My wife and her BHS pension, advice please

happyhero

Hi can anybody guide me with my wife’s pension please, as she relies on me with these sort of things. She understands zero about pensions. We have SIPP’s with Hargreaves Lansdown which I actively manage and have successfully been growing.


My wife is 55 and recently received a letter from Barnett Waddingham who are managing the British Home Store employee pensions. My wife had completely forgotten/never mentioned her pension with them and has kept no paperwork, so lucky for us that this letter came and I can do something. I’ve had to let them know that she is now a MRS and not a Miss and that her name has changed, so weird after all this time.


It states that she joined the scheme on 24/09/1979 (when she was 18) and left the scheme 27/08/1982 (so just short of 3 years). It says that her Annual pension at date of leaving is £109.77 and it shows a normal retirement date of when she will be 60 on 30/08/2021.


This letter mentions the Philip Green fiasco and the fact that he has paid a voluntary personal cash payment of 343m and has agreed to pay an additional amount for the costs of establishing and implementing the new arrangements.


It states that the scheme entered a PPF Assessment Period on 3 March 2016.


My basic question is should we transfer it to her SIPP as it seems so very small? I’m not sure if you can work it out from the £109.77 what she will finally get but it seems to me pathetically small so moving it to the SIPP would tidy things up and I could grow it along with the rest in her SIPP. But my worry is will there be any further developments, i.e. further boosts that she will miss out on if we do this. On the other hand how big can any boost be if the pension is so small, so is it worth worrying about?


The letter states that they will be offering her 3 options in the near future (3 to 4 months),


Option 1 Opt to transfer her benefit to a new pension arrangement called BHS2 which will have no connection with BHS which will operate on a stand alone basis.


Option 2 Current deferred members and pensioners will have the option to exchange their pension for a one off cash lump sum which if below £18,000 will be under a “winding up lump sum” WULS which will extinguish any future benefit from the BHS or BHS2 scheme


Option 3 You may choose to remain a member of the current scheme. This will mean you continue to receive benefits at levels of PPF compensation and in due course it is expected that the scheme will transfer to the PPF and the PPF will become wholly responsible for the payment of your PPF compensation entitlement.

There is a possibility that the Trustees may be able to provide benefits under this option at levels slightly above PPF compensation in a buyout contract outside of the PPF. However benefit levels under this option are expected to be lower than those offered to members by BHS2.


Unlike options 1 an2 this option will mean you do not receive the full back payment of underpaid benefits from March 2016 (if any) nor, if the scheme transfers to the PPF will you be able to take a transfer out to another pension scheme.


I copied all of option 3 in as I thought it may be relevant but with my limited knowledge of all this I am leaning towards transferring this pension to her SIPP. I am aware that there are various ways to draw a pension from a SIPP, annuity, drawdown etc.


What do you think she should do?

AnotherJoe

As its so small I'd be inclined to go for (2) as long as the whole amount can be transferred into her current SIPP. (your text says "one off lump sum" but if she got it as that she might have to pay tax on it?)

As you point out, maybe there will be a top up in future but a top up on £109.77 isnt going to be much is it?

xylophone

With regard to the £109.77, how much of it was her GMP?

https://www.barnett-waddingham.co.uk/comment-insight/blog/2014/08/18/what-is-a-gmp/

It is pre 88 GMP and as this was a private scheme, it is likely that the GMP revalued in deferment (up to age 60 for a female) by Fixed Rate.

It is possible ( depending on the scheme rules) that there was no revaluation on the balance.

https://www.barnett-waddingham.co.uk/comment-insight/blog/2012/07/24/revaluation-for-early-leavers/

http://adviser.royallondon.com/technical-central/pensions/benefit-options/winding-up-lump-sums/

I notice that a transfer out to a scheme other than BHS2 is not offered - this may have been an omission?

HL can be sticky about accepting DB transfers but I imagine in the special circumstances of BHS would accept a transfer in? You could check.

Has your wife obtained a new state pension statement?

https://www.gov.uk/check-state-pension

It may be as well to see what is on offer in due course and make a decision then.

agarnett

Don't be too hasty here. As xylophone points out, there is likely to be a GMP liability the BHS scheme owes your missus. Barnett Waddington are well known and xylophone refers to their excellent pensions technical articles frequently, but remember who they are working for. Big clue 1: it isn't your missus.

Big clue 2: the greater good of members of the scheme is highly unlikely to be to the good of your missus, a deferred member who is not yet a retiree.

Ask yourself why BW have not advised you of the revalued pension figure at the normal scheme retirement date?

