Worked for Tesco for 7 years, only in pension for 18mths, lose their contributions?

*Kat*

IDK how this is fair?! I get it...I've not been in the Tesco pension scheme for 2 years, but...I worked for them for 7!!!

So now I've lost 11% worth of contributions - what a waste of money!

*sadface*

My pension is only worth...£488 refund, less NI and Tax, OR £403.96 if I transfer.

"While you were in the Pension Scheme you were "contracted out" of the State second Pension and so paid lower NI. If you choose to take a refund we will pay to buy back your State Second Pension."

Honestly, I'm thinking of getting a refund and paying off my credit card. I am contributing to my new work pension with SW

Linton

Sorry dont understand what you are unhappy about. If you are being refunded £488 - NI/ Tax, isnt that what you paid in? What is the 11% ?

mania112

What's unfair about getting back what you put in?

noh

According to the website http://www.pensionwebsite.co.uk/leaving-us/
You have the option of return of premiums or transfer out to another scheme.
Nothing is lost.

*Kat*

Tesco's contributions are lost...

I'm getting back what I put in, which is awesome, but at the same time, I kinda wish you could keep Tesco's contributions!!

*Kat*

How can I work out the NI and Tax

Linton

*Kat* wrote: »

Tesco's contributions are lost...

I'm getting back what I put in, which is awesome, but at the same time, I kinda wish you could keep Tesco's contributions!!

As I understand it Tesco has a Defined Benefits pension scheme. If that is the case Tesco havent actually contributed 11% to your pension pot. You dont have one, everybody's pension is in one big pot. I guess the 11% of all wages figure would be what Tesco believe they have to pay to meet all the long term commitments.

If you had a defined contribution scheme you do build up a personal pot and in that case the employers contributions would form part of your pension to be transferred elsewhere, though not as a cash lump sum to you.

hyubh

*Kat* wrote: »

IDK how this is fair?! I get it...I've not been in the Tesco pension scheme for 2 years, but...I worked for them for 7!!!

I don't see why you think periods of non-contributing service should matter. Why weren't you in the scheme earlier? (The Tesco one is very good, akin to a public sector scheme in generosity.)

So now I've lost 11% worth of contributions

This is the employer contributions I assume? It's perfectly normal for DB scheme refunds to be net of employer contributions.

what a waste of money!

It wasn't really your money in the first place - membership of the scheme meant you were earning a specific amount of pension that Tesco would be duty-bound to fund if regular contributions and investments weren't enough to pay for it. As such, contributions pertaining to everyone went into the same 'pot'. (Emphasising the point, in some private sector DB schemes, there isn't an actual 'employer rate' as such at all - instead, the employer makes a lump sum contribution every three years.)

"While you were in the Pension Scheme you were "contracted out" of the State second Pension and so paid lower NI. If you choose to take a refund we will pay to buy back your State Second Pension."

Beyond the scheme (and therefore its members) being contracted out in the first place (although, again, this is normal for DB schemes), Tesco have no choice in this - if you get a refund, then the legal rational for the lower rate of NI while you were a member of the scheme goes away, and you are retrospectively put back into the State Second Pension.

atush

What is unfair is how unfair you were to yourself.

For not joining the pension earlier. You have now given away 7 years of a DB pension. Worst financial decision of your life possibly.

hyubh

*Kat* wrote: »

How can I work out the NI and Tax

While a member of the scheme, you would have paid income tax on your gross pay less your pension contributions (and the personal allowance); your NI contributions would then have been from gross pay, but at a rate of 10.6% rather than 12%, and with an additional rebate of £2.42 a month (for historical reasons, the contracted out rebate starts a bit before you actually start paying NI contributions). That said, this assumes you worked neither tiddly hours on crap pay nor full time on excellent pay.

Perhaps the easiest way to work out the difference is to use an online calculator, entering the same numbers but with NI category D (= contracted out) the first time around and NI category A (= contracted in) the second.

dunstonh

IDK how this is fair?! I get it...I've not been in the Tesco pension scheme for 2 years, but...I worked for them for 7!!!

So, you only paid into it for two. If you wanted 7 years worth of membership the you should have joined it earlier. It is not unfair. it is logical. It was also a very very bad decision on your part to defer joining.

So now I've lost 11% worth of contributions - what a waste of money!

You havent lost your contributions. You may lose the employer contribution if you take it back as a refund but if you transfer it then the employer contriubtions are usually kept by you.

Honestly, I'm thinking of getting a refund and paying off my credit card. I am contributing to my new work pension with SW

Typically, the loss of employer contribution would make that a very bad move. However, we would need to know figures to verify that.