M&S Pension Scheme

Blanc

Good morning,


Looking for some advice please. Marks & Spencer have announced to staff that they are proposing to end Sunday premiums, reduce bank holiday payments to 1 1/2 and end their final salary, defined benefit pension scheme on April 2017.
They will be sending out a pack to each member of staff who will be affected by this.


My main concerned is my pension as I have just over 20 years in it.
I strangely enough asked for a retirement quotation, as I am 55 a few weeks before this announcement, as on a final salary pension I don't feel I could work full time to 67 and wanted to reduce my hours in the next few years.
I am no good with pensions and just don't understand any of it. I know I need to go to a financial advisor but would like some help to understand it a bit better, please.


It isn't much but it is all I have,
My quotation
a, A full pension from August 2016 £8916.00
b, A reduced pension £6282.00 and the maximum tax free cash lump sum £41881.00
c, A tax free cash lump sum of any amount up to the maximum shown in b and a reduced pension.


"The pension you receive from the scheme will reduce by the State Pension deduction on 1st August 2026. At your retirement date the amount of the state pension deduction was £28822.00. If you retire after leaving service with M&S this amount increase in accordance with the scheme rules until you reach 60."


I have yet to get my proposal letter referring to the company stopping this scheme in April 2017 but believe that I will have to contribute from then.


What am I asking, Should I leave the scheme soon, before April 2017, take the lump sum and ask to reduce my hours.


Does it even look like a decent pension, I so don't know and I am sorry for been stupid.


Many thanks in advance for any advice or help to understand this.

xylophone

I am assuming that you joined the M&S non contributory defined benefit (Final Salary) scheme on or before the 31 Dec 1995 so that your Scheme Retirement age is 60?

You are currently an active member of the DB Scheme which closed to new members in 2002.

See https://www.mandspensionscheme.com/active-members

The pension quotation above is your estimated pension at age 60? Or is it the (actuarially reduced )pension you would receive if you retire at age 55?

Your State Pension Age is 67?

This explanation of the State Pension Reduction (your post above refers) given in

https://www.mandspensionscheme.com/en/useful-information/glossary
is

"State Pension Deduction An amount that is deducted from your pension. It is equal to 1/40th of the basic State Pension for each year of pensionable service plus an additional proportion for each complete month. It is usually limited to one quarter of your pension or, it will never be more than the rate of the basic State Pension that applied in the 12 months before you left service or took your benefits if earlier."

If the DB Scheme is closed in 2017, you and other employees will become "deferred members" of the scheme.

https://www.mandspensionscheme.com/deferred-members may be of interest.

Presumably you will all transfer to the Defined Contribution pension as here?

http://careers.marksandspencer.com/why-work-here

"This is why we offer an excellent Defined Contribution pension plan, where if you contribute 3% of your pay M&S will contribute 6%. For full details visit www.yourmandspension.com."

Have you yet obtained a New State Pension Statement?

https://www.gov.uk/government/publications/application-for-a-state-pension-statement

As you have been in a contracted out pension scheme for at the last 21 years your statement will almost certainly show an amount that is less than the full NSP - however, M&S have now contracted in to the SP so that NI contributions paid or credited from 6/4/16 will enable you to add to your starting amount.

atush

If you are going to continue working, even part time, i would not take the pension early/reduced at 55. Unless you are of poor health and likely to die young, I would expect the unreduced pension at age 60 to be the best option.

So join the new DC pension and work til you want to stop. You will be able to take the DC pension when you want (and before age 60 if you like) and live off that, and use that lump sum, until you take the DB pension at 60.

Blanc

Thank you for the replies,


The pension quotation is if I choose to retire now.
It is all so confusing.
My state pension age is 67.

Linton

The pension is pretty good - to buy an equivalent index linked annuity from an insurance company could cost more than £0.25M. Suggest you dont take it early and do put money into the new scheme to get the extra employer contribution. If you contribute more than 3% will M&S contribute more?

Finst

A few thoughts (in no particular order)

- How much do you think you'll need in retirement to maintain a lifestyle you'll be happy with. Does that pension give you what you'd need once you stop working part time?

- If you don't take the tax-free lump sum, you'd be able to "break even" by saving up the extra pension in (very roughly) 11 years. That's only 66, and most 55 year olds will live well beyond that. Unless you have a really strong desire for more cash now as opposed to later, you'd probably be better off taking the bigger pension (then again, we could all be hit by a bus tomorrow)

- Check to see if current employees have more generous early retirement terms than former employees (this is quite common). Check whether you would keep that if you don't retire before April 2017.

- Many companies closing final salary schemes end up offering enhanced pension contributions for a few years to soften the blow and to avoid strikes. Might be worth hanging around for a little while longer if that is the case.

Blanc

All of you are very kind to take the time to reply.


I believe the company plan to offer help in paying into their DC scheme for 1 year and reduced the 2nd year.
This I will not know until I get my proposal pack, which is due soon. I believe 11,000 members of staff are affected by these changes. I hope to be better informed by then. Never give my pension a thought until now, I am ashamed of myself.

kidmugsy

atush is right. Certainly don't take the pension until the scheme closes to new contributions in April '17. That way you'll maximise the number of years you'll be credited with. If you think you can, work on to 60, contributing enough to the new DC pension to "harvest" the maximum employer contribution. At 60 you can presumably become part-time and draw your final salary pension too. It would perhaps still be a good idea to contribute to the new DC scheme if you could afford to. Maybe the pension plus part-time earnings will let you afford to.

At some point you may feel that you have enough money in the DC pot to bridge the gap until your State Pension starts, and then retire altogether. Or perhaps do some work for the company at peak times - bank holidays, Christmas, school holidays, or whatever. The wife of a friend of mine used to work for John Lewis at Christmas; she enjoyed seeing old friends again, and welcomed the pay.

There are two advantages to waiting until 60 to draw the final salary pension. (i) It will be bigger: maybe somewhere about one third bigger than at 55, plus any inflation protection. (ii) It will probably offer you a better deal on giving up a bit of pension to get a tax-free lump sum.

Oops, maybe there's a third advantage. By staying on you may perhaps be offered redundancy with some redundancy pay, and the ability to get your pension without reduction. You never know your luck.

Last thought: it might be worth checking on what to do to preserve your access to the 20% discount card. Maybe part-time work would do the trick.

xylophone

Are you happy to continue to work for M&S until age 60?

If so, you could choose not to take your pension now but let things run their course until 2017, when you will become a deferred member of the DB scheme.

Your pension will revalue in deferment as described in the link in my first post.

Up to when you retire (say 60), you contribute to the DC scheme with the additional assistance from M&S as you describe.

You take your DC benefits when you retire.

At 60, you retire and take your deferred pension in the form you prefer, with or without the lump sum etc.

You will still be under state pension age so if you find that you have not yet reached the full state pension amount, you can make voluntary NI contributions up to SPA to bring you up to or close to the full amount.

Don't forget to obtain the new state pension statement - see link in post above.

Blanc

Hi just checked,


My state pension forecast is £155.65 estimate if I pay N.I up to 2028. My COPE £30.14. COPE added to my State pension is £185.79 forecast.


Is this good, I am so sorry for been so stupid, I appreciate all opinions, thank you.

Thrugelmir

Blanc wrote: »

Looking for some advice please. Marks & Spencer have announced to staff that they are proposing to end Sunday premiums, reduce bank holiday payments to 1 1/2 and end their final salary, defined benefit pension scheme on April 2017.
They will be sending out a pack to each member of staff who will be affected by this.

Presumably this relates to the increasing minimum wage that is being phased in. So not all negative. Basic pay levels will be improved.