Frozen Pension ??? Advice required.

Saver58

I left HSBC (formerly Midland Bank) in 1987 after 11 years service and was informed in 2006 that value of present pension benefits at that date were £2516.18 p.a., with assumption (not guaranteed) of a value of £3805.95 at retirement date 1st May 2019. They advised that discretionary increases were stopped in 2005 but those already granted would not be lost and my pension would be subject to statutory increases. ( I still have their letter making these claims).

They had declined giving any update on the value of my pension benefits since this date and until this year (i.e. within 1 year of normal retirement date) when they have valued my pension at "£2516.28 p.a." an increase of 10p since 2005 rather than the £1289.77 previously projected.

They now claim that the rules dictate that pension has to increase in line with statutory requirements since leaving. This calculation has worked out 10p higher that benefits standing in 2006. So my pension has been frozen for the last 14 years, 2005 till retirement in 2019. The failure to advise me of this has even robbed me of the opportunity to transfer this pension into my new employer in 2006 where the benefits would have increased. I have referred this to the Pension Ombudsman - IS THERE ANY OTHER ACTIONS I CAN TAKE ???

Dox

The PO won't take the case until you have been through the scheme's own complaints process, called the Internal Dispute Resolution Procedure. You need to ask the scheme to send you the relevant information - it is scheme-specific.

Whether you have a valid complaint is far from clear. Final salary schemes are not generally required to give updates between the time someone leaves active membership of the scheme and the time they take their pension from the scheme.

Given the date on which you left the scheme, it is possible that only the benefits earned for service from 1 January 1985 until you left HSBC were subject to statutory increases.

Any mention in the paperwork of something called a GMP (Guaranteed Minimum Pension)? Are you female and if so, did you pay the 'small stamp' (the lower rate of NI married women could choose to pay)?

xylophone

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

You were a member of a Defined Benefits Pension Scheme and left with a deferred pension.

Were you given a statement of deferred benefits when you left showing GMP (all pre 88 in your case) and excess?

Do you have a copy of the scheme booklet?

HSBC also still has "abatement/clawback".

See House of Commons BRIEFING PAPER
Number CBP-01121, 15 February 2018
Pension integration (or
'clawback')

https://www.savvywoman.co.uk/2018/04/pension-clawback-or-pension-integration-why-its-unfair-to-women/

https://forums.moneysavingexpert.com/discussion/3886143/hsbc-uk-staff-pension-claw-back-on-retirement

Are you male or female? The Scheme Pension Age is 60?



Have you obtained a new state pension statement?

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

The Scheme will have no obligation to index link that part of your pension that relates to pre 88 GMP after GMP age (60 for females/65 for males).

Had you looked into the possibility of a transfer out?

https://www.royallondon.com/Global/documents/GoodWithYourMoney/COMPANY-PENSIONS-FIVE-REASONS-TO-TRANSFER-OUT-AND-FIVE-REASONS-NOT-TO.pdf

Dox

OP has said they are within a year of NRD, so certainly no statutory right to a transfer out - and the transfer value isn't going to be that exciting, bearing in mind it reflects the value of the benefits the HSBC scheme offers.

HappyHarry

OP, just checking, are you sure your latest statement shows expected benefits at retirement, and not just the value of benefits accrued at the date of leaving?

xylophone

no statutory right to a transfer out -

The fact that there is no statutory right does not mean that the scheme would not consider an application.

And it may be that the OP had considered the possibility of transfer and decided against.

and the transfer value isn't going to be that exciting, bearing in mind it reflects the value of the benefits the HSBC scheme offers.

But it may be worth an enquiry.

Pun

xylophone wrote: »

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

You were a member of a Defined Benefits Pension Scheme and left with a deferred pension.

Were you given a statement of deferred benefits when you left showing GMP (all pre 88 in your case) and excess?

Do you have a copy of the scheme booklet?

HSBC also still has "abatement/clawback".

See House of Commons BRIEFING PAPER
Number CBP-01121, 15 February 2018
Pension integration (or
'clawback')

https://www.savvywoman.co.uk/2018/04/pension-clawback-or-pension-integration-why-its-unfair-to-women/

https://forums.moneysavingexpert.com/discussion/3886143/hsbc-uk-staff-pension-claw-back-on-retirement

Are you male or female? The Scheme Pension Age is 60?



