age and imminent ability to take benefits from a contracted out pension pot makes some of the others particularly relevant. If your plans included taking pension benefits and perhaps retiring at 55 this may significantly negatively affect you.