Small final salary pension

Daniel54

dbrookf wrote: »

How come it is 'risk free'?

There is no investment risk to the deferred pensioner -the enhancement is calculated by the scheme actuaries to reflect the "value" to the scheme of not paying the pension in the first or subsequent early years.

Of course the risk is that you don't live long enough to recoup the pension payments you would have received without deferment

agarnett

rpc wrote: »

The only person in this thread who has mentioned a GMP is you. OP may not have an has not mentioned any GMP.

Well I think one or two others have mentioned it now. Old deferred final salary scheme benefits seem to usually/if not always include GMP, right?

Plus I myself have an old one like that. 10 years worth of employment start salary around £3K, leaving salary around £15K, non-contributory, transfer value (if that is an indicator of final result) seemed to be growing surprisingly well last time I looked, but the risk is for how long can the old employer in its current guise sustain it I guess. Current transfer value maybe £200K+

OP suggests that he is approaching the scheme NRA anyway so it should all be made up. While I don't know too much about GMPs (I'm not that old) I'm pretty sure that they don't keep getting revalued beyond age 60/65.

Now that is a question I would be interested to hear the answer to ... Daniel54 has alluded to one provider's response ... is that fairly typical, do we think ?

Daniel54

agarnett wrote: »

Now that is a question I would be interested to hear the answer to ... Daniel54 has alluded to one provider's response ... is that fairly typical, do we think ?

To be clear.I was talking about a private sector DB scheme with an NRA of 60,same as the OP and as per my original post

The GMP element is only payable at age 65 and I can see no option that this can be deferred,even if I wished to.

I think discussion of the GMP is a red herring in relation to the OP taking or deferring his main pension at the age of 60

agarnett

Daniel54 wrote: »

To be clear.I was talking about a private sector DB scheme with an NRA of 60,same as the OP and as per my original post

Same here - there's a lot of us aged 55+ in that particular type of boat, I reckon

The GMP element is only payable at age 65 and I can see no option that this can be deferred,even if I wished to.

Now that is an interesting observation, so thank you again for that reminder.

I think discussion of the GMP is a red herring in relation to the OP taking or deferring her main pension at the age of 60

I believe I understand your point, assuming we take the contents of the OP's post as a closed summary of her (two only) options, but if she is anything like me, then she might be thinking:

1. the pension numbers in the forecast really are small and unexciting in projected future income terms for both options
2. in light of the new rules (for better or worse ... we don't really know yet in relation to deferred DB pensions?) then perhaps there is a third or fourth option involving transferring the thing
3. sooner (before April 2015), or
4. later before NRA or age 65
   and releasing cash in far more flexible ways from a different type of pension ?

To be honest, if it isn't the law already, I believe DB providers sending letters to people like the OP fast approaching NRA should be obliged to tell them that other options exist if they transfer the money, in much the same way that (I think?) DC schemes have to advise that annuities can be bought from competitors at NRA.

I guess the only reason they haven't been forced to yet is because we are still conning ourselves that the pensions devil we know is better than the myriad of one(s) crawling out of the woodwork that we don't ...

I am kind of glad I am not 60 this year and being forced into a decision before the new rules pan out. On the other hand I am over 55 and am wondering if my particular deferred DB scheme has now been ridden as hard as it can be, might keel over anytime soon, and so might I be advised to be changing horses before April ? That's especially if I think I can grow that transfer value, or better employ it now, somewhere else entirely. I am slightly worried that with my one (only) deferred DB scheme, my transfer options / cashing in options may become more restricted after April ... does that make any sense?

Maybe a premature transfer would make no sense if behind the scenes the GMP provision is ensuring that the transfer value is growing much better than most alternative investments currently ?

Maybe the OP can say if she has thought of any options beyond the two her provider has put under her nose, and others can say whether it would be crazy or not to consider creating wider options by a timely transfer (if possible)?

What I am actually thinking might best be summed up as

"When is a small final salary pension on paper just before NRA, not a small final salary pension?"
"When it is a large transfer value bolstered by GMP provisions, for example?"

xylophone

OP, are you male or female?

Were you employed by the company between 1978 and 1997?

Was the scheme a Contracted Out Salary Related Scheme?

See 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/

I am assuming that you no longer have the scheme booklet but you might find it on the internet if you type the name of your scheme into Google.

dbrookf

xylophone wrote: »

OP, are you male or female?

Were you employed by the company between 1978 and 1997?

Was the scheme a Contracted Out Salary Related Scheme?