Have you obtained a new state pension statement?

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

The Scheme will have no obligation to index link that part of your pension that relates to pre 88 GMP after GMP age (60 for females/65 for males).

Had you looked into the possibility of a transfer out?

https://www.royallondon.com/Global/documents/GoodWithYourMoney/COMPANY-PENSIONS-FIVE-REASONS-TO-TRANSFER-OUT-AND-FIVE-REASONS-NOT-TO.pdf

This is an incredibly complicated answer for anyone not familiar with the jargon/concepts associated with pensions. Some simple guidance, rather than exam style references, would be much appreciated. I could follow Dox's which was very clear, but this one left me goggling (as opposed to googling).

Saver58

Hi Guys, thanks for responses here. In answer to queries:-
I am female & normal pension age is 60
the only scheme booklet I have does not refer to increases of deferred pensions
My main concern with this is the "misleading information" given that my pension benefits were worth £2500 in 2008. That these benefits would not be lost and that pension would now (as in from 2008) rise with statutory requirements - also giving an estimate of £3800 at retirement. Actual increase since this letter is 10p since 2005 compared with £1200+ advised but not guaranteed.
If I had information that previous discretionary increases would be offset against discretionary increases I would have looked to transfer these benefits into a new employers scheme.
From what I understand Midland bank scheme was in surplus when it was taken over so has HSBC simply made a profit on this.
Thanks

hyubh

Saver58 wrote: »

Hi Guys, thanks for responses here. In answer to queries:-
I am female & normal pension age is 60
the only scheme booklet I have does not refer to increases of deferred pensions

What about xylophone's other questions?

- Does any statement refer to 'GMP'?
- Did you pay the married women's reduced National Insurance rate (alias 'E rate') while a member of the Midland scheme?

Relevance is, some (or all) or your pension being GMP would necessitate the scheme to revalue (i.e., increase between leaving and drawing the pension) that element. However, if you had chosen to pay E rate NI contributions, then no GMP would have been applicable, and the pension would be all 'excess' (i.e. pension beyond GMP).

If it is the case that you have no GMP, then given when you left, the only legal obligation for the scheme to revalue the excess would be on pension relating to service from 1 January 1985 - so, two and a bit years. This could explain the 10p.

My main concern with this is the "misleading information" given that my pension benefits were worth £2500 in 2008. That these benefits would not be lost and that pension would now (as in from 2008) rise with statutory requirements

From the (limited) details you have provided, it is perfectly possible they have risen with statutory requirements - and before 2008, had risen far beyond statutory requirements.

From what I understand Midland bank scheme was in surplus when it was taken over so has HSBC simply made a profit on this.

Very doubtful. The accounting is much stricter nowadays, life expectancies are materially higher than when you joined the scheme back in the 70s, and more basically, a DB scheme becoming 'mature' (top heavy with pensioners and aging preserved members rather than actives) does rather fix attention to the true cost of the thing...

Brynsam

Saver58 wrote: »

My main concern with this is the "misleading information" given that my pension benefits were worth £2500 in 2008. That these benefits would not be lost and that pension would now (as in from 2008) rise with statutory requirements - also giving an estimate of £3800 at retirement. Actual increase since this letter is 10p since 2005 compared with £1200+ advised but not guaranteed.
If I had information that previous discretionary increases would be offset against discretionary increases I would have looked to transfer these benefits into a new employers scheme.

Are you sure that the discretionary increases referred to related to deferred pensions? I suspect it is much more likely that the statement related to pensions actually in payment.

You say you would have looked to transfer, but the transfer value you would have received would only have reflected your (modest) entitlements under the HSBC scheme, so there is no guarantee that transferring would have given you a better outcome, always assuming your new employer's scheme was prepared to accept a transfer in.

xylophone

This is an incredibly complicated answer for anyone not familiar with the jargon/concepts associated with pensions.

I'm afraid that a person with scheme pension/GMP/clawback/entitlement to state pension needs to familiarise himself with these concepts and that might require him to read the information to which I have linked.