Scheme with normal retirement age of 60 refusing to pay deferred pension until 65

Seabee42

Cyberman60 wrote: »

Thanks for those replies folks. Seabee42, this is not early retirement as I will be at Normal Retirement age of 60 according to the scheme. I believe that the offsetting of benefits accrued against GMP is called 'franking' which apparently was made illegal on January 1st 1985 via the Health and Social Security Act 1984 (see legal timeline pre94 on Aries Pensions website ) so can it still now be used on deferred pensions ?

I'm tempted to contact the Pensions Ombudsman for his view on this. What do you think ?

Offsetting GMP increases against other benefits is called Franking.

Your situation is whether the scheme rules allows them to only pay out your benefits to meet preservation requirements. Your benefit at 60 is not high enough to cover the revalued GMP. Our deed has a subject to preservation rule in it. I do not have access to yours and you should specifically ask them to show you in the deed and rules why you cannot retire at your normal retirement date.

Even if they can you might get sympathy from the pensions ombudsman (due to being given misleading information) if you have letters telling you that you can take your benefit from 60. The process of applying to the pensions ombudsman is that you must go through your schemes disputes resolution procedure first.

Cyberman60

I cannot see how it can be fair for a deferred pensioner having supposedly built up benefits of a 10th of salary over six years to then have them disregarded at 60 (NRA) and only a GMP guarantee to be allowed at 65. That is obviously why the law was changed over the years as people were being scammed so I will take this further and let you know the outcome.

xylophone

When you left this employment, what were you told about your deferred pension? Was there a scheme booklet?

Cyberman60

Hi Xylophone, I was never given a scheme booklet as such but there is scheme documentation online that I have been able to view recently that appears to differ with the narrow view of the trustees. I have today contacted the pensions advisory bureau for their view and will contact the trustees again in due course. I also asked details of a transfer valuation just out of interest from the trustees last week which I am still awaiting and also for an estimated revaluation of the GMP (including their calculation methodology) which it seems they are reluctant to provide until I am much nearer 65. As I understand it GMP for my scheme would be revalued at 8.5% for each year since I left employment since 1979 as it comes under pre-1988 GMP. Can somebody confirm that I have this correct ?

SeekTruth

A few points:

It appears that quite a few pension administrators are reluctant to provide estimates of future GMP. I think HMRC are responsible for producing the final figure and presumably the pension administrators are concerned about complaints if their estimate is in error.

Pension schemes had a choice about the method of revaluation to apply to GMP whilst in deferment. Option 1, which I think most public sector schemes chose, increased GMP in line with Section 148 Orders (loosely speaking the rise in average earnings). Option 2, which I think most private sector schemes chose, increased GMP by a fixed percentage - the actual percentage depended on the date of leaving, but the OP is correct that if this method was chosen then the percentage was 8.5% for those leaving before April 1988. If I remember correctly the number of annual increases is one less than the number of complete tax years between date of leaving and age 60 for females and age 65 for males. I think that for a while there was an Option 3, but I can't remember what it was.

For those leaving a DB scheme in or before December 1985 there was no statutory right for benefits in excess of GMP to be revalued.

xylophone

Option 3, but I can't remember what it was.

Limited rate revaluation - http://www.barnett-waddingham.co.uk/news/2012/07/what-is-a-gmp/

Cyberman60

Hi Seektruth, yes I understand that there is no obligation to revalue anything other than GMP, but to hide behind GMP and deny any pension at normal pension age because this is lower than GMP at 65 seems extreme to me. Later changes of the law appear to bear this out as being deemed unfair and thus rectified since 1st Jan 1985 by banning Franking.

Another thing that crosses my mind is the irony in that if I was not contracted out of SERPS I would be probably be better off as I would surely get a pension at sixty plus the state additional pension at 65.

I would also add that my deferred pension is with a top six Bank !!

xylophone

Another thing that crosses my mind is the irony in that if I was not contracted out of SERPS I would be probably be better off as I would surely get a pension at sixty plus the state additional pension at 65.

Judging by the above, you might not have received any pension at all from your employer?

However, had you not contracted out you would have built up SERPS but this would only have been payable with your state pension.

You will be receiving State Pension under the single tier reform?

See https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/181237/single-tier-pension-fact-sheet.pdf

ScottyLP

Cyberman60 wrote: »

Hi Atush, the DBS scheme was closed to new members in 2012 and retirement age raised to 65 but people could remain retiring at 60 if they agreed to pay an extra employee 3% contribution. As a deferred member though I surely remain with the original 'Normal Retirement Age' of sixty as my terms cannot be varied. I mentioned this to the Trustees in my letter to them and they have not denied that being the case but are simply using the GMP guarantee as a get-out IMO.

Did you pay the 3% or just assume that because you were a differed member that even without paying it you'd still have a NBA of 60?

And if the latter was this a self made assumption or an assumption made on something you'd seen in print/been told?

hyubh

ScottyLP wrote: »

Did you pay the 3% or just assume that because you were a differed member that even without paying it you'd still have a NBA of 60?

And if the latter was this a self made assumption or an assumption made on something you'd seen in print/been told?

While the OP may have opted out of the pension scheme while staying an employee of the company, most people become a deferred member of a DB scheme because they get another job elsewhere. As such, changes concerning active members don't apply.

That said, the question is not whether the scheme rules changed, but what they were when the OP left. E.g., it is not impossible that the normal retirement age for deferreds was always higher than for actives anyhow - this is so in the current firefighters' scheme, for example, where actives are 60 and deferreds 65.