Pension uncertainty

Kendall80

I have contacted the pension provider with these queries but they are being very coy it would seem... when they do respond that is.


I worked for a company between 2003 and 2008 that had a defined benefit scheme. I only contributed 2k in that time.


The defined benefit aspect of the scheme was withdrawn in 2010 so my first query is would I have been 'locked in' on the DB scheme?


On my last statement (2008) it said I'd have a pension payable at age 65 of £8700 per year - not bad for just contributing 2k. It is not clear if this figure is arrived at by assuming continued membership/employment. If that is locked in I'd happily keep it there.


However, if this is not guaranteed I would very much like to take control of it myself. With that in mind I asked for the relevant forms. They appeared quite keen at that point, still without divulging the requested information.


The transfer cash value I was quoted was 17000 - which again isn't bad for just £2000 contributions.


So essentially I'm stuck in between keeping it or transferring it and I don't seem to be able to gather the required information on any locked in benefits to make an informed judgment.


I'd appreciate any thoughts on the matter. If it helps, the pension is with Hanson/Heidelberg (Civil and Marine before takeover) - run by Capita.

hyubh

I worked for a company between 2003 and 2008 that had a defined benefit scheme. I only contributed 2k in that time.

Your personal contribution isn't directly relevant, and may only serve as a very rough guide at best.

The defined benefit aspect of the scheme was withdrawn in 2010 so my first query is would I have been 'locked in' on the DB scheme?

Yes, the change to DC wouldn't have been retrospective.

On my last statement (2008) it said I'd have a pension payable at age 65 of £8700 per year - not bad for just contributing 2k. It is not clear if this figure is arrived at by assuming continued membership/employment.

It should say on the statement. What was your leaving salary? If the DB scheme was a final salary one the pension due would likely be (roughly) your leaving salary (make it a full-time equivalent if a part timer), mutiplied by the number of years/part years you were a member (pro-rated down for any periods of part time working), multiplied by a fraction (typically either 1/60 or 1/80).

If that is locked in I'd happily keep it there.

It would be likely best left regardless.

However, if this is not guaranteed

If it's DB, then whatever the amount is, is indeed essentially guaranteed. Both the pension fund itself and the sponsoring employer would need to go bust for it not to be 100% guaranteed, but even then there's the PPF which would still get you most of it (https://www.pensionprotectionfund.org.uk/).

With that in mind I asked for the relevant forms. They appeared quite keen at that point, still without divulging the requested information.

Not saying they shouldn't have responded more properly, but did the deferred benefit statement you received not come with any accompanying notes? Moreover, did you get a scheme booklet when you joined, and if so what does it say about the basis of the benefits?

The transfer cash value I was quoted was 17000 - which again isn't bad for just £2000 contributions.

Again, your personal contribution isn't directly relevant - the 17000 isn't the 2000 'grown' in any way.

I'd appreciate any thoughts on the matter. If it helps, the pension is with Hanson/Heidelberg (Civil and Marine before takeover) - run by Capita.

So, private sector DB? In which case your personal contribution is even less likely a good guide to the benefits earned than in a public sector DB scheme like the LGPS or TPS.

kidmugsy

Kendall80 wrote: »

However, if this is not guaranteed I would very much like to take control of it myself.

By golly, that could prove an expensive hobby.

dunstonh

The defined benefit aspect of the scheme was withdrawn in 2010 so my first query is would I have been 'locked in' on the DB scheme?

You say you left in 2008. So, closing it to new members in 2010 will have no impact on your pension.

However, if this is not guaranteed I would very much like to take control of it myself.

The base figure is guaranteed but there will be an indexation which is unknown.

The transfer cash value I was quoted was 17000 - which again isn't bad for just £2000 contributions.

But pretty rubbish if the income level is £8700

Kendall80

Thanks for your replies.

@hyubh: Yes I did get a scheme booklet but the company I was with initially underwent 2/3 takeovers within the 5 years I was there. the format of the statements changed greatly, along with the information contained within.

@Dunstonh: Yes it does seem rather rubbish and according to online calculations 17k TICV would indicate a greatly lower expected pension.

