What would you ask pensions minister Richard Harrington?

Justanitgeek

Stop messing around with pensions so we can all plan where we may be financially at retirement age.

A couple of worthwhile things to change.
Link annual allowance, currently £40K to inflation. (RPI)
Remove lifetime allowance or link it also to inflation.

pammy50

I am part of a group of people who worked for Midland Bank. I joined after 1/1/1975 and there is what they call a DESIGN FEATURE in their DB scheme which is commonly known as Clawback or state reduction. This means that when you get to state pension age the bank takes an amount of money off your bank pension which in my case is 20-25 % of my meagre £3400 pension. At the same time the goverment is reducing my pension because the bank contracted us out, so in effect we are being penalised twice. Many other people at that time had clawback in their pension schemes but such as lloyds. Fire Service,Police but they have removed the clawback clause. What can the minister suggest we could do to remedy this situation and make the bank have a conscience and do the right thing and abolish the state reduction or the COPE in these instances

dunstonh

and there is what they call a DESIGN FEATURE in their DB scheme which is commonly known as Clawback or state reduction.

Or bridging pension or various other names.

At the same time the goverment is reducing my pension because the bank contracted us out,

You were always getting less state pension. You paid less NI. You never qualified for the additional state pensions. Just the basic state pension.

The move to the single state pension has to take that into account to remain fair. So, any reduction is only matching what you had qualified for under the old system.

which in my case is 20-25 % of my meagre £3400 pension.

The time you were a member of this scheme, I believe it was non-contributory. £3400pa indexed is worth around £120k. So, its hardly meagre.

What can the minister suggest we could do to remedy this situation and make the bank have a conscience and do the right thing and abolish the state reduction or the COPE in these instances

Why should the taxpayer fund an additional pension for you when you never paid for it in the first place whilst having the luxury of a pension that most people would kill for and gave you a number of years of extra payments to bridge the gap to the state pension?

jamesd

pammy50 wrote: »

I am part of a group of people who worked for Midland Bank. I joined after 1/1/1975 and there is what they call a DESIGN FEATURE in their DB scheme which is commonly known as Clawback or state reduction. This means that when you get to state pension age the bank takes an amount of money off your bank pension which in my case is 20-25 % of my meagre £3400 pension.

That isn't how a claw back scheme really works. It starts out as a base pension for life, say £2800 a year. To help people to retire before they reach state pension age there is an option or built in ability to take a higher pension before state pension age then a lower one after. Then instead of level £2800 people would get £3400 before state pension age and £2500 after.

When it is offered it is a popular choice because it helps a lot with early retirement. A big problem is that many people don't realise that they are swapping some later pension for a higher one at the start and think they are being wronged by something that was done to help them.

The reduction due to contracting out is a similar misunderstanding. In a workplace pension like yours, the scheme was contracted out of the earnings-related bit of the state pension and in exchange it agreed to pay that as part of its pension benefit. So what you see as a state pension that has been cut is really just that bit of income being paid out of your work pension instead of by the government. Roughly the same money, just coming to you from a different payer.

But the single tier/flat rate state pension offers a possible way to increase your state pension. For years from 2016-17 onwards if you are under state pension age and if you work enough for NI, get credits or buy years your state pension will be increased by 1/35th of the flat rate per year for life until you reach the flat rate cap of £155.65 a week. It's excellent value for money and it is mostly available to people like you who were contracted out because the rest of those who worked a lot are probably over the cap already. So you have the chance to get both the private bit and more from the state, while they can only get the state bit.

You should also check that your state pension forecast says that you have at least 30 years counting towards the state pension up to and including 2015-16. If you don't then it is likely to be worthwhile to buy enough years to get to 30. This is because years up to 30 normally increase the state pension for people who were contracted out because they normally end up with the old rules calculation for their foundation amount. Sometimes people who haven't been contracted out much can benefit from the new rules calculation and up to 35 years through 2015-16 but this is less likely and you should check with DWP to see if it will make any difference to your foundation amount before buying years. These things are also usually excellent value for money.

You might find it useful to start a topic just for you so we can better help to sort out how you could benefit.

