Santander Pension Query

Stezzy

I worked at Girobank/Alliance and Leicester for 21 years until 2001. The company has since been taken over by Santander.

On 27th May 2011 I received a letter complete with Santander logo from the then administrators Mercer. I was told that if I completed an early retirement request I would be entitled to a lump sum of £33,369.73 plus £5,005.44 p.a. in October 2011. I was also informed that if I waited until December 2014 (my 60th birthday) the estimated payment would be £43,677.69 plus £6,551.70 p.a.

I decided to be prudent and wait.

After a change of circumstances in early 2013, I contacted Mercer again for another quote. I was informed that if I completed the documentation I would be entitled to a lump sum of £40,314.52 plus £6,047.40 p.a. It would be £44,030.51 plus £6,604.58 on my 60th birthday. Pretty much in line with the previous figures I again decided to wait.

JLT took over as Alliance & Leicester Pension Scheme administrators in March 2014. I received a letter from them yesterday stating that I can expect a lump sum of only £35,910.15 when I am 60, with an annual pension of just £5,386.52.

It would seem to me that either Mercer or JLT has made a miscalculation somewhere along the line. If Mercer has made the errors am I entitled to some form of compensation from them, Santander or both? All of my big financial decisions for the last three years have been on the basis of the quotes that they have provided me with, My lump sum is apparently to be more than £8k less than I have been lead to believe, and I will be getting £1.3k less every year! Had I cashed in on either of the early retirement settlement figures I was quoted I would be considerably better off - and it seems to me that I have been misled at best!

I also wonder whether any other ex-Girobank/Alliance & Leicester staff have been let down in this way.

Can anyone offer any advice on what options may be open to me?

xylophone

It would seem that on the two previous occasions, you were provided with "estimates" - a weasel word?

At all events, you could write to the scheme administrator citing the estimates you were previously given and asking the reason for the discrepancy?

Stezzy

I don't believe they were estimates. The amounts stated on the documentation that I still have were appropriate to me making an early settlement in 2011 or 2013. I understand that the amounts relating to my 60th birthday were estimates.

Zelazny

You should definitely query it - something big must have changed in their calculations.

Unfortunately, if the statements from Mercer were wrong, there's probably not a lot you can do about it. If you had taken the money, they would now be within their rights to reclaim any overpaid amount (anything paid within the last 6 years, anyhow).

sandsy

Agree with Zelazny that you should query it.
My guess would be that they've assumed an inflation rate for revaluing the benefits each year when providing you with estimates and the actual revaluation orders are lower than the estimate.

PeacefulWaters

It sounds like they've applied an actuarial reduction for early retirement when they shouldn't have.

Ask them to double check that they've got your normal retirement date correct.

meantime

Resurrecting an old thread as I'm in the same position as the OP as a former Girobank/A&L employee. I've received the following explanatory letter from Santander's pension manager. Do I have any option than to accept the lower figures?

Dear Mr xxxxxx

Santander (UK) Group Pension Scheme - Alliance & Leicester DB Section ("the Scheme")

I refer to our recent email correspondence regarding the difference between the pension figures quoted to you in 2011 and in 2014. I have set out below the reason for the difference.

(i) Legal requirements for Guaranteed Minimum Pensions (GMP)

The GMP is the minimum pension which must be provided by a contracted-out pension scheme in respect of pre-6 April 1997 service.

In order to maintain its value, the GMP is subject to statutory revaluation requirements. Legislation requires the GMP to be revalued at GMP payment age (65 for a man and 60 for a woman).
The pension payable at GMP payment age in respect of pre-6 April 1997 service must not be less than the revalued GMP.

(ii) Change of practice for increasing GMPs

Under the rules which apply to your benefits, the Trustee has discretion as to the amount, terms and conditions of an early deferred pension, including whether early payment is permitted.

Prior to March 2014, where a member took their deferred pension before GMP payment age, revaluation was applied at the date the pension started, rather than at GMP payment age. This practice was different from the statutory revaluation requirements explained above.