As i'm only dealing with a small amount i'm heavily leaning towards transfer to a SIPP. However, I will definitely wait til i've obtained a satisfactory answer from capita regarding the pension at age 65.

xylophone

I did get a scheme booklet

What does it say about pensions in deferment?

What information has been supplied since about your deferred benefits?

At all events, if you are a deferred member of a final salary pension scheme see

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

The reference to GMP does not apply to your situation.

Presumably when you come to draw your pension it will also be increased in payment by RPI/CPI according to the rules of your scheme.

dunstonh

@Dunstonh: Yes it does seem rather rubbish and according to online calculations 17k TICV would indicate a greatly lower expected pension.

This is one of the reasons why defined benefit schemes are seen as much better value for money (based on the amounts actually paid by the member). it is also why over 90% of the time, people should stay in the defined benefit scheme.

PensionTech

On my last statement (2008) it said I'd have a pension payable at age 65 of £8700 per year - not bad for just contributing 2k. It is not clear if this figure is arrived at by assuming continued membership/employment. If that is locked in I'd happily keep it there.

That would seem rather high for 5 years' service. Even if it was a 60ths scheme (which would be quite generous), you'd have had to command a salary of over £100k for £8,700pa to be your accrued pension (which you may well have done! - but the odds suggest otherwise). In my experience DB active benefit statements do tend to assume continued membership to NRA so that figure probably doesn't represent the pension you actually earned by the time you left. I think your preserved pension will turn out to be a fair bit lower, particularly if your CETV is £17,000. Whatever it is, it will indeed be "locked in" albeit at a lower level (and it'll continue to increase in preservation and then in payment), and it's still unlikely to be a good idea for you to move it.

As people have said, your personal contribution doesn't really relate to the level of your benefits from a DB scheme - but it certainly helps you to appreciate how valuable a DB pension is.

With regard to Capita - they should have provided you with a statement of your preserved benefits when you left the scheme, and by "should" I mean "were required to by law". If that's gone missing then it should be no big deal for them to reprint the 2008 statement and send it out, even if they're dragging their heels in calculating the revaluation up to 2014.

Kendall80

xylophone wrote: »

What does it say about pensions in deferment?

What information has been supplied since about your deferred benefits?

At all events, if you are a deferred member of a final salary pension scheme see

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

The reference to GMP does not apply to your situation.

Presumably when you come to draw your pension it will also be increased in payment by RPI/CPI according to the rules of your scheme.

It says very little about deferred pensions and was superseded within a year by the takeover company - for whom I do not have a scheme booklet

I will have a look at that site you linked.

Yes the pension was to increase at 5% a year for inflation but I do remember receiving correspondence that due to new legislation that was to be reduced.

Kendall80

PensionTech wrote: »

That would seem rather high for 5 years' service. Even if it was a 60ths scheme (which would be quite generous), you'd have had to command a salary of over £100k for £8,700pa to be your accrued pension (which you may well have done! - but the odds suggest otherwise). In my experience DB active benefit statements do tend to assume continued membership to NRA so that figure probably doesn't represent the pension you actually earned by the time you left. I think your preserved pension will turn out to be a fair bit lower, particularly if your CETV is £17,000. Whatever it is, it will indeed be "locked in" albeit at a lower level (and it'll continue to increase in preservation and then in payment), and it's still unlikely to be a good idea for you to move it.

As people have said, your personal contribution doesn't really relate to the level of your benefits from a DB scheme - but it certainly helps you to appreciate how valuable a DB pension is.

With regard to Capita - they should have provided you with a statement of your preserved benefits when you left the scheme, and by "should" I mean "were required to by law". If that's gone missing then it should be no big deal for them to reprint the 2008 statement and send it out, even if they're dragging their heels in calculating the revaluation up to 2014.

Indeed, it does seem high. Its more likely to be around 1k per annum (ish). With that in mind, the 17k transfer offer may be the best decision here as I can invest that in a SIPP and significantly add to it over the next 25 years. Greater flexibility too.

Regarding the statement of preserved benefits, I do not recall receiving any such correspondence from Capita on leaving the scheme but I shall get onto them as soon as possible. Thats a crucial piece of information which my decision hinges on.

dunstonh

In 2008 when you got your statement, were you still an active member of the scheme? I wonder if the 8k figure is based on you still working for them.