See 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/

I am assuming that you no longer have the scheme booklet but you might find it on the internet if you type the name of your scheme into Google.

Am female, started work (Midland Bank) 1973 till 1981, contracted out...

xylophone

Re Scheme booklet.

http://www.futurefocus.staff.hsbc.co.uk/deferred-dbs-home/library?WT.ac=HBEU_def_dbs_library

Tab down to Midland and download the PDF.

and re new state pension https://www.gov.uk/new-state-pension/overview

https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/210299/single-tier-valuation-contracting-out.pdf

dbrookf

Have had a reply from HSBC, if anyone can explain it to me, it would be much appreciated as all this is a bit over my head, I'll be honest!!

Quote
Deferring your pension payments

You may defer taking your benefits past age 60 but as on 1 May 2015 you will be entitled to receive the GMP element of your pension, the payment of this element of your pension will depend on your employment status at GMP Age.

If you are not in active employment at GMP Age, then this element of your pension should commence on 1 May 2015.

Alternatively, if you intend to continue in employment after age 60 you have the option of deferring this element of your pension until the date you cease employment.

Please complete the enclosed form of consent to confirm your intentions.

Late Retirement

As you know, your pension will normally be paid once you reach normal pension age (NPA).

Your pension is generally eligible for increases between the date you left service and the date the pension normally becomes payable. Different increases apply for different parts of you pension. Some of the increases are required to be provided under the rules of the scheme, some are awarded on a discretionary basis and some are required by legislation.

In calculating your late retirement pension, the pension you would have been entitled to at NPA would be adjusted to reflect the fact that it is expected to be paid for a shorter period of time and for the additional pension increases that would have been awarded when the pension came in to payment at your NPA.

The Trustee has the discretion to decide the adjustments to be made to your pension if you retire late, although they need to ensure certain statutory requirements are met. It is the Trustee’s current policy that your late retirement pension is calculated to be at least equivalent in value to the pension you would have been entitled to had you retired at the NPA.

This value comparison calculation is performed for each member individually, based on your benefit entitlements and any statutory underpin which applies to you. However, for most members, the pension might be expected to be increased by up to 9% for each year that has passed between your NPA and retirement. This increase will take in to account all of the relevant details of your pension entitlement (for example, the rate of annual increases which are required and any benefits which may be payable to your spouse) so different increases may be applied to different elements of your pension.

Please note this uplift factor should only be seen as an guide and your actual uplift quoted depends on your specific benefit entitlements and increases to those entitlements.

xylophone

You should read the guide, taking note of the fact that as you are a female member who joined before 1.1.75 you are directed to APPENDIX 2.


GMP is explained in the link in my previous posts (and see p 3 of the Guide).



If you look at page 21 of the Scheme Guide, it covers deferred benefits but as far as I can see, the state pension reduction will not apply to you because you joined before 1974. (See page 4 of Guide).

You need to clarify what is meant in the letter by "employment" - does it mean employment with the bank or any employment?

With regard to "rules of the scheme, discretionary, required by legislation, statutory underpin" etc, see the Barnett Waddingham links on GMP and revaluation in deferment and your own scheme guide.

With regard to increases on your GMP, (all pre 1988), the scheme is not obliged to pay inflation linked increases after GMP age (60 for women).

It would not appear that these will be paid with your state pension once it comes into payment under the new state pension. See BW link. You might need to clarify this with the Scheme Administrator.

With regard to your personal situation, you need to ask the administrator for some sample calculations.

dbrookf

xylophone wrote: »

You should read the guide, taking note of the fact that as you are a female member who joined before 1.1.75 you are directed to APPENDIX 2.


GMP is explained in the link in my previous posts (and see p 3 of the Guide).



If you look at page 21 of the Scheme Guide, it covers deferred benefits but as far as I can see, the state pension reduction will not apply to you because you joined before 1974. (See page 4 of Guide).

You need to clarify what is meant in the letter by "employment" - does it mean employment with the bank or any employment?

With regard to "rules of the scheme, discretionary, required by legislation, statutory underpin" etc, see the Barnett Waddingham links on GMP and revaluation in deferment and your own scheme guide.

With regard to increases on your GMP, (all pre 1988), the scheme is not obliged to pay inflation linked increases after GMP age (60 for women).

It would not appear that these will be paid with your state pension once it comes into payment under the new state pension. See BW link. You might need to clarify this with the Scheme Administrator.

With regard to your personal situation, you need to ask the administrator for some sample calculations.

Thanks! Really appreciate the time you have taken. Will read all documentation and try and get my head round it and go back to the administrator if need be.