In March 2014, the Trustee exercised its discretion under the rules-to change the practice of revaluing GMPs for members who draw pension before GMP payment age, to bring this practice in line with statutory revaluation requirements. Since March 2014, revaluation increases have been applied to the GMP at GMP payment age and a check is carried out to ensure that the pension attributable to pre-6 April 1997 service is equal to the revalued GMP.

The Trustee considered the position of members who would have received statements which assumed that GMP revaluation increases would be applied at the date the pension started. The Trustee determined that early payment quotations would be honoured for any members who had already formally accepted a quotation but not for any other members.

The Trustee's reasons for making this change included:

• The Trustee was advised that the previous practice was common in the past but now the new practice is more usual.

• The A&L Section of the Santander (UK) Group Pension Scheme has a substantial deficit. As at 31 March 2013 this was £135 million on an ongoing basis and over £1 billion on a discontinuance (or winding up) basis. The Trustee and the Company are working to improve the funding position in the interests of all members. The Trustee considers that it is not in the interests of the benefit security of all the members to payout benefits which are greater than the rules or the law require.

Decision

The Trustee cannot honour the earlier quotation. I am sorry that it is not the outcome you want. In recognition for any inconvenience and distress I would like to offer you an ex gratia payment of £200. If you wish to accept this offer, please sign the attached copy of this letter and return it to me at the above address. Payment will then be made as quickly as possible.

If you wish to accept this offer, please sign and return the enclosed and provide me with the following details:

• Account Name

• Sort Code

• Account Number

• Building Society Roll Number if applicable.

If you are not satisfied with this response, you have the right to complain through the Scheme's Internal Dispute Resolution Procedure (IDRP). The form to enable you to do this is enclosed. Please note that you would need to provide evidence of actual financial loss as a result of reliance on the information previously provided about GMP revaluation in order to receive higher benefits than those payable under the Scheme's rules (please see the "Details of Complaint" section of the form for more information.

The Pensions Advisory Service (TPAS) is available to assist members and beneficiaries of schemes in connection with any difficulty with the scheme and can be contacted at:

The Pensions Advisory Service 11 Belgrave Road London SW1V 1RB
Telephone: 0845601 2923

The Pensions Ombudsman may investigate and determine any complaint or dispute of fact or law in relation to a scheme and can be contacted at:
The Office of the Pensions Ombudsman 11 Belgrave Road London SW1V 1RB
Telephone: 02076302200
Yours sincerely

xxxxxx xxxxxx
Scheme Pensions Manager

I accept the offer of £200 in full and final settlement of the above dispute.

Signed ................................ Date .....................

xylophone

http://www.barnett-waddingham.co.uk/comment-insight/blog/2014/08/18/what-is-a-gmp/

http://www.barnett-waddingham.co.uk/comment-insight/blog/2012/07/24/revaluation-for-early-leavers/

When you left service, what was your pre 88 GMP, post 88 GMP
and excess?

What was said about the method of revaluation in deferment?

Was Scheme Pension Age 60?

Are you male?

xylophone

http://forums.moneysavingexpert.com/showthread.php?t=4736856&highlight=cod+gmp&page=9

post 165 might be of interest.

The OP was male and a deferred pensioner of the Barclays Scheme which had a Scheme Retirement Age of 60.

The Scheme revalued by Fixed Rate.

Notice that retiring at 60 he received his revalued excess and unrevalued GMP.

At 65 there is a step up.

How does the Santander Scheme match up?

xylophone

http://www.actuarialpost.co.uk/article/jlt-appointed-by-santander-for-pensions-admin-6045.htm

Do you have access to BenPal? Does it throw any light?

meantime

xylophone wrote: »

When you left service, what was your pre 88 GMP, post 88 GMP
and excess?

What was said about the method of revaluation in deferment?

I've mislaid any documentation from when I left service, but I don't remember there being any mention of GMP (which doesn't of course mean that there wasn't).

Was Scheme Pension Age 60?

Yes

Are you male?

Yes