Should my Pension escalate annually

Pension12

My believe is that if one manufacturer wishes to offer an extended warranty on the bigglenut and sigglenut in order to entice customers from a competitor then as long as it meets/exceeds the legal minimum requirement and does not break the law in other ways then they enter a binding contract which they must honour.

Regarding the jbwm document it, like all others I've read, states there is no requirement to increment the pension, rather than it must not be incremented, so does not preclude a company from offering to increment a pension in order to gain a competitive advantage.

In case your wondering I used to spend many a happy hour arguing how phrases in supplier contracts should be interpreted and can usually argue either way depending on which side of the French I am.

As a precursor to the ombudsman I've posed the question to the pension advisory service, but have heard nothing back yet.

So I will probably have another go with then pension company before approaching the ombudsman.

xylophone

Let us know the fruits of your researches!

Pension12

Will do, but I suspect it might be a while before things progress as I don't expect the pension company or the ombudsman are likely to react quickly and I also have some hols coming up in the not too distant future.

Once again thanks for your help.

Pension12

Hi, I'm back with an update and a question. I've now spoken with the pension provider and as expected they are still saying no, the reason being the last paragraph of Condition 9 (now written out in full below) and its interpritation. I would therefore appricate your interpritation of the last paragaph (shown in bold).

Condition 9: Pensions purchased under Condition 7 shall increase at the Escalation Percentage Rate specified in the Second Schedule. If the an Escalation Percentage Rate is not specified the Insured may elect that the pensions purchased shall increase a percentage rate not exceeding 8.5% compound per annum. The increases in pension shall apply from each anniversary of the Benefit Date or the Substitute Benefit Date. This is subject to the amount of the pension per annum being limited to the Maximum Pension or Maximum Widow's Pension as appropriate increased by the accumulated increase in the Retail Prices Index published in the calendar month preceeding the month in which the Benefit Date or Substitute Benefit Date occurred or by 3% compound per annum whichever is the greater less in the case of a pension payable to the Insured the pension equivalent of any cash sum taken at the Benefit Date or Substitute Benefit Date under Condition 10. If the value of the Retail Prices Index is not published in any particular month the most recently published value will be applied.

The rate of increase in pensions shall not be such that the pension and Widow's pension which can be purchased by the Capital Sum shall be less than the Guaranteed Minimum Pension and the Guaranteed Minimum Widow's Pension respectively.

Also, they pointed me to the following location at the pensions adviory service: about-pensions/retirement-choices/pensions-in-payment/annual-increases

Which in fact supports my previous arqument about them being able to offer increases above those required by law, with the statement:

These are the minimum increases that your scheme has to pay, by law. Your scheme may increase your pension above these levels. These additional increases may be set out in the scheme rules or paid on a discretionary basis. Where it is the latter, the scheme has no obligation to continue to apply the increases.

So now it all appears to hinge on the interpritation of the last paragraph of Condition 9, so views on it interpritation would be much appreciated.

xylophone

These are the minimum increases that your scheme has to pay, by law. Your scheme may increase your pension above these levels. These additional increases may be set out in the scheme rules or paid on a discretionary basis. Where it is the latter, the scheme has no obligation to continue to apply the increases.

The important words in the above are may, scheme rules and
discretionary.

What an institution may choose to do and must do are different things.

The rate of increase in pensions shall not be such that the pension and Widow's pension which can be purchased by the Capital Sum shall be less than the Guaranteed Minimum Pension and the Guaranteed Minimum Widow's Pension respectively.

Which being interpreted means that it must not not be less but does not have to be more?

Put positively, "The rate of increase in pension must be at least enough to cover the purchase of the GMP and the GMWP respectively"?

But I think that just takes us back on a circular track to the fact that your fund is either only just enough or not even enough (insurer has to make up the shortfall) to meet the GMP requirements and that the GMP is all pre 88 so that there is no obligation to increase in payment?

You have seen post 5 here? https://forums.moneysavingexpert.com/discussion/comment/72002907#Comment_72002907

Pension12

“ These are the minimum increases that your scheme has to pay, by law. Your scheme may increase your pension above these levels. These additional increases may be set out in the scheme rules or paid on a discretionary basis. Where it is the latter, the scheme has no obligation to continue to apply the increases.
”
The important words in the above are may, scheme rules and
discretionary.

What an institution may choose to do and must do are different things.

In my case they have chosen to lay it out in the scheme rules and do not say it is discretionary, so I'm confident it applies.

“ The rate of increase in pensions shall not be such that the pension and Widow's pension which can be purchased by the Capital Sum shall be less than the Guaranteed Minimum Pension and the Guaranteed Minimum Widow's Pension respectively.
”



Which being interpreted means that it must not not be less but does not have to be more?

Having now fused my brain thinking about the ways in which the above paragraph can be interpreted I am tending towards the following:

If one were to assume that part of the lump sum is used to pay for the annual increments then the remainer of the lump sum must be sufficient to purchase the GMP/GMWP. But of course the law and Condition 7 requires that they buy an annuity which pays at least GMP/GMWP so the rate of increase cannot be such that it will impact the lump sum in way which means the pension paid is less than the GMP/GMWP. That is, because all it potentially does is increase the existing shortfall thus increasing the amout the pension provider has to contribute.

Finally, thanks for the link I had not seen that thread. It is nice to see others have the same issue and it made interesting reading.