final salary pension,state pension claw back

rtzpillar

Hi, I have been in my current job for 25 years and up until 2002 I was in the company's final salary pension until they decided they could no longer afford it and closed it. Recently, I have been looking into taking the final salary section of my pension early (at 58) and was extremely disturbed to find that the pension has a " claw back" clause whereby the company will deduct an amount which will equal about 45% of my pension, when I start to draw my state pension. I understand that this is legal and something that many larger organisations did to reduce their pension liabilities but I think it is quite wrong as it mainly affects low paid workers. If I was drawing a directors pension of £80kpa then £1.6k would be nothing but to me its a huge part of my pension. I have been advised what my final salary pension pot is worth if I want to take it now and transfer it to a money purchase scheme. Another alternative is to take it now at a reduced rate but at least I will get 100% of it until I reach 65. Where can I go to, to get the best advice where it won't cost me a fortune?I still intend to carry on working for another couple of years so I appreciate that any pension I take now will be taxable.

dzug1

Whilst it seems unfair, remember YOU will amost certainly have been paying reduced contributions as well as your employer. One of the aims being to provide you with an affordable pension from a low income.

bigfreddiel

rtzpillar wrote: »

I have been looking into taking the final salary section of my pension early (at 58) and was extremely disturbed to find that the pension has a " claw back" clause whereby the company will deduct an amount which will equal about 45% of my pension, when I start to draw my state pension.

well actually this is what happens when you take a fsp early - in my case I would lose 5% per year early and as can take mine at 60 i would lose 10%

you don't say what your fsp retirement age is but i'm guessing its 66 which means you're 8 years early so a similar reduction of 5% per year early is about right.

anyway it's all defined in your pension documents so you must have known about this for the past 25 years but i guess you just never read any of it thus your disturbance.

if i were you i would wait until the date the scheme is set for and keep on working - that's what i'm doing the tought of losing pension if I take it early is just not acceptable to me.

cheers

fj

xylophone

http://www.web40571.clarahost.co.uk/archive/saga/2000_and_before/990202.htm

jem16

bigfreddiel wrote: »

well actually this is what happens when you take a fsp early

This is nothing to do with an actuarial reduction for taking a final salary pension early.

BobQ

rtzpillar wrote: »

Hi, I have been in my current job for 25 years and up until 2002 I was in the company's final salary pension until they decided they could no longer afford it and closed it. Recently, I have been looking into taking the final salary section of my pension early (at 58) and was extremely disturbed to find that the pension has a " claw back" clause whereby the company will deduct an amount which will equal about 45% of my pension, when I start to draw my state pension. I understand that this is legal and something that many larger organisations did to reduce their pension liabilities but I think it is quite wrong as it mainly affects low paid workers. If I was drawing a directors pension of £80kpa then £1.6k would be nothing but to me its a huge part of my pension. I have been advised what my final salary pension pot is worth if I want to take it now and transfer it to a money purchase scheme. Another alternative is to take it now at a reduced rate but at least I will get 100% of it until I reach 65. Where can I go to, to get the best advice where it won't cost me a fortune?I still intend to carry on working for another couple of years so I appreciate that any pension I take now will be taxable.

I can understand that if you draw any FS pension earlier than the schemes defined retirement age you will have it reduced for the rest of your life by an amount that increases the earlier you retire. This just reflects the fact you are spreading the available funds over a longer period.

But you are saying that they will also deduct the value of the state pension when you get it? If so it seems very unfair but if its in the scheme rules there is probably little you can do about it although it does seem to be a misrepresentation of the term final salary pension.

jem16

rtzpillar wrote: »

Another alternative is to take it now at a reduced rate but at least I will get 100% of it until I reach 65.

You won't get 100% of your pension no matter when you take it as the clawback will happen as it's in the rules.

Take it early and you will be subject to the normal actuarial reduction plus the clawback at age 65.

Take it at normal retirement age with no actuarial reduction plus clawback.

Where can I go to, to get the best advice where it won't cost me a fortune?I still intend to carry on working for another couple of years so I appreciate that any pension I take now will be taxable.

Best advice, if you are working still, would be to leave the pension till normal retirement age.

BobQ

xylophone wrote: »

http://www.web40571.clarahost.co.uk/archive/saga/2000_and_before/990202.htm

What has happened to the campaign since 1999. Was it ever tested in law as discriminatory?

xylophone

http://www.guardian.co.uk/theguardian/1999/apr/17/features.jobsmoney2
Some progress for certain pensioners.
http://www.scottishlife.co.uk/scotlife/web/site/BeeHive/BeeLines/BHBLJuly04Page130.asp from 2004
http://www.theyworkforyou.com/wms/?id=2012-03-26a.99WS.0
The practice is clearly still current despite campaigns to end it.

jamesd

You've been paying contributions into the scheme to get a pension amount that is mostly the rate that applies after state pension age, which is expected to be paid out for some 25 years. For a few years you will get more to help cover you until the state pensions start. Those few years aren't many compared to the longer time so to double your pension you'd also have to double lt the amount paid into the pension. Do you want to pay twice your pension contribution plus the amount that your employer has been paying to get the total contribution doubled and provide the money for this?

Those who benefit most from the boost to pensions for retiring early have lower incomes, the gain is less for those on higher incomes.

gamston

on the railway our scheme claws back 11/2 times the single state pension, which as you say hits the lower paid the hardest
that claw back could be any figure the pension committee decide