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

kidmugsy

xylophone wrote: »

Is there a guaranteed annuity rate attached to the annuity?

No; if only there were I might cool on the idea of transferring it.

kidmugsy

xylophone wrote: »

http://www.pru.co.uk/pdf/AVCK0433.pdf Relates to a particular Scheme but may be of interest.

Thank you: good and explicit. I'll ponder over the weekend and then try the Pru again in case two-out-of-three voting is in action.

adspence

So, I have now received some more documentation from Towers Watson including a cash equivalent transfer value, which they have only done for "all" of the benefits held under the scheme - as they won't quote for partial, but are investigating that.

I'm still pretty confused, not least given that the numbers don't seem to add up. Maybe this will help decipher what the MPP piece really is.

Below is exactly what is on the docs they sent me.

Date of leaving: 3 Feb 1995
Date pensionable service commenced: 9 Jan 1991
NRD: Dec 2029
GMP Age: 65

Transfer Entitlement
Guaranteed transfer value which includes: £226992.38
Scheme pension built up before 6 April 1997
transfer value of GMP : £54,685.63
Scheme pension (over GMP) built up before 6 April 1997 rights : £172,306.75
Scheme pension built up from 6 April 1997: £0.00

Guarantee Date 23 April 2015

Plus
Non-guaranteed transfer value from MPP account: £740.31
Plus
Fund value from a previous transfer in - not guaranteed: £52,872.26
Please note part of this fund needs to be used to provide a GMP which at date of leaving was £203.32 a year

Pension Benefits Pension at date of leaving
GMP built up after 5 April 1998: £330.20
Scheme pension (over the GMP) built up before 6 April 1997: £3,3332,36
Total Scheme pension : £3652.56 a year

Death Benefits
Spouses Pension : £2435.04 (there are actually two numbers but actually both are irrelevant as I'm single)

There are also a number of points about increases before and after benefit being paid. It looks like the scheme pension is one that increases by the lower of RPI or 5%, and the GMP by 7% before GMP, and 3%/RPI after.

There is the obvious typo in the Pension Benefits section of course. But the number given for the MPP is a little odd, as it bears no relation whatsoever to the current value of the funds shown on their website, which is about £15K - and the money I originally wanted to move away (but can now see this is not the main issue here at all).

The reference to another transfer-in is baffling, I don't recall doing the latter at all, and thought the only thing that moved with me from my previous company was done as the MPP. I can't believe it would be worth that much from my employers prior up to 1991. My pay was terrible and it was only 3.5 yrs. However elsewhere in the covering docs it does state that "please note the un-guaranteed transfer value is in respect of your benefits transferred in from <my previous company>. As such, part of the fund value will need to be used to provide you with a GMP at retirement. The GMP in respect of these benefits at date of leaving was £203.32 a year which should be revalued at fixedrate between date of leaving and Normal Retirement Date".

They seem to be saying that the transfer value of the £330pa GMP is £54K and the £3300 scheme pension is £172K. These values seem extremely high given the yearly amount, or am I missing something? Are they omitting to tell me what it is worth now, and simply quoting what it was worth in 1995 before increases, so I've no way of determining whether the transfer values are a good deal or not?

In addition there is the MPP account £740.31 (which doesn't seem to be accurate) plus the £52K from previous transfer-in.

Finally, the transfer value documents give the Guaranteed transfer value as £279864.64, and non-guaranteed TV as £740.31. The former seem like an awful lot given that it was for the first 8.5 years of my career when I wasn't earning anywhere near what I am now...and I certainly haven't built up a pot to the same degree in the following 20 years.

Nowhere is it really clear what the expected pension at retirement age would be. i.e. what I would be giving up by transferring into a personal pension/SIPP as a DC pot - presumably somethng much more than £3600 pa, but how would I figure that out?

Any help much appreciated. Given the transfer value I'd have to get an IFA involved to move the DB portion anywhy. It will be staying where it is for now until I can get more answers.

xylophone

The letter is confusing and made worse by what one must assume are typos.


To begin with the DB pension provided by the company you joined in 1991.

At date of leaving, your 88-97 GMP was £330.20?

The excess over GMP at date of leaving was £3320.36?

The GMP is revaluing at Fixed Rate.

The excess by statutory revaluation?

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

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

Is NRD the same as GMP age (65) or is it 60 (or earlier)?


The Guarantee Date of 23 April last refers to a guaranteed CETV of £226992.38 at that date?

With regard to the MPP - is it in two parts? One part was contracted out?

Part (a) £740.41
Part (b) an amount which included a GMP of £203.32?

The existence of the GMP related to the MPP is what is causing TW to tie the DB and MPP together?

The GMP is a safeguarded benefit and the value of the MPP is greater than £30,000.

At all events, I think that if you wish to move any part of the above to your SIPP or any DC plan, you are going to have to take the advice of an IFA with the necessary expertise and permission for Pension Transfers.

This type of firm?

http://financialadvisorbureau.co.uk/pension.php?gclid=CP7VyaXQxsUCFU_HtAodJ0cAqw

or try https://www.unbiased.co.uk/

adspence

xylophone wrote: »

The letter is confusing and made worse by what one must assume are typos.


To begin with the DB pension provided by the company you joined in 1991.

At date of leaving, your 88-97 GMP was £330.20?

The excess over GMP at date of leaving was £3320.36?

The GMP is revaluing at Fixed Rate.

The excess by statutory revaluation?

Yes, that is what it seems to say.

Is NRD the same as GMP age (65) or is it 60 (or earlier)?

NRD and GMP are both 65.

The Guarantee Date of 23 April last refers to a guaranteed CETV of £226992.38 at that date?

