Annuity and Penion Credit

bobdaz

For several years I paid a total of £17,600 into a company pension scheme and the company matched it pound for pound so the total pot was £35,200

The company pension handbook clearly stated it was a pension scheme.

Due to incapacity I was able to claim my pension before the retirement age and
received a lump sum of £18,200 and a monthly annuity of £83.20

The company bought an annuity from prudential and now I have a reduction in my pension credit of £83.20 a month which I regard as unfair as I believed I was going to receive a pension!
Had I have known this I would have put my £17,600 in a high interest long term account.

Would I have any comeback on my company regarding not revealing an annuity would be purchased?

Silvertabby

If it's any consolation, had you put your money into a high interest long term account then it would still be taken into account when assessing your entitlement to means tested benefits.

What comeback? If you mean you think that your company shouldn't have told DWP that you are in receipt of an annuity, then that's a non starter.

luvchocolate

Pension credit is there for someone who does not have the required income as you are now is receipt of this amount you no longer need it.
Be happy you are now self sufficient, your own money is worth much more

molerat

You bought a pension and they now pay out that pension as agreed via an annuity, all quite normal. Just because it has taken you above the income limits for pension credit is no reason for complaint. You should have done your homework or enlisted the advice of an IFA to explore the options, did you ask if they would pay out the whole amount as a lump sum (which I suspect would be more than £17.6K) ? The providers are not authorised to give advice.

dunstonh

The company bought an annuity from prudential and now I have a reduction in my pension credit of £83.20 a month which I regard as unfair as I believed I was going to receive a pension!

Pension credits are not reduced on a £1 for £1 basis. So, you are still better off.

Had I have known this I would have put my £17,600 in a high interest long term account.

Which would have reduced the savings element of pension credit and that hurts more.

Would I have any comeback on my company regarding not revealing an annuity would be purchased?

Absolutely none.
Firstly, looking at the absurdity of your question. What did you think a pension was going to do upon retirement? It was going to pay you an income. Guess what? It is paying you an income. The name of product providing the income is irrelevant. It is doing exactly what you it was meant to do.

Secondly, you got free money from the employer. You are completely wrong in your assumptions about being better off with a savings account. The pension with 100% matched contribution beats it hand over fist even with a reduction in income related pension credits.

Thirdly, do you honestly believe that the people should be encouraged to live on benefits and that by not doing that, someone has done something wrong?

Finally, you did not employ an adviser so you cannot complain about advice you didnt pay or or get.

kidmugsy

The issue is whether your lifestyle should be paid for by you, the annuity holder, or by me, the taxpayer. You pay for yours and I'll pay for my own.

jamesd

bobdaz wrote: »

Due to incapacity I was able to claim my pension before the retirement age and received a lump sum of £18,200 and a monthly annuity of £83.20

Was that before age 50 or before age 55? 55 is the normal current age at which pension benefits can be taken but if you bought a while ago it could have been before 50 to get ill health retirement benefit access.

bobdaz wrote: »

The company bought an annuity from prudential and now I have a reduction in my pension credit of £83.20 a month which I regard as unfair as I believed I was going to receive a pension!

You are receiving a pension, an annuity is one of the things that pension means.

How did the company get to the point where they bought an annuity from Prudential instead of the normal thing, you doing it?

It seems that £17,000 was used to purchase an annuity. £83.20 a month is 5.87%. Does this annuity increase with inflation or stay the same?

Were you asked any health questions in conjunction with buying this annuity? Less than normal good health normally produces higher annuity payment rates.

Did you have some particular need for a lump sum that big as a percentage of the pot?

Have you reached your state pension age yet? Did you reach it before or from 6 April 2016?

Just when did all of this happen and how old are you now?

bobdaz wrote: »

Would I have any comeback on my company regarding not revealing an annuity would be purchased?

Maybe. Depends on exactly what you asked for or maybe insisted on and when and what you were told, particularly in writing.

The company handbook saying that it was a pension scheme was clearly right, so no problem there for them. But you may have thought that pension scheme only meant defined benefit pensions like final salary ones. It really also means defined contribution pensions that have a pot allocated to each person, which seems to be the type that this was. With that type the pension income doesn't depend on final pay and years of service. Instead it depends on the value of the pot and what is purchased with it. That hasn't had to be an annuity for more than a decade now but it might have been required when you got it.

Pension Credit is a means tested benefit for those who haven't managed to provide enough for their own retirement income needs. It's normal and expected for it to be reduced for those who have substantial savings or income from any source, including your annuity. That's the way the social security safety net benefits like Pension Credit are expected to work.

bobdaz

Thank you for your input. my belief is that no question is absurd!

AnotherJoe

You may not have got the right level of annuity. Less than 6% doesn't sound very high if it was some years ago and you were in poor health. There was something in the papers about this yesterday but I could only find this older story http://www.bbc.co.uk/news/business-37653560

It may be worth your while complaining on that count, that your annuity isn't high enough because they didn't give you an increase on account of your health. That's it.