For all of this I have assumed that your income will not be so low that you will be entitled to means tested benefits. If you would be, that can change whether getting more state pension is a good idea or not. Similarly if your health is worse than normal that can also change what is best.

pammy50

Re comments by DUNSTONH
I think you may have been a little unfair here in judging my circumstances. I had other jobs when I paid not contracted out contributions, in fact whilst working for the bank at night I had another day job.
Also don't be mislead about bank salaries, they were not good and the supposed benefit was that the pension scheme for which the bank was benefitting by paying less NI too, was dangled as a carrot for the low salaries and supposed to be 2/3 of your salary.
I do not disagree with getting less pension because I was contracted out, but I do disagree with the bank yet again being able to renege on its promises.

dunstonh

I think you may have been a little unfair here in judging my circumstances.

I am not judging your circumstances as I do not know them. I am commenting on your misunderstanding about bridging pensions.

I do not disagree with getting less pension because I was contracted out, but I do disagree with the bank yet again being able to renege on its promises.

They have not reneged on any promises. It appears to be a misunderstanding about what they are doing. Its not personal. it is easy to forget these things 20-30 years after you may or may not have read it in a paragraph in a 20 page booklet.

Alice_Holt

Is it possible that those (mostly) manual workers who experience health problems in their late fifties and sixties and are consequently physically unable to continue in their occupation could access the state pension early on medical grounds?

It seems inequitable that an individual who started their working life at (say) 16/7 and works 40+ years in a strenuous manual job has the same retirement age as myself - a graduate who started paying NI contributions at 22 and whose profession is knowledge based.

The options facing many in poor health and in their late 60's are bleak. Either claim JSA when the realistic chances of work are low, or try to claim ESA and be subject to frequent WCA's. For people in this situation the initial physical problems are often subsequently compounded by depression and stress (with additional costs to families and the health service / society)
After, say, 40 years of NI contributions could not a more flexible SP be considered?

SnowMan

Question for the Pensions Minister

Lower paid workers, earning less than the personal allowance, currently £11,000pa, who are members of trust based pension schemes operating the net pay system of tax relief (including many schemes used for auto-enrolment), cannot get tax relief on their pension contributions.

What action will the Government take to remove this anomaly, an anomaly potentially affecting millions of part-time workers?


(for one of the better explanations of this anomaly please see this article by the former Pensions Minister, Steve Webb)

zagfles

SnowMan wrote: »

Question for the Pensions Minister

Lower paid workers, earning less than the personal allowance, currently £11,000pa, who are members of trust based pension schemes operating the net pay system of tax relief (including many schemes used for auto-enrolment), cannot get tax relief on their pension contributions.

What action will the Government take to remove this anomaly, an anomaly potentially affecting millions of part-time workers?


(for one of the better explanations of this anomaly please see this article by the former Pensions Minister, Steve Webb)

Although the anomaly is really the other way round - people with RAS schemes earning under the PA get "tax relief" despite paying no tax!

SnowMan

zagfles wrote: »

Although the anomaly is really the other way round - people with RAS schemes earning under the PA get "tax relief" despite paying no tax!

Given that some of those low paid workers who get no tax relief will be basic rate taxpayers in retirement, perhaps when their state pension kicks in, that would mean a tax disincentive to save in a pension.

Every £1 saved in the pension could really be worth 85p after allowing for the tax disincentive (allowing for 25% tax free cash and 20% tax on the rest when taken out). This compares with £1 saved in an ISA that is worth £1 after adjusting for tax.

Everybody else saving in a pension (for example through relief at source arrangements) gets the advantage of the 25% tax free cash so every £1 of after tax income saved in a pension is worth at least £1.06

Higher rate taxpayers who are basic rate taxpayers in retirement gain further with every £1 of after tax income saved in a pension worth £1.42 after allowing for tax relief, tax free cash and tax on money coming out.

Giving that higher rate taxpayer a tax incentive making their £1 worth £1.42 while denying that lower paid worker any tax relief making their £1 worth £1 (or in fact making their £1 worth 85p in the extreme case) doesn't seem fair to me.

So clearly there are big incentives to save in a pension denied to the category of lowest paid or part time workers I mentioned, who may even be tax disincentivised to save in a pension

But I'm interested in the Pension Minister's reply to this rather than discussing this here.