Old Plan with DB and DC/MPP - restricted options?

adspence

I have an old pension plan that I'm no longer contributing to (not for 20 years actually). The plan was a final salary DB scheme, but I also transferred money as an MPP from a previous employers scheme

The people who run the plan (Towers Watson, on behalf of Citigroup) are telling me that I cannot transfer the DC pot on, say, a SIPP, without also transferring the DB part as well. This doesn't sound right to me. They even indicated that if I was to leave the DC pot with them then the only options at retirement age would be to purchase an annuity with them or another provider. Surely I should just be able to move that money to a SIPP/PP or simply take it all out (under the new rules), and if that is the case at retirement, then why isn't that an option now.

The DC pot isn't a huge amount of money, but I'd like to manage this myself from now on, rather than being restricted by the fund choices that they have.

Are they right? Or is this some arbitrary limitation by the plans trustees? There seems to be no reason why the DB and DC parts should be linked in any way.

xylophone

Do you mean that you transferred a defined contribution pension into a defined benefit pension?

Did this not mean that you bought benefits in the DB scheme so that to all intents and purposes you just have one deferred Defined Benefits Pension? The DC pension no longer exists as a separate entity - you just happen to know its value on transfer in?

This would mean that at scheme pension age you can draw your benefits according to scheme rules, rather than "receive an annuity"?

You can now request a transfer out (of the whole, because it is one pension now) into a DC scheme of some description but assuming the CETV is greater than £30,000, will require advice from an IFA qualified in Pension Transfers?

Or have I misunderstood?

adspence

No, sorry, that isn't what I meant, the MPP piece is definitely not part the DB portion. I know the funds it is invested in, and can make changes to those (within the constraints of the funds that are listed). The yearly report has an "MPP account summary" and a Final Salary Benefits summary. They are listed separately...but they are saying I have to transfer both, or neither.

They are going to send me the details of the CETV of the DB part - it is currently stated as ~£3500/year at NRA (65 in this instance). But I really would like to leave that alone, I like the idea of at least some guaranteed income on retirement. It is the MPP part that I want to move.

I really wish I had never moved the cash from the original plan into this one, as it seems that when I did they glued the two together and won't split them again even though they are basically unrelated. If I'd left it in the original plan then I suspect it would have been trivial to move that...rather than this mess. It was a long time ago, and I really can't recall what the options were at the time.

xylophone

Do you mean that you worked for a company that closed its DB Scheme and replaced it with a Money Purchase Pension, perhaps contracted out?

You left the company,and both schemes were administered by Citigroup but are now administered by TW?

Otherwise I cannot see how the MPP would be connected in any way to the DB scheme?

adspence

It is confusing, and thanks for bearing with me as I try to explain the mess.

I left a company, joined another (which would ultimately become part of Citigroup), and moved the previous company pension as an MPP to the new scheme. But it was an always was separately referenced as far as I recall.

I really have no clue what took place back in 1990 when I joined the company that eventually became Citigroup (via all sorts of mergers since I left) and transferred the funds in from my first employers scheme. There is a convoluted sequence of who ran the plans, culminating with TW who have only recently been running it (and finally taken it online so I can actually see what is going on with it better than I have or have not for the last 20 years since I left).

I'm only now getting to grips with all my various pension pots, and I'm just thankful that the MPP piece is a minor part of my overall DC pots, but that doesn't mean that I don't want proper and free access to it.

xylophone

Have you asked TW how the MPP is connected to the DB?

greenglide

So the relationship between the two components is similar to between a DB scheme and AVCs - you can't take the AVCs before the main pension.

If similar rules apply to this then you can't transfer out until the main pension is taken. Could it be that an annuity was the only option at the time the plan was set up as this predated the removal of the forced annuities in 2006 or so?

Can you not take it as a tax free lump sum? It is not as though this would cost TW or the plan anything.

In my case any transfers in to my DB scheme are held separately and used to pay a fixed rate pension, determined at the time of the transfer, with no index linking of the amount either before or after it went into payment. Chose not to accept this option.

xylophone

A "defined benefit" AVC would certainly worked as Greenglide describes, enabling the contributor to buy added years in the DB Scheme - this meant that the benefits had to be taken at the same time as the main scheme - some schemes permitted the whole of the PCLS to be taken from the AVC.

However, the OP's "transferred in MPP" does not appear to be connected in this way?

PensionTech

If the DC benefit truly is DC, and doesn't have anything funny about it (e.g. some kind of underpin), then you have a statutory right to transfer it out of the scheme while leaving the DB benefits where they are. This is a new right with effect from 6 April 2015, so TW might not be aware of it, but they should be.

I would ask them to explain why they do not think that you have a right to transfer the whole of your DC benefits on their own in line with s94(2) of the Pension Schemes Act 1993, following the 6 April changes introduced for this very purpose. They should either then look into it and realise they've made a mistake, or explain why that right doesn't apply to you - the only real explanation being that your DC benefits are actually "safeguarded benefits" in some way.

adspence

Thanks for the info on the applicable laws. I'm awaiting some sort of justification from TW on why they think I don't have these rights, i.e. what exactly makes the DC component inextricably linked to the DB final salary component. They've kept saying the same thing with no evidence or back-up other than "our trustees don't allow them to be split".

Surely, at least at NRA (65 for this one) I should be able to take the whole pot at once, obviously with potential tax implications above the 25% tax-free...though it seems like I wouldn't get access to this one until 10 years after all my other more flexible plans.

kidmugsy

PensionTech wrote: »

If the DC benefit truly is DC, and doesn't have anything funny about it (e.g. some kind of underpin), then you have a statutory right to transfer it out of the scheme while leaving the DB benefits where they are. This is a new right with effect from 6 April 2015, so TW might not be aware of it, but they should be.

I still have an untouched AVC, originally associated with a DB pension that I have been drawing for several years. Do I have a statutory right to transfer that AVC?