Dad passed away - pension contracted out??

sophie131

Hiya,

My Dad recently passed away. He had a frozen pension with Canada Life.

My Mum recently got a letter saying that she would receive £12 a week as a contracted out pension payment.

Can someone explain this a little please, does this mean his pension with Canada Life is worth £12 a week to my Mum or is this something additional/different?

Thanks for any help

jamesd

Was your dad ever an employee of Canada Life or any firm that they took over? It's those people who may have had a frozen final salary or similar defined benefit pension with them.

Alternatively, did he have a personal pension that he purchased from them? Have they mentioned the word annuity at all?

Had he ever taken any income or lump sum from the pension?

It appears from the words "contracted out" that it wasn't a frozen pension - which always means for employees - but rather a personal pension pot that he'd accumulated after contracting out of the state second pension and/or SERPS. Assuming that this is correct, it would also normally be an option for your mum to get the whole pension pot paid to her as a lump sum, with no tax to pay. She could then choose what to do with it.

It is possible that the Canada Life product has not been updated to offer the latest options and that they are merely offering what their product allows, without mentioning any other possibilities.

It would be good to know more about the whole content of the letter except names of people and also to know more about the nature of the pension than the letter might say. It's fairly likely that it is not in your mum's best interests to accept the offer of an income from Canada Life. It's normally the case that the open market for annuities that pay an income will payout more than the first offer from the firm that held the money. That sometimes isn't the case if there is something called a guaranteed annuity rate attached to the pension that the firm provides also in the case of death. These rates can be substantially higher than the current market rates for annuities.

sophie131

Thanks for your help so far - my Mum is out tonight - I will look at the letter tomorrow and see exactly what it says and put the info back on here.

Thanks so much - things can be so confusing!

sophie131

Hello,


I don't have the original letter about the Canada life pension but I do have the letter from HMRC.


The letter states:


According to our records your late spouse was contracted out of the additional part of the State Pension scheme and they had an employer's pension or private pension at some point during their working life since 1978.


As a result, your late spouse has built up a private pension. Part of this includes an amount we refer to as the contracted-out deduction.The total weekly COD is, broadly speaking, the amount of additional pension your late spouse would have received from the State if they had not been contracted out.


Who will pay this part of the pension?
On the pages attached you will find details of the periods that your late spouse was a member of an employer's or private pension scheme, along with the last known pension scheme names and addresses, as shown on our records. However, if your late spouse transferred their benefits to another pension scheme you may hold more up to date details.


Your total weekly COD is £12


If you are already in receipt of your late spouse's employer's/private pension, toe COD amount shown above is already included and will not be paid as an additional amount.

IF you are receiving bereavement allowance, please ignore any reference to COD as it does not include and additional pension. We have sent you this letter to tell you the pension providers details for your late spouses pension.


What does this mean for me?
You will receive a pension from your late spouses pension scheme as well as your state pension. If any of your late spouse's pension rights have been paid as a lump sum instead of a weekly pension, this will already have been taken into account when calculating your state benefits.










I hope this letter helps a bit - the part in red is because my Mum is receiving bereavement allowance - I didn't see this part before and it has confused me even more making me think that this letter actually doesn't mean anything!!


If it helps any my mum is in her 50's and so was my Dad so neither had claimed any pension previously.




Thanks so much for any help!

jamesd

Thanks. The next thing to do is ask Canada Life to say:

1. What type of pension it is? Personal? Retirement annuity contract? Something else?
2. How is the money invested?
3. What is the transfer value?
4. Was there a guarantee annuity rate? Did it also apply to an annuity for a spouse?
5. Is a lump sum death benefit of 100% of the pot value available? It not, why not?
6. Do Canada Life offer any options other than purchasing an annuity?
7. Is there anything about the pension that prohibits a transfer that would get the spouse the full modern range of options?
8. Any other observations that they care to make about this product that may be helpful in deciding what to do?

Debt_Free_Chick

@ jamesd

Canada Life used to be one of a small number of providers of S32 policies. It could be that the policy is worth very little, but the guarantee to pay the GMP has applied.

HTH

jamesd

Yes, it could be. I considered including section 32 in question 1 but went with "something else?" instead. If GMP is involved then it might well be a better deal just to take the income.

sophie131

Thanks for your help so far!

Now in terms of this £12 odd a week, my mum is receiving bereavement allowance, does this mean she doesn't get this £12 a week?

If this is the case, will she receive it when she stops receiving bereavement allowance?

xylophone

https://www.gov.uk/bereavement-payment/overview

Your mother has received the Bereavement Payment and will receive the Bereavement Allowance for 52 weeks as above?

These payments have nothing to do with your father's pension arrangement with Canada Life.

Have you actually been in contact with Canada Life to advise them of your father's death?

Did your father ever work for Canada Life (and so was a deferred pensioner of a Canada Life Pension Scheme for its employees) or did he simply have a pension policy with the company?

If the former, what documentation did your father have about a deferred pension? If the latter, have you found the policy document among your father's papers?

Given the information from HMRC, it is possible that your father had a S32 policy with GMP - see here http://www.financialadvice.net/s32_buy_out_plan/zone/1288

But your first step must be to contact Canada Life.

xylophone

http://www.canadalife.co.uk/canada-life/ExistingCustomers/Forms/DeathNotification.asp

Might be necessary.