Is it to start to groom you to trivialise this pension in your mind and then lead you to accept a a cash equivalent transfer value which reduces the trustees' (I assume there still are trustees at this point?) liability (risk) nicely and cheaply?

Trust no-one, and don't prematurely trivialise this in your mind until you have a better idea of what you could be walking away from.

hyubh

agarnett wrote: »

Don't be too hasty here. As xylophone points out, there is likely to be a GMP liability the BHS scheme owes your missus. Barnett Waddington are well known and xylophone refers to their excellent pensions technical articles frequently, but remember who they are working for. Big clue 1: it isn't your missus.

They are contracted by the PPF to do the admin on certain schemes. There's lttle (nothing?) more to say on the matter.

Big clue 2: the greater good of members of the scheme is highly unlikely to be to the good of your missus, a deferred member who is not yet a retiree.

There are PPF 'compensation' levels, which are entirely standardised, and overtly involve a 'hit' for members (preserved or in payment) under normal pension age. In the BHS case, there is also now a successor scheme, the terms of which may or may not be superior to PPF compensation terms, depending on the individual. The terms of the BHS successor scheme are however not a secret, so members can make their decision with their eyes open.

Ask yourself why BW have not advised you of the revalued pension figure at the normal scheme retirement date?

BW are a third party administrator in this case, and it does not make a blind bit of difference to BW as a company which option the OP takes. The PPF have over the past few years been undertaking a programme of bringing admin for schemes that have fully entered the fund in house, so more people deciding to stay where they are and enter the PPF permanently doesn't imply BW will have more work in the future. Conversely, as PPF contractors, BW are neither well nor poorly placed to administer the successor BHS scheme (until it entered the PPF assessment period, the original BHS scheme was administered in house, i.e. there was a small BHS pensions department).

Is it to start to groom you to trivialise this pension in your mind and then lead you to accept a a cash equivalent transfer value which reduces the trustees' (I assume there still are trustees at this point?) liability (risk) nicely and cheaply?

What's that got to do with BW...?

agarnett

Just because BW know their stuff does not mean BW are a deferred pensioners' friend - nor are PPF.

Why has the 1982 leaving pension not been revalued for the member and advised in the letter? Why too has the GMP not been notified and revalued? Was the BHS scheme not contracted out from 1978 like most large DB schemes of merit? The BHS Pensions website loosely confirms "The Bhs Pension Schemes were “contracted-out” of the State Second Scheme, previously known as the State Earnings Related Pension Scheme (SERPS)." but it doesn't say that they were contracted out at the earliest opportunity which would have been 1978.

As a possibly useful comparison, I had amassed a perhaps lukewarm looking £2000pa leaving pension in another such DB scheme of merit as at a leaving date 6 years later than 1982. That one revalues to the region of £9000pa when I reach 60 - still no great shakes but an increase factor of 9/2 is better than nothing over the 30 years from me leaving to me becoming 60. Who knows then what a £109pa might have revalued at with a leaving date 6 years before mine. For a start, the GMP revaluation rates were higher pre 1988. Maybe up to 8.5% per annum if it is largely GMP? A fixed rate revaluation over 38 years (say age 22 on leaving up to age 60) at a 8.5%pa rate creates a multiplication factor of 22! It's the very top end of possibilities I think, so I'm not suggesting the OP count the chickens based on 22 x £109pa, but the OP's question has to be much more carefully examined than simply dismissing £109pa as a number of little consequence ... And for proper analysis, much more info should be freely provided up front by the scheme administrators, no matter who they are.

The scheme may well be more or less part controlled now by PPF (one of the three trustees and chairman of the trustee board happened already to be on PPF's "specialist trustee panel" - some pension trustees can be pretty mobile and undertake multiple appointments thesedays a bit like MP's and ex MP's) but it should be noted that although being currently "assessed" by them, the scheme hasn't formally yet moved into the PPF.

And no, hyubh, I am not at all suggesting that BW manipulate members for their own direct benefit, but I am strongly suggesting they will be working to a moneysaving/scheme de-risking brief, and seeking to succeed at it! For members that means caveat emptor with regard to all the options BW publish on behalf of the trustees, plus it may be up to more canny members to ask about options that have not been published.

People so often can be predicted (by businesses, and that includes by trustees of pension schemes which these days are corporate despite their directors being loosely referred to as "trustees") to behave quite like sheep.

In the BHS case, the whole flock knows it was a close run thing as to whether anyone would persuade that dreadful man to stump up some cash. So right now, the obvious tendency for the average deferred BHS member might be to grab whatever might be offered as a CETV (if indeed a CETV is on offer?), and then run before the shutters come down and lock members into a restrictive PPF pension with no lump sum nor transfer option of any description.

