Pension advice please Santander

Dell007

I have received the following communication from Santander with whom I have a deferred pension. Though the letter suggests that the change is to simplify administration, I do have some doubt, and that it will actually cost me money. I would appreciate any guidance anyone could give as to what the text of the letter reproduced below actually means and what the impact on my pension might be.

Many thanks in advance.

“Whatyou need to know
When you retire, the Scheme's requires two pension calculations to be compared to:
Your defined benefit pension calculated using 1/60th or 1/80th of your final pensionable salary multiplied by your length of pensionable service (for example: 1/60 x 10 (years) x £20,000 = £3,333.31 per annum).
2.The pension that could be secured from the accumulated value of your contributions and certain other payments made to the Scheme because you were contracted-out of the State second pension scheme(protected rights). This is called the underpin:
ln practice, the pension calculated under 1 above is always expected to be higher and therefore it’s no longer necessary to make this comparison. It is intended that in future step 2 above will no longer apply

In addition, some complex provisions about how protected rights are used, which are no longer required by legislation, will be removed from the rules using a statutory power. Again, this is to simplify administration.
A record of the amount of your protected rights will still be maintained and that amount will be paid as a lump sum on death in service or death in deferment if no survivors pension is paid.
Rationale for the changes
These changes are being made to simplify the administration of the A&L Section using the amendment power of the
Scheme. The law requires us to say that removal of the checks of your pension against the underpin and against your protected rights is subject to the 'actuarial equivalence' requirements in s67c of the pensions Act 1995. This means that we have to get a certificate from the Scheme's actuary that the value of your benefits will not be reduced by the changes;the Scheme actuary has confirmed that this certificate will be provided if the amendments go ahead.”

xylophone

http://helpfiles.thepensionsregulator.gov.uk/members/hybriddetails.aspx

Protected rights came to an end in 2012.

http://adviser.royallondon.com/technical-central/information-guidance/death-benefits/death-benefits-and-protected-rights/

It would seem that you are a deferred member of a contracted out defined benefits scheme - those employed between 1978 and 1997 had a right to a Guaranteed Minimum Pension - see https://www.barnett-waddingham.co.uk/comment-insight/blog/2014/08/18/what-is-a-gmp/

Your pension scheme had to guarantee to pay you a pension at least as great as you would have earned had you not contracted out.

In practice, a company pension would have paid much more than the minimum.

At GMP age (which used to align with state pension age), the part of your pension which represented your GMP would have been shown separately in your pension statements because of the fact that at that point, the Scheme did not have to index link your pre 88 GMP in payment or your 88-97 GMP above 3%. The increases would have been paid with your state pension, except in certain circumstances.

The new state pension arrangements will not fit in with the above.

https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/181237/single-tier-pension-fact-sheet.pdf

Presumably the letter means that the value of your GMP will no longer be compared with the value of your pension benefits at retirement, but that a record of that entitlement will be kept so that it can be used in the outlined circumstances?


You have been given a guarantee that the new administrative arrangements will not leave you worse off - you could just ask the administrator how your pension will increase once in payment.

Assuming that you are over 55, you might request a new state pension statement. https://www.gov.uk/government/news/millions-more-offered-free-pension-statement

Dell007

Hi xylophone,

Thanks for the comprehensive reply. I guess I need to wait until this is all finalised, request a quote of pension from DWP, and then see whether it would be worth 'topping up' my pension.

It would have been beneficial to everybody if JLT/Santander had written a clearer document.

Many Thanks for your time.