Yes the guarantee date is for that quoted CETV

With regard to the MPP - is it in two parts? One part was contracted out?

Part (a) £740.41
Part (b) an amount which included a GMP of £203.32?

I don't believe it is in two parts, the MPP shouldn't be related to the GMP amount, that seems for be for the previous transfer-in - which I guess would have come in at the same time from the previous company along with the MPP (which I know was only a few K at the time). I can't figure out where the £740.41 number comes from at all. The MPP is just simply in various funds to a current value of £15K and that is also about the only thing referred to in the yearly statements I've had in the past (other than the £3000 pa figure for the final salary portion). The "previous transfer-in" has never ever been mentioned in any statement I've had in the past.

The existence of the GMP related to the MPP is what is causing TW to tie the DB and MPP together?

I thought that might be the case.

The GMP is a safeguarded benefit and the value of the MPP is greater than £30,000.

At all events, I think that if you wish to move any part of the above to your SIPP or any DC plan, you are going to have to take the advice of an IFA with the necessary expertise and permission for Pension Transfers.

This type of firm?

Thanks for the info. I would probably want to simply leave well alone...if only I knew what the DB final salary pension is likely to actually give me. Presumably something much more than the £3K pa or so mentioned (especially given the computed value quoted would fund an annuity far higher than 3K) as presumably that gets adjusted for inflation for all the years from leaving date until NRD. Depending on what that is predicted to be I may be perfectly happy leaving it where it is so that I get a nice predictable guaranteed pension bump at 65, State Pension at 67, leaving me with figuring out how to fund my hoped for retirement at 55 with other pension pots etc.

xylophone

You have already been told that the GMP for your DB pension is revaluing at fixed rate.

Presumably statutory revaluation is being applied to the excess - see the BW links - ask TW to confirm how your DB pension is revaluing in deferment.

Ask TW to explain the value of the MPP given in the letter.

Is it a transfer value? The value estimated to be required to fund the GMP? Or what?

Ask them to explain the "previous transfer" as you have no idea where it comes from.

adspence

Will do, thanks for the info and links.

adspence

Spoke to TW today. Hope I can describe what they said without confusing everyone even more!

The DB portion above GMP for the main pension (that accrued 1991-1995) is being revalued, and they are going to send me details of what it is (much more than £3300 hopefully) and projected to be at NRA. That will give me some idea if £172K is a reasonable transfer value. The GMP is separate and is simply revalued by 7% pa until I'm 65. Presumably I can simply work out £330 + 7%pa compound from 1995 to 2029 for that one myself - isn't that something over £3000?

The MPP is where is gets complex. It seems that when my previous pension benefits - DB and AVCs - were transferred in it all went into a DC pot. However it needed to provide GMP too (as I was contracted out of SERPS there too), and that is the reason why decoupling and transferring that separately is not immediately possible. It sounds like the guaranteed part shouldn't really have ended up as a DC pot. The mysterious £52K is the value required to honour the GMP requirement from the previous employers scheme - and the mention of it being "non-guaranteed" isn't really correct as pretty much all of it is needed for the GMP. The £730 is what is left after the GMP is covered, I think. The odd thing is that they said that the £15K DC pot I see and can choose funds for is the thing covering both GMP and DC. The transfer value of £52K is clearly way beyond the value of the pot. I wonder what would happen if the DC pot were to fall massively in value. They would still have to pay me the required GMP at 65 regardless of what is in that pot, right?

They obviously made a right mess of the transfer back in 1991. If I were to transfer out now, I'd be quids in (for this piece anyway) as the pot value is actually £15K but I'd get £52K for it. That is what they said anyway. No idea what they will do if they agree to a partial transfer, I guess it would be a very small amount as they'd need to keep something in an attempt to honour the GMP. £203 compounded by 7% from 1991-2029 would also be a reasonable amount at 65 right?

Last night I actually found an old set of calculations/projections that I received when setting up a Personal Pension back in 1999. This included information about transfer values of this Citi pension and projected benefits should I not transfer. The projection said £7055 pa at 65 and £3295 GMP. I'm not 100% sure that they had all the facts about the way this pension was set up though, as the transfer value back in 1999 was only £26K.

The upshot is that it is highly likely I will simply leave this scheme well alone until 65 - provided the predicted yearly amount is reasonable. Any guesses what £3300 + lower of RPI/5% over 20-35 years would be? I don't know what RPI has been like in the last 20 years. That plus the GMP at 65 might be a decent starting point for guaranteed income to cover base level costs (plus SP 2 years later). This was not what I expected when first thinking about this particular pension, though its value is such that I might now need to think about LTA issues.

xylophone

The pension that you transferred in was part DB and part COMPS?

See http://www.nortonrosefulbright.com/knowledge/publications/54409/pensions-abolition-of-defined-contribution-contracting-out-and-protected-rights

The DB should have transferred into the DB with the new employer and the COMPS into a DC with protected rights?

adspence

xylophone wrote: »

The pension that you transferred in was part DB and part COMPS?

See http://www.nortonrosefulbright.com/knowledge/publications/54409/pensions-abolition-of-defined-contribution-contracting-out-and-protected-rights

The DB should have transferred into the DB with the new employer and the COMPS into a DC with protected rights?

Sorry I really don't know what it was in the previous employer (pre-1991), all I know is that it was transferred into the Citi MPP/DC and none of it ended up in the new DB scheme in 1991. They seemed to admit today that this probably shouldn't have been how it should have happened, and that they have a few of these that they are trying to figure out what to do now.

thanks for the link...though having read it I am none the wiser. It seems to be such a complex mess of labyrinthine regulation and disparate acronyms, I'm surprised anyone on the planet understands any of it.