Right now, the BHS Pension is not locked down by PPF but it is clearly pretty much restricted by the trustees.

In fact, having re-read the letter as copied by the OP and looked at the April 2017 announcement on the BHS Pensions website, it doesn't look like a CETV is being offered at the moment at all. The only option that looks like it is designed to be floated off relatively unshackled from the woes at BHS is BHS2, but that one looks more designed to tempt existing retirees to jump ship. There seems no information about how BHS2 will assist deferred members beyond the hope that once in it as a still deferred member, perhaps obtaining some kind of CETV quote and then getting out of it might still be possible. By then though, I imagine the pension promise will be heavily diluted, especially for deferred members versus existing retirees. I doubt for example that it will be set up to accept transferred in GMP liabilities.

Option 2 dangles the possibility that some kind of lump sum might be available if the pension is small enough, but again, it doesn't sound like any kind of pension promise transfer arrangement. It looks like it is pure cash?

And option 3 seems to be being presented as the risky option i.e. the do nothing and chance it if you dare option, risking that PPF do rapidly take over fully causing all other bets to be off, particularly of there being any chance of a CETV.

Having said that though, if the revalued pension turns out to be four figures not small three figures, then being able via PPF to secure the PPF minimum 90% of that 4 figures might still be the best deal. There's just insufficient information given at this stage to compare options.

So what other interpretation can we put on the BW letter being sent without specifics for members to consider other than that it is designed to massage member expectations in a very non-committal way, and if that's not grooming, then what is?

Surely it is most likely the case that no proper decision can possibly be made just yet, by individual members like the OP's missus, until an accurate idea of the original pension promise revalued to age 60. Only then can the options be evaluated sensibly.

So meantime, I think the OP should press BW for more information about how revaluation of the original promised pension in his wife's case was intended to work (original scheme rules as applied on leaving date way back in 1982 should still be available). The OP and missus might then be able to plot what the PPF last resort 90% of promised pension from age 60 will look like, and so be ready to quickly jump the right way when more detail of the other options emerges.

hyubh

agarnett wrote: »

Just because BW know their stuff does not mean BW are a deferred pensioners' friend - nor are PPF.

I didn’t say they were. You see intentionality - i.e., BW and/or the PPF actively working either for or against this particular member’s interests - where there is likely none.

If a BHS scheme member needs up to date figures, they should just ask for them from BW. That said, the wording used by the original poster - 'the letter states they will be offering...' suggests more details are to come.

Why has the 1982 leaving pension not been revalued for the member and advised in the letter? Why too has the GMP not been notified and revalued?

When the BHS scheme entered the PPF assessment period, it was still in the process of reconciling its GMPs - as you may or may not know, most schemes that either were or had contracted out have been needing to go through a GMP reconciliation exercise due to HMRC from the end of next year no longer allowing schemes to resolve any GMP issues when members retire.

Was the BHS scheme not contracted out from 1978 like most large DB schemes of merit?

It did contract out.

brewerdave

On the GMP reconciliation issue specifically - an ex colleague of mine is trying to get figures for his expected pension as he has just reached 65 and will probably need to access his pension soon - the pension administrators (Mercer) are telling him that they are having considerable difficulties reconciling GMP figures with HMR &C ,to the extent that they can't give him any guidance on its resolution:eek:

xylophone

https://www.gov.uk/government/publications/countdown-bulletin-22-january-2017/countdown-bulletin-22-january-2017

agarnett

The HMRC NICO helpline number at the foot of that article xylophone just posted is worth a bell. Or alternatively same number with 0300 200 3500 instead of 3507.

They are very busy and the backlog for responses to individuals currently seems to be 7 or 8 weeks. But they promised me a breakdown of my various contracted out pension GMP expectations, and they certainly had very comprehensive records of the histories of, and changes to, all the contracted schemes I was a member of, including where they wound up and the GMP was transferred to an insurance co as a Section 32.

However, re-reading one of the other links xylophone very usefully provided earlier made me wonder in fact this case is one where we know contracting out the GMP liability had started i.e. post 1978, but maybe the law requiring mandatory revaluations of GMP had not got started until after 1982. It is perhaps even more unlikely that any revaluation of any excess over and above GMP had got traction by then (1982) either.

This was around the time I too started working and for others who remember, inflation was still quite high - I seem to remember getting annual double figure percentage cost of living wage rises as well as performance related on top - unions were much stronger at collective bargaining and brought that to bear on pensions - eventually. Hopefully not too late for the OP's missus.